Bitcoin has been kind to me this year. Especially the last few months. It may not get me to early retirement this cycle, unless some of the uber moon boys are right about it hitting $250K-$400K next year. But it has made me a lot more comfortable than I was a year ago.
Like many, I first heard about Bitcoin back in 2017 during the peak of its bull run. I admit I really had no idea what it even was. I likened it to website credits or tokens you might win playing an online RPG like World of Warcraft.
I didn’t think about Bitcoin again for a few years until 2020 after the Covid crash. I bought my first in September, right when it was around $10K. I made regular buys thereafter before sinking in a sizable amount almost a year later following its initial peak in March, 2021. I saw my investment nearly double in a matter of months, before plummeting down hard the following year.
It was wrenching to watch my investment sink by almost 75%. But having watched Bitcoin rise and fall twice before in ’17 and ’21, there accompanied my dismay a slight reassurance in the fickle decentralized digital currency. I kept stacking sats, HODLed and hoped, until eventually it climbed back to even early last year. This last run-up has finally put it into the six-figure zone at $100,000. A momentous achievement.
Is Bitcoin going to climb higher and higher into next year? Or will there be another calamitous crash? Who knows. There are many positive signs lining up for the currency. The incoming Trump Administration is very crypto-friendly. Trump has expressed interest in starting a national strategic Bitcoin reserve, which may prompt other countries to do the same. Michael Saylor, the CEO of MicroStrategy, continues to buy Bitcoin by the billions with his stock sale scheme. Wall Street has opened up numerous ETFs for Bitcoin, which have seen billions of inflows. China has dropped its opposition to it. The digital asset has certainly gone mainstream. While it hits road blocks here and there — MicroSoft shareholders just rejected putting it on their balance sheet Saylor-style, for instance — for the most part it just keeps bouldering ahead.
Will it one day be worth $13 million a coin? Or even a million a coin? I have no idea. I don’t do predictions, projections, or prognostications. Bitcoin attracts far too many Punxsutawney Phils who see price targets in their shadows. But fundamentally, if there are more and bigger buyers over time, the asset should see a gradual rise in value. Here’s a simple thought experiment. As of now, MicroStrategy owns almost 2% of all Bitcoin that will ever exist. If the U.S. acquires 1 million Bitcoin as is intended for the proposed strategic reserve, that would mean a 5% stake. That’s 7% between just two entities. If other countries and major corporations follow suit, that will place enormous buying pressure on an asset with a fixed supply. What happens then? Number go up, of course.
I do believe in Bitcoin long-term as a tool to counter centralized banking and its widepsread currency debasement and inflation. I’m not a Bitcoin trader. I have no plans to sell my holdings, unless I’m moving the proceeds into another investment or an asset of some kind. But unlike before, when my buys were largely random or inconsistent, I want to set up a DCA system. Therein lies a problem, as many exchanges charge exorbitant fees. I’ve been with Coinbase since 2020, but their charges are excessive.
Recently, a finance Youtuber named Marko — Whiteboard Finance informed me about River in one of his videos. River is a Bitcoin-only exchange that allows you to set up recurring buys for no fee after a week.
(NOTE: I’m not affiliated with River. This is simply my own experiment. I’m not even going to provide a link to the exchange, but it is easy enough to Google. Also, do your own research on Bitcoin and crypto and whatever else you want to invest in with your own money).
Here’s my simple plan:
Starting this month and going forward next year, I’m going to DCA $20 into Bitcoin every day through the end of 2025.
Twenty bucks every day. That’s $7,300 in total over the next 365 days.
River also currently pays 3.8% in BTC on cash deposits you make on the exchange. Since I’ll be dropping a good bit of that $7,300 up front, I should also see gains from that annual rate as well.
I already made my first buy yesterday, Dec. 12th. So, one day down, 364 to go.
Hey, wait! Why not just smash buy Bitcoin with that money right now?
Well, I plan to buy chunks of Bitcoin in addition to this daily DCA over the next year and beyond. But part of why I’m setting up this experiment is to take the hand-wringing and guess work out of when to buy Bitcoin. I struggle with paralysis-by-analysis a lot when it comes to making investment decisions. Well, with most decisions in life, if I’m being honest. Mostly that comes from fear. Fear of losing money. Fear of uncertainty. But also fear of missing out (FOMO). So, this DCA strategy with River is a happy medium. It’s a sizable enough purchase over a year to make a difference. But it’s not so much where I won’t have reserve funds to make bigger purchases when I feel it’s warranted.
I’ll be providing updates over the next year, perhaps monthly, on my 2025 Bitcoin Experiment. We’ll see how it goes.
You know those crazy videos where someone goes skydiving or performs parkour stunts on the edge of a skyscraper? The ones that give you sweaty palms just watching them?
That’s what it feels like reading about a middle-aged guy with a family who sank his entire fortune into a brand spanking new digital currency that just popped into existence.
Now, in retrospect, this may not seem like the absolute worst, most insane idea anyone’s every had to make a fortune. Since its inception at around $2 in 2015, Ethereum has climbed to as high as almost $4700 back in November, 2021. It currently sits at just over $2300.
