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Blood on the streets: It’s definitely NOT easy to heed Warren Buffett’s advice to “Be greedy when others are fearful”

chanman · Feb 3, 2018 · Leave a Comment

Jesus Christ. What has happened to the crypto markets since the New Year?

There is literally blood on the streets.

Bitcoin (BTC) is down to USD 9,000 from highs of around USD 20,000 and the whole of the top 100 on coinmarketcap.com are also down at least 50% from their highs just a month ago.

Coins like Ripple are down more than this. XRP was around USD 3.65 on 8th Jan and now it’s trading at USD 0.8. If you’ve bought at the high, then you’re licking your wounds. Hope that you haven’t lost too much.

The crypto markets are shitting themselves.

The newest money that piled in at the end of 2017 have dashed, or they’re holding on whilst their assets have more than halved in a month.

That’s the volatility of these markets.

It’s clear that fear has taken over.

Every day, there’s talk of a regulatory crackdown. Or there’s been a hack of an exchange (Coincheck). Or there’s a scam behind a coin (Tether and Bitfinex).

Why wouldn’t you be shitting yourself? Pundits are now talking about Bitcoin going down to zero.

Are they all wrong? Is it possible that they’re right and I’m wrong? Am I just being a fanatic by thinking that this is just noise and that this will just blow over?

Perhaps.

I’m certainly not thinking about selling my house and putting it into crypto.

But maybe the fear has been overdone.

Let’s look at it from a different angle.

Have the projects themselves changed in the last month? No. They’ve very probably carried on working and developing. Monero’s developers haven’t been standing still whilst the markets shat themselves. They’ve been improving their code and making new features.

Value and price are different things. To quote Buffett again: Price is what you pay, value is what you get.

The value of the underlying has only been increasing in the last month.

Developers must have been working behind the scenes, at Decred, Bitcoin, Augur, OmiseGo, Cardano. Everywhere. These projects must all be better than they were a month ago.

The real questions are:

  • Are the fears about regulatory crackdowns real?
  • And if not, then have crypto prices gone down too far vs this risk?

Are the fears about regulatory crackdowns real?

The worst case scenario is that all governments around the world ban and criminalise holding and trading any crypto asset. This would mean that I could be sent to jail for holding and trading Bitcoin. Likelihood = low. Different countries have different approaches to crypto. See this wiki article about different countries’ approaches. This means it’s likely that some countries would be pro-crypto.

The next worst case scenario is that your own country bans crypto. I’m in the UK and I don’t think that this would happen. From the same wiki article above:

“As of 2017, the government of the United Kingdom has stated that bitcoin is unregulated and that it is treated as a ‘foreign currency’ for most purposes, including VAT/GST.

Bitcoin is treated as ‘private money’. When bitcoin is exchanged for sterling or for foreign currencies, such as euro or dollar, no VAT will be due on the value of the bitcoins themselves. However, in all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for bitcoin or other similar cryptocurrency. Profits and losses on cryptocurrencies are subject to capital gains tax.”

It doesn’t look like from the above that Bitcoin or other cryptos are viewed as heinous in the UK and I think therefore that it’s unlikely to be banned in the UK.

And if not, then have crypto prices gone down too far vs this risk?

If we think that people see this regulatory risk as real, then we can assume that this is baked into the current prices of cryptos.

I.e. if the regulatory risk was removed or felt by investors to have been removed, then we might think that the prices will increase towards previous levels.

Is this as far down as we’re likely to see it?

Let’s look at Bitcoin as a proxy for the entire crypto market. The chart below from coinmarketcap.com is for the last year:

Look at the grey bars at the beginning between 6th Nov 2017 and 29th Jan 2018. That’s volume. That’s the amount of Bitcoin that changed hands. Compare that to the date period to the left of that. The volumes really only started picking up in November. That volume we might think is new money. Retail investors who have piled in with FOMO. Now these same new retail investors AKA weak hands have been shaken out.

Where is the support level?

If we go by the volume example above, we might think that the price level before volumes became enormous (relatively), would be a good guide:

I’m going to call it as the bottom price levels that we could expect are around USD 5,000. From here, it will be about building momentum again and positive news around crypto.

