January Review aka Crypto crashes and burns


January was one of the worst performing months for cryptocurrencies in a long time. At the start of the month, bitcoin was worth almost $15,000. Today it fell below $9,000. Over the past 4 years, this was the 3rd worst performing month for bitcoin.

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Keep some perspective. This 25% drop in bitcoin comes on the heels of some insane returns from the latter half of 2017. If you were fortunate enough to buy in during those times, then this January drop is only making a small dent into your profits.

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And if you’re curious about that -7.44% last September, that was due to China announcing the banning of crypto exchanges. That led to similar doom and gloom as today, but as you can see, bitcoin bounced back to have record returns the following months.

Interestingly enough if you look at the past 3 January’s, you’ll notice a definite pattern. Some people speculate that it’s related to Chinese New Year being in January and traders in Asia sell of their crypto to buy gifts for the holiday.

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So how did the other coins do in January?

Most of the top 10 coins also crashed, except for Lumens and Ethereum.

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Of the top 50 coins in January, these were the ones that were positive and there was still some good gains, especially if you held VeChain.

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Most of my profits were wiped out, but I fortunately had Eth and XLM to keep me afloat. Here’s hoping for a better February!


The 4 big untruths about Bitcoin


Bitcoin is going to revolutionize the way we pay for things because it’s quick, cheap, anonymous, and decentralized. Well, not quite. It turns out that this is kind-of-not-completely true. I wouldn’t say a lie, but more like … an untruth(Da da da. Cue suspenseful music..)

Quick and cheap – By design, the Bitcoin network processes 3-6 transactions per second. Sounds fast! But for reference, Visa handles 47,000 transactions per second. When the number of Bitcoin transactions worldwide was low, this wasn’t a problem. Now that Bitcoin has skyrocketed in popularity it is not uncommon for wait times of 30 to 60 minutes. Anecdotally I had a transaction that I made at 3:30pm which didn’t get confirmed until I woke up the next morning.



Also, in order for a transaction to be processed, there is a transaction fee that used as incentive and reward for the miner to process the transaction. Not including any transaction or too low a transaction fee has the risk of waiting for a long time for your transaction to be processed. Again, due to high levels of transactions and the laws of supply and demand, people have seen fees upwards of $30. So imagine waiting half an hour for your cup of coffee, and paying an extra $30 for the privilege of paying with your Bitcoin.

AnonymousAs I’ve already mentioned, Bitcoin is not truly anonymous. This is because the blockchain is open and public, so even though you don’t know which address belongs to who, anyone can see the balance of any Bitcoin address. You can also actually trace the flow of Bitcoin. For example, picture the scenario where Alice pays Bob and Bob in turn pays Charlie. You could see that funds flowed from Alice’s bitcoin wallet through Bob and onto Charlie.

Decentralized – Ok, so this one is still true, BUT it’s not 100% impossible to circumvent, and we are nearing a situation where decentralization could be compromised. There are thousands of Bitcoin computers aka miners around the world. Bitcoin needs them to be independent because they are confirming transactions essentially by voting. If over 50% of miners say a transaction is valid, then it gets confirmed You can imagine a handful of rogue miners submitting false transactions. Those transactions would get rejected by the other thousands of miners who would disregard those miners’ transactions. Phew… as long as more than 50% of the miners don’t band together to conspire to confirm false transactions.

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Beware of evil miners!

BUT due to cheap electricity costs, most Bitcoin is mined in China, an estimated two-thirds of all Bitcoin. Having such a large percentage of miners in one country puts decentralization at risk. While I can’t imagine how the Chinese government would be able to take control of all the miners inside the country, this is also the same country that has shut down access to Facebook and Google to over a billion people, so there is definitely a greater than 0% chance. And keep in mind that decentralization is what makes Bitcoin valuable. So there you go, it IS possible (albeit still very very unlikely) to destroy Bitcoin.

So where does this leave Bitcoin?

Well, Bitcoin is still the godfather of cryptocoins, and is by far the most recognized and has the most potential to hold value. But this is one of the reasons why there are hundreds of other cryptocoins out there. We are already on the second and third generation of cryptocoins, each one seeking to shore up Bitcoins weaknesses. Litecoin can process about 50 transactions per second while Ripple claims a ridculous 1500 transactions per second. Other coins like Monero and Dash focus on privacy and provide the anonymity that Bitcoin lacks.

As always, invest wisely!





The up’s and down’s of Bitcoin

On November 20, I bought my first cryptocurrency. It was $25 of Ethereum. Within days it jumped to $30, an astounding 20% jump. It took the S&P 500 all of 2017 to go up 20%. Over the coming weeks, I gradually purchased more and more cryptocurrency. Since Coinbase offered Bitcoin, Ethereum and Litecoin, I figured I should diversify and spread my odds across all three.

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Here is a simple Excel chart of the unrealized gains of my cryptocurrency since I started. (I use Cointracking.info to track my coins, but that’s the topic of another post). By Dec 18, I had bought $1200 of cryptocurrencies and was up $985, representing an insane 82% increase. That was the day bitcoin hit $20,000. I knew I was going to be a millionaire in a matter of months. I felt like a genius, and my only regret was that I didn’t put my entire life savings into bitcoin. Of course, I had to stick to my genius strategy of just putting more money into bitcoin and watching it explode. As you can see from the chart, in less than a week, my profit would drop to almost $400, still a respectable 25% profit based on the ~$2000 I had deposited.

However, because this chart only plots the daily profit, it doesn’t show the hour by hour and minute by minute volatility of each day. On Dec 24, my crypto-profit had all but disappeared and I was looking at a $100 loss and expecting my $2000 investment to go to zero within a few hours. Going from being in the black 82% to being in the red in less than a week was shocking. I was this close to getting out of the cryptomarkets altogether. I stuck it out because of my stubbornness long-term hold strategy. Fortunately, it has bounced back and has stabilized to a still awesome-but-not-amazing-as-82-percent 25% gain. I’m going to hold off putting too much more $$ into bitcoin until I can figure out a good crypto investment strategy and gain a better sense of the market cycles. But I’m glad that I was able to experience a crypto-market correction and still be invested. That’s not to say I won’t pull all my money out if/when it crashes again though!

How did you handle the recent market correction?