But we’re talking almost ten years ago. When Bitcoin and the entire crypto market were still in its toddler years. It was the wild west.
Conway’s idea was partly inspired by Bitcoin’s shocking success in 2013, when it ran from under $100 to over $1000 in a matter of months. Could Ethereum perhaps replicate the same sort of mindboggling returns? That was the big question.
At the time, Conway was 45, “quietly desperate,” and slaving away as a corporate middle manger in San Francisco, making $150,000 a year. He was married with three kids, had about $100,000 in savings, and some built-up equity in his home. While not destitute by any means, Conway was like a lot of people willing to do anything to escape the 9–5 grind. Making matters worse (or better, depending on your POV), Conway had a somewhat addictive personality. He’d struggled with alcohol and drugs. He was even in a 12-step program.
But he was able to channel his “mania” into a new obsession — this strange new cryptocurrency. As he learned more, he became more confident that ETH could potentially replicate Bitcoin’s success from years earlier. His belief was partly due to his experience working for Macromedia in the ’90s, the company behind Flash. He was familiar with how a new tech product with the right developers can suddenly catch on and rapidly soak up market share.
Still, ETH was so new that even his friends in the San Francisco tech world didn’t believe in it.
“Most of my friends in tech — folks working at places like Google, Apple, and Uber — were dismissive of blockchain. Few of them had heard of Ethereum. When I told a buddy of mine that I was considering investing in cryptocurrency, he broke out in laughter, as if I’d admitted I was hedging my future on Smurfberries or Scooby Snacks.” (Source)
Nonetheless, in mid-2016, Conway went to his bank Wells Fargo and transferred his family’s entire life savings to the new crypto exchange Gemini (founded by the Winklevoss twins) for nearly $7,000 ETH tokens, at a price of about $14.
Then something catastrophic happened.
All of a month later an Ethereum project got hacked and Conway’s $100,000 investment sank to less than $40K. It was a harsh welcome to the world of crypto. While most people might have capitulated, the sudden reversal only cemented Conway’s belief in ETH’s potential. He doubled down. Big time. By sinking over $200,000 of home equity into the dip. Now he was all in at $300K but at an average price of about $11 a token.
As it turns out, the frightening flash crash was the pivot point. Over the course of the next year crypto saw a return of the bull market. Ethereum climbed from its bargain basement price of $8 to over $1,300.
By the time Conway cashed out in late 2017 into early 2018, his risky bet had turned into $10 million.
However, there was a huge personal toll to pay on the path to decamillionare status. Conway admits to a lot of emotional volatility, obsessively tracking ETH’s price, and late soul-searching nights worrying about his crypto account getting hacked. He was fired from his job. He even wound up in the emergency room with a “panic event.”
I find Dan Conway’s story equally thrilling and inspiring. Even somewhat relatable. I had some success with Ethereum, Bitcoin, and other cryptos myself back in 2020. It was reading stories like his that motivated me to finally step outside the comfort zone of my more conservative investing style, and take a little risk on this new asset class. I started with Bitcoin when it was under $10,000, and then Ethereum when it was sub-$500. While my returns aren’t nearly as high as Conway’s, I’ve still done okay. Time will tell whether the crypto market will undergo another face-melting run like before.
Conway is a unique personality. Very few people would be willing to go all in on something so unproven as a new crypto token like he did. Especially at 45, with three kids, a wife, and a mortgage, living in one of the most expensive areas of the country. There’s something very admirable about that. Reminscent of the Old West gold rush prospectors, or the family’s that traveled West on the Oregon trail.
However, Conway is very aware of his good luck:
“I banked everything I had on a relatively unproven technology and got out at the right time. For every story like mine, there are hundreds of others about people who lost it all. I know that could’ve easily been me.
At the same time, I’m no blackjack player. My investment wasn’t purely a blind gamble that came up aces. I was, and am, a true believer in crypto — and I had the right mix of courageousness and craziness to take a big risk.” (Source)
Since striking it rich in crypto, Conway has retired to a more normal life. He’s written a book called Confessions of a Crypto Millionaire. If you want to read more, you can also check out his first-person account of all the action in The Hustle.
Would you be willing to go all in on an investment you believe in? Was Conway crazy or ahead of the curve?
By most accounts, crypto is still in a bear market. But not if you’re in the business of doing daily updates on the crypto space.
Niche Knowledge, the series devoted to exploring lucrative business niches that real people have found real success in, next takes a look at the rapidly growing YouTube channel Altcoin Daily.
Overview
This is a channel that I, like many others, discovered around the beginning of the last crypto bull market — roughly late 2020. But since then, the channel is still chugging along nicely.
Altcoin Daily, as the name suggests, uploads daily news recaps, opinions, and interviews with experts about all things cryptocurrency. The channel was started by brothers Aaron and Austin Arnold back in January, 2018. That was back in the depths of the last crypto recession, when Bitcoin fell as low as around $3,400 a coin, and Ethereum was as low as $85. Talk about starting at the “worst” possible time. But like many businesses that become uber successful, Altcoin Daily took advantage of the crypto freeze, and began building its brand.
