Tips on Trading Cryptocurrency

One of the fun things to do on Steemit is to poke around and take a look at everyone’s wallet. The first time I did this I felt a bit like a voyeur because most people won’t let you look at their personal finances.

Everything is transparently laid out on the block chain and this does help a bit to see what things are being done. Many of the accounts move coins back and forth from the exchanges and between each other. I hope people don’t mind my looking - I don’t mind if anyone looks at my wallet.

I’ve been trying to learn and understand what I can do to be both a long term support to the coins that I like and improve the economy and environment. These things I have learned by observation and trading coins around on a daily bases. My background is not in stock trading so please take anything I say with a grain of salt and do your own due diligence on any of the coins I talk about – this is not investment advice so please don’t blame me if my tips result in your losses.

Having a working block chain and good technology with developer support towards maintaining and improving the code base is only part of what makes a cryptocurrency successful. A coin has to be used to get popular and needs to flow like water. When I first started I hesitated to sell anything feeling like just holding until the right time, but unless someone moves the coin it can’t gain in value. The social community and trading of the coin is a key part of what produces long term success for any cryptocurrency imho.

Getting Your Headspace Right

Figuring out where your mind is at on all of this is a key to doing what is needed. By that, I mean being really internally okay with all of it.

Every coin needs traders and investors. If nobody is willing to buy and trade the coin, a price and value for it can not be determined well. Buyers help support and provide value and obviously, if no one sells any of the coin there will be no volume either. By buying and selling in a way that supports these smaller coins you can build interest in them and make a profit for yourself and the entire community.

Sometimes your going to need to move some funds around fast and if things don’t exactly go your way it can get a frustrating. Patience, diligence and knowing the market well enough to feel how it is likely to move are good qualities. I think thankfulness too is very helpful – I know it is kind of intangible but a happy trader is a better trader and less likely to make mistakes that they may regret.

Moving Coins on Exchanges

I usually mint proof of stake coins on my computer and sell them on the smaller exchanges. I found that there are times when I can make some very good deals on some of the coins I like on these smaller exchanges by placing low buy orders.

When prices rises, I will sell of some of the coins for a profit on a bigger exchange or put them back up for sale on the same exchange.

Many of the bigger exchanges will support Steem but won’t mess around with some of the smaller proof of stake coins because of the comparatively lower volume that they have. People tend to hoard these coins more so they can be deflationary and subject to wide price fluctuations when people dump coins. I like to mint Truckcoin, Hyperstake, Quotient, Magi, Greencoin and Genstake but there are many more out there. I doesn’t take much electricity to mint them all at the same time on my computer while I do other things like trading, art or blogging.

Bitcoin is a real pain to move around right now and it has always had some fairly high fees. Hopefully things will change soon. In order to avoid the fees I like to use Magi coin to move value around. This coin doesn’t pay anyone real well to maintain the block chain but that is an advantage in some ways because investment dollars stay in the coin. I buy Magi on the smaller exchanges and sell them to buy Steem or other coins (or reinvest when the price lowers). I keep a lot of coins in my wallet and mint Magi to help move the blockchain. It pays around 2.5 percent.

I’m usually making a profit when I move Magi to purchase other coins. Buy orders generally fill pretty fast and selling the coin is easy. Many times I’ll sell high on Bittrex and buy back at a lower rate on another exchange using funds gained from minting coins. Because I carry a big balance in my wallet if I don’t make a direct profit right away it works out as a long term profit if I factor in all the coins I’ve mined or minted. You can also mine this coin on a CPU but I no longer do this because I’ve found other easier ways to make a profit that doesn’t use as much energy.

I usually use Litecoin to cash out but I don’t invest in it so I have to be careful when I move it around or I end up loosing value. Dogecoin is another coin I use to move value but don’t save in a wallet. You have to be really careful moving Dogecoin because a one sat difference in price can become a big percentage loss depending on what Dogecoin is trading at. I don’t like to keep these in wallets in general as long term investments because I’ve got many other coins that I support blockchains for.

Taxes

I used to track all my profit and loss using a spreadsheet but it became a very onerous thing. The US tax guidelines state that you need to declare your mined crypto as revenue at the time you get it. At one point I declared several hundred dollars of mining profit only to have the coin drop in price to near nothing immediately afterward.

With crypto it is very hard to determine a fair market price at the time you get coins, because there may only be a small buy order that supports the price. You could have a great many coins without any way of trading them for any real value.

The way I figure it a ‘fair market value’ can’t really be determined if I’ve got a ton of coins that I can only sell a little bit at a time without tanking the market. Even Steem is subject a bit to this depending on your whale status and how much your unloading.

I really like to be free to buy and sell whenever I want and not have to worry about tracking everything in detail. I think this helps me go with the flow much better.

Besides I’ve developed an aversion to spreadsheets and the mathematics to calculate profit/loss is way too onerous for my limited brain power at this point. ;) I’ve decided to declare any income I get as business profit, at such time as I cash out to fiat currency. This is likely a higher tax rate compared to long term or short term capital gain tax. I figure if any bureaucratic really want to request all the data to do a more accurate calculation more power to them. I would probably get a tax refund by the time everything is said and done, but don’t quote me on that.

Maybe someday my claim to fame can be: the infamous Steemit blogger that spent time in the slammer for tax evasion along with the likes of Al Capone. :D

Other Notes

The current dollar value of any crypto will be effected by the value of Bitcoin since most things are traded in it. Therefor using the dollar value and can be deceiving when trading. I find it better to use the Satoshi value as a comparison help figure out when to buy or sell.

I’ve put some information together that is helpful for Estimating Coin Values that you may find useful.

Before I started trading I was always wondering about how people can make a profit in a way that benefits both parties. I can see now that it is complex. Ultimately any activity that we do individually has to be supported by the earth’s ability to sustain us – trading crypto seems environmentally better than many other activities at least.

How do you feel? Is taking a profit from trading crypto a good thing to do, or should we all be just be posting blogs or doing other types of work?

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Thanks for reading! All support very welcomed. Pictures were taken by me on my Galaxy S7.