Should you wait for that? I’m not sure as it may never get down to those levels again, and so it might be worth a nibble at these prices to at least get a measure of cheapness.

What do you think? Let me know in the comments below.

How and why to buy Binance (BNB) (potential 2,000% upside from here)

chanman · Jan 6, 2018 · Leave a Comment

buy Binance (BNB)

Further to my last post about buying riskier crypto assets, one of the assets on my watchlist was Binance Coin (BNB). This post is about how and why to buy Binance (BNB).

How did I hear about Binance (BNB)?

I first used Binance, the exchange, when I bought some Verge (XVG). I really enjoyed how easy it was get setup and how easy it was to trade on there, so I had a positive impression of the brand itself.

One of the heavily promoted (in terms of visual positioning on the Binance site was the BNB/BTC trading pair. I looked up BNB on coinmarketcap.com and it’s been steadily chunking out significant price rises in recent weeks. So I decided to look into this further.

Where do I think that the Binance (BNB) price could get to?

Check out this screenshot from coinmarketcap.com taken at 12.45pm UK time on 6th January 2018:

buy Binance (BNB)

That’s a market cap of USD 1.6bn, with a circulating supply of 99m BNB with a total supply of 199m BNB, a current price of USD 16.87.

What’s going to drive the price?

We know that price is a function of supply and demand, and for price appreciation, it’s about limiting supply and increasing demand.

Demand will increase because:

Binance itself is an ever increasingly popular crypto-exchange making general exposure to Binance (BNB) ever greater

  • It’s popular because it’s an easy way to swap between altcoins and it lists ever more exotic coins.
  • Plus you don’t need to provide verification documents unless you want to withdraw more than 2 BTC within a 24hr period.

There is also a solid use case for Binance (BNB)

Actual use cases for crypto coins/tokens/projects are few and far between. An actual use case gets lost in the frenzy for speculation. However, Binance (BNB) has a solid use case, namely that if you use it to pay for commissions when trading on the Binance exchange, you get a 50% discount on the fees you pay. A 50% discount! Why wouldn’t you look into owning a few? (This will reduce in subsequent years of the exchange’s life. See more details here) And why when you own a few, would you let any go outside of paying for trading fees on Binance? In which case, demand isn’t going down, it’s actually going up. You also get a discount on ICOs offered through Binance.

Supply will reduce because:

Binance is buying back Binance (BNB) with profits generated by its exchange. Then it burns (destroys) those buy backs. This is similar to when a company buys back and cancels its shares. This act literally limits supply. In fact, it will reduce supply.

From this article on their website, Binance will:

In accordance with our whitepaper, each quarter, we will use 20% of our profits to buy back and burn BNB, until 100MM BNB are burned. We will buy back and burn 986,000 BNB in 2017 Fall based on our profits in this quarter.

So how did I get to 2,000% upside from here? Here’s the maths:

So if the total supply above is 199m BNB, and if Binance is successful and able to burn 100m BNB, then the total supply of Binance (BNB) will literally be halved. If demand stays constant as is, then this will double the current price of Binance (BNB).

Let’s try and speculate on potential upside using relative/comparative market caps.

Bitcoin’s (BTC) current market cap is USD 283 billion and ranked number 1 on Coinmarketcap.com.

Ripple’s (XRP) current market cap is USD 123 billion and ranked number 2 on Coinmarketcap.com.

Ethereum’s (ETH) current market cap is USD 100 billion and ranked number 3 on Coinmarketcap.com.

Binance (BNB)’s current market cap is USD 1.6 billion and ranked number 29 on Coinmarketcap.com.

Based on all of the above reasoning, it’s completely feasible that Binance (BNB) could get to 10x its current market cap in 2018 without a full ‘buyback-and-burn’.

With the full ‘buyback-and-burn’,  this would double (as explained above).

So we get a conservative 2,000%. (10x is 1,000%).

From the current price of about USD 17, that makes a price target of about USD 350.

How to buy Binance (BNB)

Log into your Binance account or open up an account if you haven’t got one.

Using existing funds (other cryptocurrencies), look at the relevant BNB trading pair. (If you don’t have any funds deposited on the exchange to use, deposit some first. I use Bitcoin as my go-to currency to trade/swap into other cryptos, and I’ll use Bitcoin (BTC) in this explanation.

