What to do with last year’s crypto gains in 2018
I won’t be alone in having made some money (on paper at least) out of cryptocurrencies in 2017. Like me, I’ll assume you did the same by diversifying across a number of coins and by withdrawing your capital as soon as you could, as a result of taking profits regularly.
If I took my paper gain as it stands today, and divided it by the amount of time I have spent learning about, researching, writing, training and mining cryptocurrencies, I’d be on an hourly rate of about £95. But it’s just on paper and so it counts for nothing. Hourly rate could only be determined by looking at the profits beyond my ring-fenced capital that I could bank as real money I can easily spend. For me, as a UK resident, that is British Sterling.
When should I bank my gains?
Maybe the answer to this should be right now. Many people reckon we are in a bubble and it’s hard to argue against that. If that’s true then ideally I’d bank my gains before the bubble bursts. But what if I do that and this insane growth isn’t done yet? Isn’t even nearly done?
One other thing that stops me cashing in is that I want to hold on to what is now a diversified portfolio of 15–20 currencies because it’s through those investments that I continue to learn more about blockchain. If I do nothing, and the bubble bursts, I’ll still have some kind of holding, and a platform from which I can continue my learning.
In every bubble I think foolhardy investors often say that this time it’s different. Even though I’m not about to cash in, this isn’t because I think it’s different. I think some similar sort of crash is due here as to what happened with dotcoms in the early noughties. Even then though, those who held stocks of some of the early big players did really well if they held for 10 years plus. If all my gains today are upside then I lose nothing by holding for the same period, even if that sees my profits tumble in the short term.
Just before Xmas most currencies fell by almost 30%, and then just largely bounced back. This sort of volatility happens a lot within crypto and as such people are winning or getting wiped out over ridiculously short time scales. I think the volatility has to stop before the bubble can burst, and right now I can’t see what will bring the fluctuations to a halt and send prices solely one way for a sustained period. But on the basis that history repeats itself I’m working on the basis it will happen at some juncture.
So, in terms of how to prepare for a seeming inevitable occurrence one day, I’m doing this. When I started on this journey, I thought a gain, in a year, of 10% on this Bitcoin thing would be nice. And so I’ve banked that 10%. Job done. And each month I’ll keep banking that 10% until the portfolio runs dry. If the whole sector grows, my portfolio will stay intact and I’ll be drawing an income for a while. If the whole sector goes pop within a month. (And I define the bubble bursting by a fall of 90%), then I still have my portfolio. And, when in the first month I can’t bank that 10% because my portfolio has gone, I’ll have to say at that level I had a pretty good ride, having made returns way beyond my expectations. And, in the meantime, we will have seen a lot of change and embrace a lot of learning opportunities. It really is a very exciting time.
