5 Tips for Investing in Bitcoin and Other Cryptocurrencies

Learn to buy and properly store major coins before trading.
If you listen to The Three Donkeys podcast, you hear Peter Jennings, Adam Levitan, and I tell stories about trading ridiculous cryptocurrencies like Titcoin, or the time I owned a huge percentage of Vegas’s strip club currency (not to brag).

And so my initial piece of advice here might surprise you: don’t get into crypto so you can buy up coins whose primary purpose is to make it easier to get a lap dance. “Now wait, I’m supposed to swipe this where?!”

This post isn’t meant to walk you through how to buy and store crypto or go into depth about the various exchanges and wallets because there’s a mountain of content out there already, but I’ll give you a few reputable sites/tools to help you out. There’s a lot of good stuff out there, so this is just a shortlist to get you started…

Coinbase

Simple to use
Beginner-friendly place to start buying BTC, ETH, BCH, or LTC
Kucoin.com

Ability to trade cryptocurrency
Beginner-friendly
Lots of bonuses and giveaways
Changelly

Must already own cryptocurrency to use
Allows trading of currency pairs you cannot trade elsewhere
Easy-to-use exchange that searches for best rates at other sites for you
Trezor

High-security hard wallet on which you can and should store coins you plan to hold
Safer than keeping coins on an exchange
There are a variety of other sites and exchanges out there, but there’s really no reason to be trading Einsteinium on an advanced exchange until you learn how to purchase currencies and store them on a hard wallet.

I’d start by learning how to purchase Bitcoin on CEX.IO or a comparable site and send anything you don’t plan to trade to a Trezor or another hard wallet (Ledger is another good one).

A couple tips: use a bank transfer to purchase crypto (lower fees than a credit card) and make sure you enable two-factor authentication on any site you use.

If you want to learn more about crypto basics, check out this collection of resources.

Don’t diversify for the sake of it.
This is going to be pretty unpopular advice. All over the internet, you’ll find people telling you to not put all of your eggs in one basket. This is true for pretty much every type of investment. It’s certainly true in sports speculation; DFS players are told to diversify their player exposure and sports bettors to hedge their bets.

I don’t believe this is smart. The only reason you should diversify is to be able to invest more money, overcoming a lower ROI with more volume to see greater long-term gains.

I’ll use DFS as an example since that’s my expertise. If you think Michael Thomas is the top wide receiver play this week, you should have as much money on Thomas as you’re willing to stomach. It’s high-variance to not diversify, which is why people avoid it—it feels shitty to have large swings—but it will lead to the greatest ROI over the long run (if you’re right).

So why not put Thomas in every lineup? Well, you’re always trying to balance the highest possible ROI—which zero diversification allows for—with the greatest overall profit and the lowest possible risk of ruin (going busto). If you were to seek the highest ROI and greatest profit, you’d not diversify at all and play 100% of your bankroll, which would of course be idiotic since your long-term risk of ruin would be 100%.

As it relates to crypto, I’m of the opinion that you should identify what you believe is the best value, then invest as much money as you’re willing to lose in that single asset. Then, knowing that adding another coin—diversifying—can slightly reduce your risk of ruin, put as much money as you can stomach into that (which should be a lower amount).

In this way, you’re diversifying solely to be able to invest more money, increasing your profit and reducing your risk of ruin.

Okay, now two caveats. The first is that the swings in crypto are bananas. If you haven’t woken up to 35% of your investment just—poof—gone, you haven’t lived my friend. And so with that greater volatility comes more of a reason to hedge.

The second caveat is that it’s more difficult to know what’s “optimal” in cryptocurrency than in other alternative investments. Although I might be off a bit here and there, I pretty much know the top values—or a small pool of players who could be considered the top values—in DFS. It’s somewhat obvious. That’s probably not true in crypto—certainly not to the same extent and especially not for someone like me who doesn’t know what the hell he’s doing.

If you believe in the overarching concept and believe the entire cryptocurrency market cap will rise, there’s an incentive to just stay in the game, meaning it’s probably wise to diversify more here than in more “solved” games like DFS.

Nonetheless, I think something like a 60/25/10/5 type of split is better than putting 5% of your cash into 20 different coins.

Market cap matters more than coin price.
A friend of mine saw that I had some early trading success—mostly just the result of a bull market for altcoins and a few lucky moves—and asked if he could give me some money to invest. I agreed, and so he’s become interested in the space and has his own suggestions of trades to make. In the beginning, those were often, “We should get XYZ because it’s under $1.”

This is the most common mistake I see made by those new to crypto. The price of coins is relevant only after accounting for the circulating supply. The number of coins multiplied by the price of those coins is the total market cap for the token, and that’s what really matters. When you buy any coin, what you should really be focused on isn’t the price of the coin, but what percentage of that total market cap you’re purchasing.