Here’s the trading screen:

Go to the Buy BNB box and click into the Amount field. This will reveal how much BNB you could buy:

You can see that I have 0.02073007 BTC available in my account and that I could use this to buy a maximum amount of 18.47 BNB. (This amount of BNB could have been more or less depending on how much BTC I had in my account (or whatever cryptocurrency you were using to trade into BNB))

Now simply, hit ‘Buy BNB’ and you’ve put in an order to buy Binance (BNB).

Go to your Open Orders at the top of the screen:

And very soon, this trade will have settled – i.e. you will have some Binance (BNB)! You can check this in your Trade History tab.

Here’s my current balance of BNB (I will add to this soon):

buy Binance (BNB)

Further reading

I got a lot of value from reading the following articles. Check them out:

Determining the intrinsic value of the Binance Coin (BNB) and why you should be buying it

Guide to Buying Binance Coins (BNB)

Here’s the official Binance site (this link has a referral bonus for me in that if you use it, I get 50% of any trading fees from any trades you make. But don’t worry, you don’t have to use the link – I won’t be offended!)

Important disclaimer

This blog, Adventures In Crypto, and its contents are for informational and entertainment purposes only and should NOT be construed as investment advice. Always consult a licensed investment professional before making important investment decisions. The opinions expressed here are those of its writer Edmond Chan and he shall NOT be liable for losses resulting from investment decisions based on information or viewpoints presented on Adventures In Crypto.

What do you think of the prospects for Binance (BNB)? Do you agree with the reasoning above? Let me know in the comments below!

Increasing the risk/reward in my crypto portfolio whilst trying to protect the downside

chanman · Jan 6, 2018 · Leave a Comment

In my last post, I detailed my crypto portfolio as at 31 December 2017.

I think it’s pretty solid and it’s made some good gains, and I think it’s set up for some good gains in 2018. But I’m not sure it’s going to 10x in 2018.

Let’s take a look at my portfolio again:

I still want to Protect The Downside

One of Warren Buffett’s maxims is Don’t Lose Money. He says to ‘protect the downside’. This is because losing money makes it mathematically harder to make your money back.

If the value of your portfolio goes down by 50%, to get back to where it was, it needs to increase by 100%.

That’s why not losing money is Buffett’s starting principle.

(Now he might laugh about the idea of protecting your downside within cryptocurrencies but that’s another question!)

I think that my portfolio above is pretty good at protecting the downside. I see steady gains for all the coins above with the exception of Verge. Verge is a highly speculative play for me. (See how and why I bought Verge here)

But I want to increase my risk and therefore my chance of reward

It’s so easy to get caught up in the frenzy that we’ve seen in late 2017 and even in the last two weeks. Three friends have suddenly started buying cryptocurrencies, using Coinbase and Binance to buy Ripple etc.

Some coins are seeing 200% to 1,000% rises.

That makes me question my asset allocation.

Is my split too conservative by crypto standards? Am I missing out on potentially life-changing amounts of gains by playing it too safe?

The portfolio above is solid and if you bought the same split today, I would think that you wouldn’t lose money in 2018 and you might make 10x. But are there more gains out there? Am I being too greedy? Are we definitely in bubble territory now? (A classic oft-quoted example of bubble territory is when your taxi driver asks you for stock tips. Translate that to crypto and the equivalent is when The Sun tabloid starts giving in-depth guides to cryptos like Verge (XVG) and Stellar (XLM))

I want to add some risk to my portfolio but not so much that I fail to protect the downside

What’s the spice and how much to allocate to it

I’m going to add 15% – 20% of my portfolio into riskier coins which have the chance to at least 10x from here and that could actually return even more.

On 3rd Jan 2018, I deposited some Bitcoin onto Binance and bought a nibble of Cardano (ADA), Ripple (XRP) and some Stellar Lumens (XLM).

Yes there was certainly some FOMO in those buys but the amounts I’ve put in aren’t big enough to risk my downside. Their prices have dropped off a bit since the 3rd and I might buy a bit more of each to dollar cost average my entry price and I’ll write up how and why I bought these in subsequent posts.

