Back in on May 31st I wrote part one of this article. (Link) The cryptocurrency market sub sequentially crashed.
Last week they roared back.
Bubble markets look the same, be they dotcom bubbles, single stock bubble or Bitcoin.
They go up like a rocket and come down like a rock.
However, the point I was making was massive companies will come out of these emergent technologies, company like Amazon which came out of the dotcom crash. The children of the Cryptocurrency bubble will be colossal.
Where this bubble goes is impossible to guess, how high incalculable, but the take away is:
Tulip mania crashed horribly taking a large part of Dutch economic dominance with it. Yet today Tulips are still big business in Amsterdam. Bubble are a phase not the whole lifecycle of something new.
A bubble is just the beginning of something big.
There will be crashes. There will be scandal. There will be ruin for many, there will be those left behind moaning it isn’t fair. There will be giant fortunes made.
A new industry will rise and a new generation of billionaires will spring from nowhere and strut about. This will be a remake of an old movie.
What makes a bubble, does not disappear with it.
Not tulips, not railways, not cars, not Wall Street itself, not electronic, not computers, not the internet. Nor will Blockchain technologies or their offspring Cryptocurrencies vanish.
After my article Bitcoin, Etherium etc crashed and now they have bounced back.
I believe there is a huge lack of global M2 and this will drive this private sector money supplies success and it fills a vacuum left by government. US has trillions less M2 (money and near money) than it has government debt, that imbalance is causing Cryptocurrency to fizz up into the void left by too little ‘official money.’ It has happened many time in history. When there is too little money, economics finds a way to make it in the private sector.
From an investment point you have to play this game.
As an investor you have to jump on in and skill up and learn.
But how?
Let’s start at the beginning.
Make this call. Are Cryptocurrenices going up or down in the medium to long term.
I say up.
As such I can be serious about investing. I am building a broad portfolio of coins, over time. I have about 20 different ones. Any of them could go to the moon or to nothing. It is such crystalline speculation it makes me smile. I am gambling this is a hugely positive sum game. If it is I will do well.
If the call is down, then you need to play these markets with a fist full of dollars and trade it like a computer game with putting in so little money you don’t care if you lose it. Let’s say $100. And you can.
Because cryptocurrencies have so many decimal points some of the coins out there are effectively toy tokens. Yet they still have markets and can still be ‘mined’ for ‘free coin’ with your computer and played with in the same way as a $3500 bitcoin.
Every investor should at least do this, because they need to understand this world as it will soon be a tide that will sweep all markets.
Blockchain technology is a fantastic new technology, it can be thought of as, part database, part cloud service, part political platform, but is at the heart a way to keep records in a new way that has and adds significant and unique value.
Blockchain enables Cryptocurrency and the value of Bitcoin and the universe of Altcoins cascades from it.
Understanding Cryptocurrencies unlocks for the investor, the coming Blockchain boom which will and must hit the stock market soon. There is no Blockchain “dotcom” stock market frenzy yet, but it will come and understanding it will be very valuable.
Right now that frenzy is in ICOs, mainly unregulated cryptocurrency flotations, and this thrilling madness, will at some point spill into the old highly regulated world of equities.
Anyone who ‘gets it’ when this happens will be set to make fine returns.
Now a disclaimer. I am knee deep in cryptocurrency, if I mention it here I use it or I own it. I own lots of different ones, which amounts to quite a chunk of change in total, I’m mining it like a nerd in a mania. ADVFN the financial website I run is adding more Cryptocurrency content by the day.
TDLR: This is the big one for the next few years.
But what should someone who doesn’t know anything, do?
Firstly you need to kit up.
There are many sites in this game but the following ones are solid basic starting points. However at all stages remember this really is a wild west situations. There is no mummy here and the environment is saturated with predators, chancers and fools. Navigating this anarchy is where the big money is to be made and that will take experience.
That aside you can start here.
www.coinbase.com You can buy and sell 3 of the big coins here. Just Bitcoin, Etherium and Litecoin. You can even buy some with a credit card, a easy way to get rolling. The site is US based and apparently raising money at a billion dollar market cap. In this wild west, these guys seem low of the insane risk curve of this arena
www.bittrex.com When bitcoin spilt they got me my Bitcoin Cash immediately allowing me to dump it at $900 before it collapsed to $250. This was execution at a level many didn’t match. It meant I made good money from this crazy situation. The proof is in performance in this game, the environment is pure ultra-risk and you have to evaluate ‘trustworthiness’ as the key variable. Bittrex support a plethora of coins, so you can deep dive into the wild world of altcoins here.
www.coinexchange.io This exchange supports some really extremely small coins and this is where I play coin with little or practically no value to practice at negligible risk.
www.nicehash.com This is where a novice can mine. The Nicehash software will try to earn you as much Bitcoin as your machine can grind out and every few days it will send it to your Coinbase or other Bitcoin destination.
The fan on your computer suddenly blowing and your machine getting hot will probably freak you out at first, but then receiving money for that is also a sobering experience. You switch your computer on and you receive money passively. That is new and that is very, very important development.
You and your computer has gone from hitting the ASK of life to sitting on the Bid and getting paid. To me, ‘mining’ if a clear example of how the Blockchain changes everything. Getting paid to run your computer opens a whole new economic chapter.
By getting yourself hooked up will push you a fair way up than extremely long and steep learning curve.
Then you will be able to play the game at different levels.
Bitcoin is the big game. It trades billions a day, a transaction can cost from $1 up, so you need to be thinking with that in mind if you are going to play with it.
But you don’t have to play Bitcoin. You could play a minnow like Boatcoin or Feathercoin, where $10 of coin gets you a long way, yet their markets can be traded like any stock. For the cost of a ‘Big Mac’ I’ve played ‘market maker’ on these coins. You can ‘market make’ coins like these like a Wall street firm and push them around and bully them like a ‘white shoe’ firm would a Nasdaq stock.
It is remarkable, they financial markets you can trade of for essentially nothing, like playing poker for match sticks. This is also an eye opener on many other levels. Stock markets do the same for companies and extract hundreds of millions in tolls as do brokers. At some point they will have to address that.
Once you have played the madness for a few dollars, you should be able to make up your mind up whether Cryptocurrency is the next big thing. You will also now know a lot more about Blockchain and cryptocurrencies than most.
Obviously you know what I think.
My point is investors need to start playing for penny ante stakes now, to skill up for when this market breaks into the mainstream. When it does there will be a lot of money to be made or lost.
With knowledge it will be much easier to be on the right side of those trades.