As an example of the difference, take a look at the top six coins in terms of market cap (specifically Ripple), via CoinMarketCap.com:

At the time of writing this, Ripple costs 23 cents—nearly 300 times less than Litecoin and 1,800 times less than Dash. Nonetheless, because of the way in which Ripple operates, there’s a much larger circulating supply, and thus the market cap of Ripple is over twice as large as Litecoin and Dash.

On the flip side, I can’t tell you how many people I know have said, “I’m not buying Bitcoin right now. If I invest $5,000, I can’t even get a whole token.”

But who cares? If the market cap of Bitcoin increases by 20%, someone investing $5,000 will have made $1,000 in the same way that they’d make $1,000 if Ripple increases 20%. Yes, it could be easier for certain coins to see massive swings in value, but that would be due to their market cap and not the coin price. It’s more difficult for Ripple (nearly $9b market cap) to go from 23 cents to 46 cents than for a coin with a $100 million market cap to double in price (regardless of the cost of one token).

The point is that the price is effectively arbitrary based on the circulating supply of tokens. If there were theoretically just one circulating Bitcoin that cost $130b+, it wouldn’t change the merits of your $5,000 investment in it.

Don’t get hung up on the absolute price.

Don’t take profits unless there’s a change in circumstances.
I got a hotel in NYC a couple weeks ago and planned to go up for the day. When that day came, I just didn’t feel like going anymore, so I didn’t. The fact I paid for the hotel meant nothing—it was a sunk cost and that money was gone—and so the only relevant factor was really whether or not I felt like going to NYC that day.

Don’t let past decisions affect future ones if they have no bearing on your happiness (or, in investing, your expected value). With any investment, it’s irrelevant whether or not you’re up or down or you’ve removed your initial investment or you’ve run it up 10x or whatever. I can’t tell you how many times I’ve been talking with my mom about crypto and she has said, “You should take out some of the money you’ve made.”

There are really only a couple reasons you should be taking profits, all of which are the result of something changing. One would be that your net worth has shifted and you’re over-exposed to crypto. As an example, let’s say you bought Bitcoin at $1k with $50k in the bank, and you think it’s smart to have 20% of your money in BTC (so you bought $10k of it). If the price of BTC is now $8k and you didn’t sell, your BTC would be worth $80k. Assuming your net worth otherwise didn’t grow, you’d have $80k in BTC and $40k in cash. Even if holding is +EV, it might be too much risk for you to stomach, in which case you’d be justified in taking money out.

Of course, if you think the future of crypto has changed for the worse—or that your money could be better invested elsewhere—then you’d also be justified in changing your allocation.

Finally, although it’s admittedly irrational, I think you could make an argument for removing your initial investment solely for peace of mind. If you invested $1k in crypto and have run it up to $10k, removing the initial $1k isn’t the worst idea if you think it will help you psychologically. A lot of people think and act differently when they’re on a freeroll; just look at how people act in casinos when they’re “playing with house money.” If it is comforting to you think “the worst that can happen is I’m back to even,” then removing a small portion of your crypto funds so you’re on a freeroll is probably fine. It’s not mathematically the right decision, but you can potentially make up for the loss in EV from just having peace of mind that you’ll never be down from your investment.

Despite cryptocurrency mania, just 8 percent of Americans are invested in them

Cryptocurrencies are in the headlines every day and some say are powerful enough to take down the stock market as well as threaten the role of century-old banks and governments.

Turns out, demand for the digital coins is still pretty low though.

Less than 8 percent of Americans own cryptocurrencies, according to a new study by personal finance website Finder.com.

The site surveyed 2,000 adults in the United States in February.

The results show the hype around cryptocurrencies is not yet mirrored by reality, said Aswath Damodaran, who teaches finance and valuation at the New York University Stern School of Business.

“Bitcoin has taken over the public imagination,” Damodaran said. “But it’s a very small phenomenon.”

He pointed out that the market capitalization of all cryptocurrencies (below $400 billion) is less than half the market cap of one company: Apple, which has a market capitalization of more than $900 billion.

The most popular cryptocurrency is bitcoin, with an estimated 5 percent of Americans owning some.

The share of Americans who own several other well-known digital coins underscores how far these currencies have to go: Less than 2 percent of Americans own Ethereum and less than 1 percent own Ripple, the survey found.

More than 40 percent of Americans who hadn’t purchased cryptocurrencies said their reason was disinterest or believing there is no need to do so. Another 35 percent said the risk is too high, according to the survey

To that point, 27 percent of people said it’s too difficult to understand and another 18 percent said they believe it’s a scam.

“We’re spending so much time on [cryptocurrencies] as if half of Americans have their wealth in bitcoin,” Damodaran said

Cryptocurrencies drop after Google bans them in its advertising

Bitcoin and the rest of the cryptomonedas have not been pleased with Google’s decision to ban all advertising related to them and the ICOs from next June. Following the decision announced yesterday, the value of all the cryptomonedas has fallen again strongly just as they were beginning to recover from the latest falls.