Since its start the channel has grown to almost 1.3 million subscribers, and become a powerful voice in the crypto space. The brothers have interviewed the likes of Raoul Paul, other popular YouTubers like BitBoy Crypto, Benjamin Cowen, Robert Breedlove, and many others.
Their videos provide not only timely updates, but important context that makes the high-tech crypto world accessible to everyday listeners. They are big crypto investors themselves, and have demonstrated a keen insight into the space, offering neutral, largely hype-free analysis.
Monetization
According to Social Blade, Altcoin Daily currently makes anywhere between an estimated $953 — $15,200 per month, or $11,400 — $182,900 per year, from Adsense.
Source: Social Blade
However, like many crypto channels, Altcoin Daily utilizes affiliate links a great deal, which certainly adds significantly to the site’s bottom line. Affiliate deals include companies like Coinbase, Ledger, and events like Outer Edge and the convention Bitcoin 2023 being held in Miami Beach.
The only merch the channel currently sells is a simple pint glass, through Spring. Typically brands try to hawk t-shirts, hats, and other apparel. But Altcoin Daily seems content with keeping things basic on the merch side.
Altcoin Daily also has a significant following on Twitter that nearly matches its YouTube subscription army. The brand has 1.3 million followers, and tweets out on a daily basis.
Niche Deets
The videos on the channel reliably get tens of thousands of views. Usually ranging between 50k to the low 100k mark. Interestingly, none of their videos have yet to crack the million view mark. Their most watched video is “How Much Cardano (ADA) Do You Need to Become a Cryptocurrency Millionaire in 2021?” featuring Bitboy Crypto, with 726,000 views. This proves you don’t need videos to go viral and get millions of views if you’re trying to make a go of the YouTube game. You just need to pump out content consistently, and let the YT algorithm do its work.
Of course, it helps if you’re in a good niche like cryptocurrency, which is a space that’s only going to grow more over time.
Altcoin Daily’s thumbnails are eye-catching and somewhat clickbaity, making sure to usually include a human face. The YouTube algo tends to like seeing faces in the thumbnail.
Source: Screenshot of Altcoin Daily
The channel’s stats over the last few years tell an interesting story. Here’s a screenshot of a chart from Social Blade:
Source: Social Blade
As you can see, during the end of the last crypto bear market, through the end of 2020, Altcoin Daily experienced steady but largely flat growth. Then when the bull market kicked in demonstrably at the end of the year, and the beginning of 2021, the channel hockey sticked upward. But since the the boom cycle ended, Altcoin Daily has plateaued into its slow and steady rate of growth.
These charts show the strength and the weakness of the crypto news niche. Bear markets are tougher to grow in. Bull markets may be easier to find traction, but they last for briefer periods. So if you’re looking to start a channel or site devoted to cryptocurrency, you’d better be prepared to stick it out for the long haul. Especially now, with the asset class still down, and a looming possible recession and near-certain continued interest rate hikes on the horizon.
From an SEO/keyword angle, a crypto channel gives you the opportunity to rank for brand new coins and tokens just as they’re released, provided you’re staying up to date with the latest news. Imagine if you’re among the first, or even the first, to break a story on a new crypto project. And say that project takes off down the road. You might be the beneficiary of that rising tide, catching some of the traffic that builds off the growth of that project. Nowadays, it’s a tall task to rank for well-known high cap coins. But that doesn’t mean you can’t keyword capture the more niche projects out there before they potentially get big.
Summary
Overall, this a channel I like for its plain, soft-spoken, and reliable uploads. As of now, Altcoin Daily has posted over 2,000 videos. That shows remarkable dedication. But the end result has been a channel that thus far has gained 158 million views, and counting.
While it’s impossible to know exactly how much the channel makes from affiliate sales, between those and Adsense revenue (and sales of pint glasses), it’s not hard to imagine Altcoin Daily making several hundred thousand dollars a year. That’s impressive when you consider that many big news outlets are laying off employees and struggling to even stay afloat. Not bad for two brothers who started a simple channel talking about their favorite topic cryptocurrency just five years ago.
What the hell happened? You were supposed to be the year cryptocurrency went super mainstream. The year where everything that wasn’t dirty, dirty fiat went to the moon, baby.
Instead, we crash landed in Death Valley. Celsius and BlockFi went bankrupt. FTX imploded, causing thousands of investors to lose access to their funds. TerraUSD and LUNA completely evaporated, taking billions with them.
And instead of Bitcoin crossing the much ballyhooed $100,000 threshold and putting a Lambo in my garage, it’s ending the year below its 2017 high-water mark.
Screenshot by author from CoinGecko.com
What am I supposed to drive now, 2022? A freaking Toyota? GTFO of here!
Man, what a terrible year for the crypto asset class.
(Disclaimer Side Note: None of this is financial advice. I am not an investment professional. This is mostly a humorous gut-checking look at my crypto stack and the future of crypto, than some serious chart-analysing deep dive. If you want a pro’s opinion, go check out ClearValue Tax on YouTube, which is where I get a lot of my info. And do your own due diligence too, of course.)
