My Cryptocurrency Experience

By now, almost everyone that lives in the world today has heard of Cryptocurrency. Bitcoin, Ripple, Etherum, and LiteCoin are just a few of the dozens of cryptocurrencies available to purchase and sell on exchanges like Coinbase, Bittrex and Robinhood. These alternative investments/currencies have gone mainstream so that Average Joe and Jane investor can now take their hard earned dollars, purchase/convert them to their Cryptocurrency of choice, and ride the wave to riches. Or at least that’s the story we all convince ourselves of.

I decided to test this world of Crypto and open up my own Coinbase account and invest a modest $300 USD. Now, I’d like to preference that my opinion here is not for or against Cryptocurrency. Nor is it an endorsement of any one coin. As a matter of fact, I’ll be quite honest in stating that I know almost next to nothing about how Cryptocurrency works, how it’s valued, and arguably whether it’s even a “real thing” or not. On that last note, it’s not lost on me that currency in general isn’t a “real thing” either, but that’s a conversation for another day.

The reason I wanted to write about Crypto is to explain my experience and findings in putting my hard earned dollars into this alternative investment. My interest piqued on the topic when I received a few calls and emails when Bitcoin was above $13,000 a few months back. At that time, it wasn’t hard to find articles talking about “Bitcoin $20,000!” “Bitcoin $50,000!” “Bitcoin $100,000” all over the internet. I’m not going to lie, even though my response to everyone who called/emailed was “I have no clue about Crypto,” I too was intrigued to try my luck. Fast forward a few months and over a 50% drop later, and here I am wanting to share what I learned.

Opening an account on Coinbase was very easy.

Finding a cryptocurrency exchange on Google wasn’t hard to do. In fact, it was downright easy. My criteria boiled down to which exchange was the “safest.” You can’t mail in a check or wire cash to these exchanges, so like most online financial accounts, you have to link up a bank account to transfer money. Coinbase had the best reviews when it came to safety after some research. So I signed up for an account, went through all the necessary steps and linked up my bank account. The entire process took me around 30 minutes. So far so good with the Crypto experience.

I spread my risk between Bitcoin, Litecoin and Etherum.

Being a financial planner and adhering to the power of MPT (Modern Portfolio Theory) and Diversification, I decided to not go all in on one coin and instead spread my risk. The coins I chose were Bitcoin, Etherum and Litecoin. Bitcoin was an obvious choice since it’s the most popular and well known. I had vaguely heard of Etherum and Litecoin, so I decided on those to round out my three purchases. Being a diligent investor, I tried to Google research on the above coins. However, there isn’t much in the way of hard research and numbers aside from trading volumes and pricing. Probably the most intense debates you find on these coins comes in the form of Reddits and Subreddits. So basically, just a hodgepodge of opinions. This was obviously one of the first red flags for me when it came to investing money in Crypto. With stocks and bonds I’ve always been able to readily access information on an investment, investigate the underlying business or bond I’m putting my money into, and pull the trigger. With Crypto, this was definitely more difficult

The first day I saw my investment of $300 go to $365.51…Easy Money!

I made money…and really quickly! There really isn’t much to comment on making money fast, except to say “Hell, yes!” However, it wasn’t lost on me that I really had no clue why it went up and why it went up so fast. In some respects, I felt like most novice investors who try their hand at the stock market. “I don’t know why it goes up and down,” is a very common thing I hear at parties and social gatherings when I tell people what I do for a living.

I had no clue that Cryptocurrency traded 24/7.

After that euphoric first day of killing the Cryptocurrency market and feeling like a genius, I checked my account the next morning around 8am to see what the day had in store. To my surprise, I had noticed that my account had lost a little bit of value (about $15) around 2am! This is when I first found out that Crypto trades 24/7. This was something I was totally not aware of, nor familiar with. US stock exchanges trade M-F 7:30am-2pm Mountain Standard Time (which is my time zone) and are closed for National Holidays. How in the world was I going to monitor this while I slept my customary 8 hours per night?!? After about a minute of thought, I convinced myself this wasn’t that big a deal and was simply part of being a Crypto investor. Coinbase does afford you the ability to create Stop-Loss instructions so that if you’re Crypto plummets more than a certain amount of your choosing, an automatic Sell or Buy trigger occurs. This is no different from a regular brokerage account, however, for novice investors in general, Stop-Loss is not something most are familiar with.

It is not very easy to actually use Crypto in the real world.

After a few weeks, my crypto had come back down to Earth a bit. I was still up from my initial $300 investment, but barely. During this time, I decided to start to be more aware of businesses, restaurants, etc. that I frequented and whether they took Crypto as payment. Not surprisingly, not a single place I visited took anything other than Debit, Credit, or cold hard American USD. If you search hard enough online, there are places that take Bitcoin and other Crypto as payment for goods and services rendered, however, they are far and few between. In order to actually use my Crypto to purchase a meal and a beer, I would need to sell my Crypto and convert to dollars, then transfer the proceeds to my bank account. This process is no different from investments in individual stocks, however, the term “currency” within the Cryptocurrency name definitely implies to novice investors a bit more immediate liquidity and ease of use.

I lost money very fast, and had no clue why.

Months passed and I watched in horror as my $300 fell over 50% to $143.53. Now, this didn’t happen overnight, but coming from a world of index funds and Blue Chip stock investments, this was a very fast fall from grace for me. And again, I truly had no idea why it went down aside from the Google research I was able to gather on my own from Reddit. I did observe days where my coins fell over 15% in a matter of hours! That’s right, hours, not days or months. What kept me going was the mentality I’ve always had with investments, which is that this was earmarked for long term savings. However, it wasn’t lost on me that most investors and novices don’t think this way and I figured most people would sell at this point.

So what’s the verdict? Did I sell my coins and close my account? Did I double down on the 50% loss and put in another $300? Did I invest in other coins such as Dash, NEO or EOS? The answer is no to all of the above. I figured my modest $300 wasn’t much in the grand scheme of my overall financial plan. So, if I lose it all and it goes to $0, no skin off my back. But I am surprised to see how many people start off investing in crypto with a lot more money than my $300 initial investment. As I stated earlier, I’m not here to tell you whether Crypto is a good investment or not, or what specific coins to put your hard earned money in. I simply wanted to share my experience and thoughts of what I went through. If there is one bit of advice I’d give to people, it’s that investing in general isn’t a get rich quick scheme. It takes time, diligence, and a strong demeanor and appetite for risk to truly reap the benefits of any investment. In addition, you should always research where you put your money and find out how easy it is to get a hold of in a pinch. Now, I’m sure there is A LOT more to talk about when it comes to Crypto and its place in the world today and its future, but that’s for another time.