Investing in crypto 101
When I read about Bitcoin in 2009, I didn’t give it much attention. Sometime in the next couple of years I heard about it again, but this time I took the chance to read Satoshi’s paper.
I was amazed, and finally understood what the Bitcoin movement was about. I think this was circa 2012–2013, just after I moved to live on my own.
After reading the paper, I bought some Bitcoins at about ~$100. Unfortunately, I was working on my own stuff without any stable source of income, so at one point I had to sell them at ~$150 to pay rent and continue working on my own stuff.
After some months the story repeated — I bought at ~$1000 and sold at more or less the same price.
The point is that I was not a super early adopter in the cryptocurrency space, so I’m not gonna talk about how I bought Bitcoins for cents and sold them for thousands — that didn’t happen.
So, knowing that I missed the first Bitcoin train, I’m going to talk about how I figured out strategies to get on other cryptocurrencies. With these steps and a good amount of luck, I managed to make >900% with one of my investments and like 300% overall. I also have to say that I’m a total hobbyist, and I’m investing super small quantities.
Decentralization changes everything. Look for new tech that leverages it
If you put decentralized before other words, great stuff happens. Decentralized currency. Decentralized storage. Decentralized cats. Decentralized Tinder matches.
The thing is, being decentralized doesn’t help making a cat better. Or a Tinder match. Or Donald Trump. Well. Maybe.
I always try to look for things in which decentralization is a game changer.
In Bitcoin’s case, being decentralized is everything. Moving value in an uncontrolled way can have a huge impact on the world. Removing governments. Being more efficient by removing intermediaries. Providing a democratic way to decide on the future of the network.
Beware of projects that are decentralized because of the hype. Yeah, in some areas decentralization doesn’t provide much value. Making a long story short: where trust in a central organization is key, decentralization usually doesn’t add up much value.
A product that works / a team that can build it
In the blockchain world, I have seen too many blockchain experts having ideas that don’t make any sense / can’t be implemented.
I can’t stress enough how important is to have a strong technical background if you want to build the next big thing in the crypto space.
For example, I really like Sia’s team. I met them a couple times, they’re brilliant hackers. They came out with a working product super quick, and they continue enhancing it constantly. You can have a look at their GitHub, it’s pretty amazing.
Something where a token makes sense
Having a token is the requirement for having a crowdsale. It makes both fundraising and revenue so easy for crypto projects.
However, there are a lot of scenarios in which a token doesn’t make any sense.
For example, I still have yet to meet anyone who thinks Factom having a token makes any sense.
The opposite case would be Augur — where having a token is the way of having a more or less optimal distribution of reputation. In Augur, reputation is everything.
Invest super early
If it has reached the mainstream, it’s just not my kind of investment. I’m not a full time trader, it’s just something I do sometimes in my free time. I want to put some money early on, and forget for a while.
The best way to do so is to invest in the crowdsale. Or when it’s already traded, but the product is in a super early stage and hasn’t demonstrated anything tangible, so it has huge possibilities of going up when it gains traction / media coverage.
So, to wrap up, I love investment in cryptocurrencies, because it has almost no friction and can make you triple digit returns pretty easily. Or triple negative digits. So before trying this at home, beware of the pump and dump!
Props to Daniele, my cofounder at Stampery, from whom I learnt most of the crypto-investment stuff I know.