Like most people, I got burned badly this year in the crypto space. But rather than wailing and whining, I thought I’d take a sober look at the wreckage. Throughout the year, I did sell some of my holdings, while keeping some others.
But even if I dumped some of my coins, that doesn’t mean I’ve lost faith in the asset class. If anything, I think all the chaos will make the space much stronger. Crypto needed a wake-up call. Investors of all stripes, amateur or otherwise, needed a wake-up call. With the Federal Reserve now rapidly raising interest rates, the era of easy money is over. For now. Investments have to really prove themselves, rather than just offer some potential speculative future gains.
So what does the current crypto winter mean going forward? Should you just HODL ‘till the cows come home, or cut your losses, and move on in life?
I think the answer is somewhere between the two extremes. For sure, some crypto assets are dead and may never come back. According to ClearValue Tax, my go-to for crypto answers, many altcoins from 2017 failed to regain their former highs in the 2021 bull market run. So just because some alts are down big now, doesn’t mean that in a future bull run they’ll make all-time highs again.
I think overall this recent crypto crash should prompt a return to the fundamentals. Even if many alts might promise exponential gains, how do you know which ones will survive through the crypto winter?
For me, I’m going to stick with Bitcoin and Ethereum, and maybe an alt or two going forward into the next run. Luckily, I was mostly loaded up on those two in the beginning anyway. So for me, not much is going to change. It’s all about HODL’ing through the pain.
For sure, it sucks seeing an asset you hold plummet by double-digit percentages over the course of a year. But if you’re planning to hold long-term, this latest “setback” is really a huge buying opportunity.
Bitcoin and Ethereum may drop more from their current levels going into 2023. In fact, I wouldn’t be surprised to see Bitcoin drop to the mid-teens to even as low as $10,000. I could see ETH hitting $600-$800. But long-term, I think these assets still have a lot to offer in the way of gains.
So, here are my Very Crude, Very Amateur Predictions
I think Bitcoin will rise somewhere between $80,000 and $120,000 sometime in the next bull run. Possibly late 2024 into 2025. After the next halving event (roughly around March 2024) and assuming the Federal Reserve pivots from hawkish to dovish. If Bitcoin first falls to $10,000, that means you could possibly be looking at an 8x-12x if you time your purchase and sell points right.
For Ethereum, I think it will rise to somewhere between $6,000 and $10,000 at around the same time. If it first falls to $600, then you could be looking at a potential 10x or greater if you time the bottom right and sell near the top.
Regarding altcoins, DeFi, DEXs, CEXs, etc. I have no freaking clue. I’m very much a crypto minimalist. I get my coins off exchanges ASAP, and hold everything in cold storage. Part of what appeals to me about cryptocurrency is the decentralization and self-custody aspect. But therein lies some danger. You have to be extra careful guarding your own stack.
I’m proud and lucky to say none of the exchange nonsense impacted me. I did briefly hold some Bitcoin and other assets on BlockFi earlier in the year. But even then, I kept hearing negativity regarding that institution. And BlockFi kept reducing its yield anyway. It didn’t seem worth it give my coins to someone else to hold for such a little payoff. So sometime around the end of last winter I pulled everything I had off BlockFi, and into my own cold storage wallet. A decision that’s paid off very well.
If an exchange, central or otherwise, is offering ridiculous yields that look too good to be true, they probably are. Stay away. I’m glad I trusted my gut regarding BlockFi. And while I never used FTX, when I kept seeing a bunch of random celebrities and YouTube crypto dorks shilling for it, my B.S. detector went off. I didn’t know why. I just didn’t like the vibe that exchange put off, much less its supposed “man of the people” founder. I don’t have some sixth sense or a crystal ball. It’s just I’m old enough to remember institutions like Lehman Brothers, WorldCom, Enron, and the numerous amount of Dot Com failures that blew up in the 2000s. Common sense told me something wasn’t right.
Hey, maybe this getting older thing has some advantages.
With all that said, here’s a more microscopic look at some of my crypto HODLings, starting with the biggest one of all.
I first started buying Bitcoin back in September, 2020. Slowly, tentatively, without really knowing what I was doing. But the more I learned about the digital decentralized store of value, the more excited and enthralled I became about its future. Even if I didn’t fully understand the technology behind Bitcoin, I understood its unique and revolutionary characteristics.
Then when the bull run began, fueled by the Federal Reserve money printing into oblivion following the Covid market crash in March, 2020, I felt vindicated. Though I’m proud to say I never got into the laser eyes craze, which felt stupid and cocksure to me.
I only bought $25 worth of Bitcoin that September, when it was valued around $10,000. Then slowly I accumulated more through the end of the year, and aggressively ramping up more into the bull run. By the time it hit around $25k-$35k in the first quarter of 2021, I’d already doubled or even tripled my investment. Bitcoin had a double top in 2021, hitting near $69k twice, and crashing almost 50% in-between. But since November of last year (2021), it’s been almost all down hill, and now it sits somewhere between $17k and the abyss. If the Fed keeps jacking rates, and the economy spirals into a recession, Bitcoin could crash even lower.