At this hour, if we look at indices like CoinMarketCap we can see that the value of Bitcoin has fallen by 13.45% compared to yesterday, and its value is already down from $8,000. In the rest of the most used kryptom currencies according to this index the fall is even more marked, with falls of 14.72%, 16.58% and 14.25% for Ethereum, Ripple and Bitcoin Cash.

Fall Crypts
As usual, the most logical thing is that in the next few days the value of cryptomoney will start to grow again. But what is clear is that, with so many ups and downs, it does not seem easy to find a short-term stability that will make them grow back to the levels they had at the beginning of the year. Even so, we will have to wait and see what happens in the medium and long term.

It should also be remembered that Google is not the only one charging against this type of technology either. By the end of January, Facebook had also decided to ban ads related to cryptom coins and initial coin offerings (ICOs) on all its services. In addition, celebrities like Bill Gates are also strongly criticising it, and some governments are threatening to ban it.

The measures taken by Google or Facebook have not ceased to cause some controversy among those who support the chain of blocks. The decisions come, according to the companies, to protect the users, and it is true that there are many deceptions trying to capture misled with keywords like Bitcoin or Blockchain. But what they are doing is generalizing and punishing everyone equally, including legitimate product advertisements that strive to do things right.

Governments like Spain are swimming against the tide
While European countries such as Germany, France, or Italy, as well as others such as the United States, do not yet seem willing to enter into the regulation of cryptomoney, there are still some who decide to swim against the tide and to position themselves in favour of this technology. This is the case in Spain, where the Treasury is studying their impact, and the ruling party is drafting a bill to try to favour them.

Spain’s idea is to offer benefits such as possible tax breaks to attract companies that use block chain-based technologies or opt for initial currency offerings (ICOs) as a financing tool. In doing so, they may want to position themselves in Europe alongside countries such as Switzerland as one of the Blockchain capitals of the world.

In any case, the debates surrounding the cryptomonedas and the chain of blocks have only just begun, and it remains to be seen what will happen after this storm of instability subsides, if it does, once Bitcoin and the company normalise the bans and countermeasures that are being imposed on them.

How Blockchain is transforming financial markets


Blockchain technology offers great alternatives in the field of stock brokerage, and its influence on the markets is already significant. From the establishment of intelligent contracts to the reduction of defaults in the negotiation limit.

Some of the main international financial institutions are betting on the implementation of blockchain technology as a technological alternative, benefiting from improvements in technology-based processes that allow for the reduction of time, costs and increased transaction security.

How can blockchain help manage information from financial institutions?
Banks and other financial institutions have increased their investment in technology and innovation in recent years, aiming to simplify and reduce the costs of back-office processes.

Proof of this is that the Australian Securities Exchange (ASX) has announced that it will change its clearing and settlement system to a new system based on blockchain technology. This will reduce costs for your customers and the development of new services. In addition, you will achieve greater market efficiencies through better record keeping, transactions and better quality data.

The Australian federal government supports the ASX’s commitment to the implementation of this technology, which will strengthen the national financial system through greater efficiencies; supporting innovative initiatives to ensure that Australia is at the forefront of technology in the financial markets and is competitive globally.

Another official body, the Canadian Securities Exchange (CSE) has also developed a blockchain-based clearing and settlement platform, which reduces risk for investors, distributors and customers by ensuring that exchanges are settled immediately.

The development of this platform is the meeting point between blockchain and the financial markets, enabling a revolution in conventional transactions and record keeping mechanisms.

CSE, Blockchain.
Within the market sector, the distributed accounting system offers great possibilities for non-affiliated operators, but it is not the only area of impact. The benefits of Blockchain in the business lifecycle for the capital markets are countless, especially affecting post-trading.

But blockchain is already being used in other areas of the financial sector, such as Smart Contracts, such as Swaps. With the creation of intelligent contracts, you can apply it to extrapolate specific data or carry out specific instructions if certain parameters are met or activated.

The smart contract allows automatic payment processing only if certain requirements are met within the agreed contract. As a result of intelligent contracts, the costly errors of manual processing of settlement instructions can be significantly reduced.

Since all parties will have access to the same data, the benefit of transparency would eliminate the need for manual settlement confirmation, thus reducing the reconciliation problems that often arise when transactions are not carried out correctly.

Reduction of trading limit violations
Business activity within financial institutions includes transactions initiated to hedge market positions and to hedge existing positions for the bank as a whole in various instruments.

These transactions are conducted with other financial institutions and are complex. Trading limits within an institution are in effect for notional amounts and settlement dates.

There are also limits on the size of the position by intermediaries, as well as for specific instruments including financial derivatives, options, fixed income and currency hedging.

Breaches of trading limits can be very costly for financial firms. Any suspicious business activity that is outside of compliance could be detected and remedied before it negatively affects banks’ position, profits and losses and balance sheet.

JP Morgan and its anticipation strategy
At the end of last year, JP Morgan announced that it was developing a program based on blockchain technology, designed to analyze the data in buy/sell transactions, and group them together with a predictive and preventive utility (analysis of trader behavior).

The general operations proposed by its creators are intended to facilitate the decision making process.