But I’m still accumulating and holding. And now is the best time to do so, hard as it may be. When the price is low, and everyone else is saying it’s dead and never coming back. Not in two or three years when it’s making all-time highs again and crypto bros are mortgaging their houses at $80k a coin, and posting YouTube thumbnails of their stupid faces and their stupid mouths wide open.
I believe in Bitcoin. But I wouldn’t say I’m a fantatic or evangelical about it. And I don’t buy into the moon shot price predictions that so many mouth breathing YouTube dweebs like to make. My plan is take advantage of the bear market over the next two years (or however long it may last). When I first started buying in fall 2020, I felt like it was too late. I missed out on buying when Bitcoin dropped to around $5000 during the covid crash because I didn’t see it for the deal it was. But next time I intend to take advantage of major price drops more, and then sell more into strength once the bull run starts up again.
ETH has actually been my most lucrative crypto investment. I started buying this one in December, 2020, and have held since. I’m still up about 2x to 3x on my holdings, even considering I bought some at the tail end of the bull run.
Even though ETH’s been a good investment, I still have doubts about it as a long term value, given the collapse of FTX and many other crypto exchange firms. Not because I think ETH will collapse like those firms, but because unlike Bitcoin, it’s not adequately decentralized. So, it goes against the whole ethos of “crypto” in general.
ETH is also buggy and expensive to use, unlike many other competitors. I compare it to Microsoft Windows in the ’90s, when despite it being slow and awkward, it had such enormous market share that everyone used it.
However, ETH will most likely continue to be used well into the future. It has the distinction of first mover advantage, which, in the tech world, is often enough to secure a stronghold for years to come. Ethereum is the foundation for many DeFi and NFT projects, and I don’t see that changing anytime soon. At this point, whatever supposed “ETH-killers” come out, they’re really competing for third place or worse.
So, my plan with ETH is pretty much the same as Bitcoin. Keep HODL’ing, and keep stacking. I missed out on loading up on ETH at its ridiculously low bottom during the Covid crash — something I regret not doing. I still say there is downside to come. So next time I’ll be more ready to deploy capital and swallow the risk. But to be clear, it’s riskier than Bitcoin, and Bitcoin itself is already far out on the risk curve as far as investments go.
Polkadot (DOT)
Screenshot by author of CoinCecko.com
While BTC and ETH will likely remain in the number one and two spots in terms of market cap and utility for the forseeable future, the question that remains is who’s going to place in the #3 spot and down?
Polkadot is an altcoin I started buying sometime in 2021 into early 2022, but eventually offloaded in favor of more BTC. In fact, I wrote about it in this article here.
DOT has some positives going for it. It’s supposedly meant to act as a bridge of sorts, linking other cryptocurrencies together via use of its native token. Its founder is Gavin Wood, who also co-counded ETH with Vitalik Buterin. DOT also has a good number of developers. It offers high-yield for staking the token, which you can do on your own wallet or on an exchange like Kraken. The downside is that DOT has an unlimited supply, and an effective infinite inflation rate. DOT may pay out between 7% and 14% (or higher), but it has to, because its current annual inflation rate is about 7%. Token inflation kind of goes against the whole philosophy underlying crypto, particularly Bitcoin, itself. Inflation is what fiat money does all on its own. And God knows we’ve seen enough inflation in 2022 to last a lifetime.
At this point, it’s really a guessing game as to what token will be able to compete alongside ETH in the future. I highly doubt anything will beat ETH at this point, even if a coin is cheaper and easier to use. I may return to DOT in the future now that it’s fallen to it’s near-ICO price (sub-$5). I may even stake it again on my Ledger, which for newbies is not the easiest (or risk-free) thing to figure out.
DOT could be one of those rare alts that make higher highs in the next bull run. Which would provide enormous returns considering its present price. But there are still just too many questionable elements. If it keeps dropping, however, and gets to the $1-$2 level during a potential capitulation crash next year, I may decide to stack some again. For now I’m staying away.
Algorand (ALGO)
Screenshot by author from CoinGecko.com
Ugh, this one was a big disappointment that once held some promise. While it may still technically be a “blue chip” alt, it’s fallen out of favor pretty hard, like many supposed “ETH killers.”
Despite its current state, I actually did okay with Algo, initially buying some up in 2021 when it was around $.30, watching it pump to over $2, before plummeting back down to earth. Like DOT, this is another alt competing to at least get into the same ball park as ETH. It has some MIT-trained founders, and a development team. It also had a very easy staking feature. All you needed to do was put it on your wallet, and you’d get daily gains (around 4% annually). I liked the simplicity of it. It was one of my first alt coin “wins.” I did okay, but sold most of my small stack well below the high.
This is another alt I may buy into if it drops hard enough, like DOT. I’m not into meme coins. I don’t do DeFi. I no longer trust exchange tokens, no longer how established they may be. For me, I look for a strong development team, utility, and other fundamentals. Algo has some good things. But its glaring weakness is its max supply, which is ten billion. While that’s better than DOT’s potential infinite supply, that’s still hardly a scarce amount.
Algo still has a lot of questions. But like DOT, it could be a survivor into the next bull run. So I’ll keep my eye on it and may reacquire if it drops low enough.
PancakeSwap (CAKE)/Uniswap (UNI)/ApeSwap (BANANA)/DeFi in General
Screenshot by author from pancakeswap.finance
I only dabbled with DeFI and its various outrageous (and childish) forms. Yes, I see the potential. No, I don’t really care. At least not anymore. And that’s because for all the research and experimentation I did, I still don’t really understand it. And it’s riddled with scams.
I think at most I put a few thousand into the DeFi space. I even made some small gains. But because I just never really got the tech behind it, I ultimately pulled out. Even if an asset space is new and looks promising, I don’t think it’s a good idea to get into it if you don’t grasp it. This is why I avoid penny stocks, most tech stocks, or investing in anything that’s too cutting edge. I like some risk, sure, but I’m not a pioneer.
Still, it will be interesting to see how this space matures in the future. I don’t know that I agree with the idea that DeFi is the “future.” Just because trust is such an important aspect of the financial world. Banks, whether you like them or not, have been established for thousands of years, have government backing, and in 99% of cases, work just fine. Ask the millions who use them for mortgages, car loans, and to store their savings. Banks ain’t going anywhere, buddy. And if DeFi never matures beyond desserts and fruit-themed tokens that crash more than 95% during bear markets, it probably won’t make it beyond the sidelines in the finance world.
Conclusion
This look-back actually encompasses 2020–2022, not just a single year. But it’s been a long time coming. And now that crypto winter has clearly set in, it was time to look at my holdings and think about the future.
2023 going forward will be all about fundamentals, and priorityzing Bitcoin and Ethereum over pretty much everything else. I see those two as the “safest” bets in terms of crypto, that still have a lot of runway. The way I see it is this: Would you rather have a good chance at your investment making an 8x-12x? Or a much smaller chance of your investment 20xing or more by going into a riskier altcoin? I’ll stick with the “smaller” but more likely return. It’s easy to lose sight of the big picture and appreciate the potential gains in the crypto space. A good diversified S&P 500 Index Fund will generally make 8%-12% a year. An 8x-12x on a few virtual coins in a few years is quite frankly a ridiculous ROI, and trying to get more than that is just asking for trouble.
Another lesson I’ll take with me moving forward is keeping a better eye on the exit. It’s nice to learn about new technology, and seeing where all this crypto could lead to in the future. But in the end, it’s an asset like anything else. Not a religion. Not a philosophy. I’m here to make money, not change the world. Had I sold my Bitcoin and Ethereum holdings late last year in 2021, I’d be sitting on a pretty good down payment for a nice house. As it is, I’ll have to wait for the next bull run. But my “mistake” of HODLing through the peak, and my patience, may potentially get rewarded, if the Fed and the economy ever gets itself sorted out. The next peak could be way bigger.
We’ll see where things go in the new year. One thing’s for sure. I’m looking forward to 2023 and beyond. 🙂
No, it’s not investing in Dogecoin or Shiba Inu, or any other meme coin that rocketed to the moon and beyond. Though I do remember seeing Shiba offered on a decentralized exchange long before it went parabolic, chuckling at the dog symbol, and then simply scrolling past it. That’s the easiest 1000x bagger I’ve ever missed.
It’s not learning about DeFi platforms, such as PancakeSwap, and the numerous other liquidity pools on UniSwap, etc.Though I do remember hearing about PancakeSwap sometime in early 2021 on Twitter before it became super popular. CAKE was all of a few dollars at the time, and you could stake it for an APR of like 800%. It has since fallen back in price to about where it was when I first learned about it. And the APR is around 38% last I checked.
Here’s the deal: You’re almost certainly going to miss out on like 99.9% of the greatest investment opportunities out there. There’s no point in beating yourself up over that. Just accept it.
But that’s actually great news. Because the truth is that you also have a 99.9% chance of finding a few great investment opportunities BEFORE they get big and deliver those nice, multi-X gains.
The biggest question isn’t whether you can find those opportunities. If you keep looking for them, it’s practically a mathematical certainty that you’ll eventually find one sooner or later. “Seek and ye shall find,” as the Bible says.
The real question is whether you’ll fully take advantage of the opportunity when you do find one.
In probably no other asset class is this rule more apparent than in cryptocurrency. The asset class where a coin or token can skyrocket 100–1000% and higher in a matter of weeks or days.
But you don’t have to luck out with meme coins, or sh*t coins, or risk rug pulls on dubious dex coins, or anything ridiculous like that.
When I look back at my crypto investments, my biggest regret is simply not investing enough in solid, reputable projects when they were cheaper, and when I had the chance.
In my article on Polkadot, I mentioned first starting to buy it in July of 2021, after it had tumbled from its initial high in the $40s, to as cheap as $10-$11 per DOT. I knew it was a solid project with a lot of developers, and a rapidly growing ecosystem. So, of course, I only invested a few hundred on the outset. Gradually dollar-cost averaging in, as you’re supposed to for proper risk management. DOT then proceeded to climb to over $50 later in November before falling briefly back down to the mid-teens this past January. It’s now in the early $20s, and still pays roughly 14% in staking rewards.
For Bitcoin, I had a similar experience. My first purchase was for all of $25 worth back in September, 2020, when Bitcoin was “only” about $10,000. I probably only managed to put in a few hundred more before it started really climbing in early 2021. Same deal with Ethereum, which I started buying initially that December when it was in the $700s.
It’s not like I didn’t have more money to invest into those coins at the times I discovered and vetted them as risk-worthy assets. If anything, I was overcautious, allocating far below what I could have and should have, proportional to my income and net worth.
I didn’t lack funds. I lacked conviction. I was too timid. And that difference of temperament may have been what separated me between mere modest gains and possible financial independence.
Of course, to be fair, that overly cautious temperament of mine could also have been the difference between solvency and ruination, had those coins not broken out to the upside.
Look, I’m not saying to go out and plunk down tens of thousands on the first good investment you come across. And I’m certainly not saying to go all in on anything, no matter how much of a sure thing you think something is.
What I’m saying is sometimes all that stands between you and getting wealthy, or at least scoring big on an investment, is balls (or ovaries).
Sometimes you’ve got to go in BIG on a conviction.
Imagine if the Winklevoss twins hadn’t committed heavily into Bitcoin when they first learned about it in Ibiza in the summer of 2012. They probably wouldn’t be among the first crypto billionaires today. Even worse, they’d still be known as the guys Mark Zuckerberg screwed over in that movie. In fact, you could even say that because they didn’t fully commit to their social network ConnectU, that they gave Zuckerberg the opportunity to take advantage of them.
Asset diversification has its place. My retirement funds are diversified, for sure. But diversification is also, as Michael Saylor puts it, “Selling the winners for the losers.”
Proper asset concentration, on the other hand, can make you wealthy.
As I continue my investing journey, one thing I’ve learned more and more is that it’s not so much about numbers or dollars. It’s more about psychology. It’s about being able to fight through the fear of loss, and committing strongly to a good asset or opportunity when you find one.
If you’re more of a conservative investor (say, an index fund maximalist), you may feel put off or suspicious of any so-called “asset” in the crypto space.
You’ve no doubt noticed the wild price swings, rug pulls, and outright scams that have tarnished the crypto asset class over the last few years. And you’ve no doubt been put off by the hype mongering, and the constantly braying moon boys on YouTube and Twitter.
Even Bitcoin, the king of digital currencies, HODL’d by billionaires like Elon Musk and Michael Saylor, has seen its value soar to over $60,000 per coin, only to collapse by almost 50% in a matter of weeks, over the last year. I mean, yikes. You call Bitcoin an “investment?” More like a time bomb you stick down your pants and sit on until it explodes, only it doesn’t have a helpful digital counter like the ones in the movies always do.
You’ve looked at NFTs and probably wondered who in their right mind would spend millions on a ugly piece of “art” like a BoredApe. I know I have. Though far be it from me to criticise Justin Beiber’s digital token acquisition habits.
Or maybe you’ve looked askew at DeFi projects like UniSwap, PancakeSwap, and their many derivatives. SushiSwap. SundaeSwap. There’s even an ApeSwap, because why not. The crypto world seems to have a simian fascination. And a food obsession, apparently.
I consider myself more of a conservative buy-and-hold type investor, for the most part. There’s not a diversified index fund, mutual fund, bond/stock blend, Vanguard ETF, State Street ETF, etc. that doesn’t rustle my jimmies. You say safe, diversified S&P 500 fund, and I’m likely to respond like Jules Winnfield in Pulp Fiction, as you’ve put my fears of wild market fluctuations at rest.
As an investor who’s mainly stuck to the safer side of the risk curve over the years, it took me a long time to warm up to the idea of plunking down any money into crypto. I remember feeling guilty just setting up my Coinbase account back in August, 2020. Feeling like an ex-con with a passing cop looking my way as I bought my first bit of Bitcoin later in September. Bitcoin was around $10,000 at the time. God, how I wish I had bought more.
But then a funny thing happened. When I realized that my not exactly insignificant Bitcoin purchases weren’t oozing through my WiFi connection like some electronic demon, to strangle me while I slept at night, I began to experiment with other cryptocurrencies. Though I know now that there’s Bitcoin and then EVERYTHING ELSE, at the time, I didn’t exactly differentiate. I judged crypto assets rather informally, looking at market cap, and what was widely considered relatively “safe” to invest in. I went with Ethereum next, sometime around late December. It was around $700 or so per token then, though it quickly skyrocketed through March-April 2021. That was the first pump that showed me the potential for decent gains in the cryptoverse. Of course, crypto puked shortly after in May. But that first pump and dump only made me more intrigued.
Cryptocurrency is kind of like a drug. You’re always chasing that first high from your first buy.
Eventually, after accumulating more Bitcoin, Ethereum, and a small so-called “Ethereum killer” known as Algorand, I eventually discovered a little gem known as Polkadot (DOT).
Polkadot is often tagged as another “Ethereum killer,” just like Algorand, or Cardano, or Solana. Though it’s a bit more complicated than that. It’s basically a giant ecosystem containing numerous other tokens and projects, called “parachains.” It’s kind of like how the iPhone is a platform on which millions of apps (like the iBeer) operate. Polkadot helps enable other blockchains to “talk” to one another seamlessly. It was created by Gavin Wood, who co-founded Ethereum. But unlike other crypto tokens, where you buy, hold, and pray they go to the moon before your next shift at McDonald’s starts, Polkadot offers something unique in the way of staking rewards.
What is “staking?” That’s basically when a crypto pays you to hold it. It’s a bit more technical and complicated than that, I realize. But in essence, you’re paid rewards (in the form of the token you’re holding) for helping to maintain the blockchain. For Polkadot, the rewards work out to roughly 12–14% (give or take) APY. Check out this calculator here to see for yourself.
There are a few reasons why I, a more traditional type investor, found myself attracted to Polkadot. One, the lizard part of my brain interpreted the staking rewards as similar to opening up a high-interest rate CD at a bank. Or better yet, a stock dividend. You’d never see double-digit interest rates like that at a bank. We’ll likely never see such rates ever again in our lives. But you do see decent dividend yields like that in stocks. Particularly for Real Estate Investment Trusts (REITs). AGNC Investment Corp., for instance, pays a 10.90% annual dividend yield. And two, staking Polkadot is pretty easy, evenif you’re slightly technophobic. Polkadot offers the opportunity to gain in market cap, allowing for larger returns. Whereas in a dividend stock, sometimes the dividends themselves eat away at the value of the stock itself, causing your overall investment to slowly erode, offsetting any gains you might have made from the dividends. Look at AT&T for an example of this.
I bought my first bit of Polkadot back in July, 2021. It was trading around $10 at the time. Crypto had just crashed from their earlier spring highs. Similar to my first Bitcoin and Ethereum purchases, I only bought a little at a time. Gradually scaling up, and watching the price slowly appreciate. I learned that you can stake DOT on platforms like Kraken, and earn a reliable 12% annual APY. You can stake and unstake at any time. The only downside is you’re keeping your DOT on an exchange, under someone else’s custody, which for those who ascribe to the notion “Not Your Keys, Not Your Coins,” that would not be acceptable. But for most investors, staking on Kraken, or other exchanges, is going to be the simplest, fastest, and easiest way to getting the DOT gravy train rolling.
However, if you want to potentially earn a higher APY, and keep more control over your DOT tokens, you’ll have to stake them yourself directly onto the Polkadot network. DOT has “validators,” who are basically private individuals who run computer networks that monitor and secure the Polkadot network. Some of these validators manage networks comprised of millions of DOT tokens. By cutting out the middleman exchanges like Kraken, and going directly to the source, so to speak, you can increase your APY. To do this, you need a crypto wallet like a Ledger, which is set-up to allow you stake your DOT directly with a validator. Ledger is what I use, and even for a relative crypto newbie, it was pretty simple to set-up. After choosing a validator, you simply assign your tokens, and then let the rewards start to roll in.
IMPORTANT NOTE: You need a minimum of 120 DOT in order to stake directly with a validator. And once you stake, you won’t be able to unstake for 30 days. Kraken, on the other hand, does not require a minimum staking amount, and you can remove your DOT from staking at any time. There is also more risk to staking directly with a validator. You can be “slashed,” which is basically when a validator does not pay you fairly for your staking share. Be sure to do your own research.
As you can see from the screenshot I posted at the top of this article, my DOT validator sends me rewards everyday in exchange for me staking my tokens with their network. The rewards fluctuate. Sometimes it works out to 10%, while other times it’s gone as high as 20%. If you average it out, it comes to about 14%.
While 14% may not seem very high in our current WallStreetBets-ified culture of “To the moon, baby!” I find that seeing rewards trickle in like that to my account every day has a profoundly satisfying and even therapeutic effect. Even if it’s just a dollar, or a $1.50, it means progress. And remember, that 14% is of whatever the value of your DOT holdings currently are. So, let’s say you were to buy 120 DOT right now at around $20, and one year from now it doubles to $40. Then, instead of receiving roughly $.92 a day, you’d be getting almost $1.84. It works the other way, too. So if DOT is $10 one year from today, you’d be getting $.46 instead. Volitility is a two-way street, and higher returns almost always mean higher risk.
I find Polkadot a unique cryptocurrency in that it approximates the dividend payout you see with traditional stocks, with its staking rewards system. It’s as blue chip as you’re going to get when it comes to alt coins, with a current market cap of over $19 billion. And it has a growing, very active, and very diverse ecosystem of projects throughout its blockchain. Like with any tech-related investment, you want to see a lot of developer brain power working to take things to the next level. But also like with any crypto, it’s unpredictable, with sudden rapid price swungs. Be sure to do your own research. And as always, nothing in this article is intended as investment advice. This is simply my own experience with Polkadot.
What do you think of Polkadot? Would you invest in it, or have you already? What other sorts of cryptocurrencies have you found?
Dean Brooks 