Coins that are on my imminent watchlist

  • Binance (BNB)
  • Dragonchain (DRGN)
  • Kucoin (KCS)

What’s on your watchlist for 2018? Let me know in the comments below!

Holdings as at 31 December 2017

chanman · Dec 31, 2017 · Leave a Comment

31-Dec-17
Prices from Coingecko in GBP
Units Total units held Total price paid for units incl sales Avg net cost per unit incl. sales (GBP) Current price (GBP) Current value of holding (GBP) Profit/Loss (GBP)
Bitcoin BTC 0.567 £1,158.93 £2,043.97 £9,828.72 £5,572.88 £4,413.95
Litecoin LTC 6.197 £328.89 £53.07 £158.05 £979.45 £650.56
Dash DASH 1.000 £244.00 £244.00 £759.39 £759.39 £515.39
Monero XMR 5.521 £488.39 £88.45 £251.55 £1,388.92 £900.54
Verge XVG 4921.074 £554.61 £0.11 £0.15 £723.89 £169.28
Augur REP 10.792 £152.28 £14.11 £47.87 £516.59 £364.31
OmiseGo OMG 19.449 £145.90 £7.50 £11.94 £232.22 £86.32
Decred DCR 5.537 £377.76 £68.23 £67.88 £375.83 -£1.93
£3,450.75 £10,549.19 £7,098.43

 

Date of first purchase Overall return
Bitcoin 15/05/2017 381%
Litecoin 04/09/2017 198%
Dash 24/10/2017 211%
Monero 24/08/2017 184%
Verge 26/12/2017 31%
Augur 19/09/2017 239%
OmiseGo 25/09/2017 59%
Decred 26/12/2017 -1%

 

Percentage of total crypto portfolio
Bitcoin 53%
Litecoin 9%
Dash 7%
Monero 13%
Verge 7%
Augur 5%
OmiseGo 2%
Decred 4%

Is Decred a good project and should you buy Decred DCR?

chanman · Dec 30, 2017 · Leave a Comment

buy decred

I first heard about Decred from Boxmining’s awesome YouTube channel and I started watching the price when it was around USD 35 around September 2017. Since then, I’ve been looking to buy Decred.

I had also seen it as an option in my Exodus wallet and it would be easy to ShapeShift some Bitcoin into Decred.

It’s been on my watchlist for a few months now and I like it as a coin as opposed to an ICO token. It’s a coin like Bitcoin, Dash, Litcoin, Monero, Zcash.

However, what really pushed me over the edge and got me buying Decred in the past week or so was watching a recent great series of 6 short videos between Tai Zen and Decred Jesus, where they discuss what Decred is and whether this is a good investment. I’m going to show these videos in full below:






What I like about Decred

It looks to solve Bitcoin’s governance problem

One of the major problems that Bitcoin has is who decides on significant questions. Questions such as ‘Should Segwit be incorporated into Bitcoin?’ The power in who decides this question lies with the Bitcoin miners. Miners perform an essential function in Bitcoin and crypto in general by verifying and validating tranactions before they get added to the blockchain.

What’s wrong with miners having this power?

If miners don’t want this change such as Segwit, then the only way for this to happen is for a hard fork to happen. This is where developers split the code and change elements of it to something else. This has happened with Bitcoin Cash (BCH).

Decred is known as a ‘Goverance Coin’, as solving this problem is a major feature of the project. It does this through a mix of Proof of Work (POW) and Proof of Stake (POS) model.

This means that people that own Decred will get a say in major questions as to Decred’s future direction.

In a nutshell, those that own Decred will be eligible for a ‘ticket’ in a random lottery and those ticket-holders get a chance to vote on these issues.

There is a fantastic current example of this happening right now, where Tai Zen (from the above videos) has submitted a marketing proposal to the Decred community asking for Decred (USD 245,000 worth) to execute the proposal. (This money would come from the Decred war chest that Decred Jesus referred to the in the videos above)

This was posted on the Decred reddit here and this reddit refers to the Politeia on Decred’s site, where Tai Zen submitted his proposal for the Decred community to discuss and debate. Holders of Decred (POS) will have the right to vote and decide on this.

Isn’t this a very civilised and democratic way of doing things? It is also closer to the dream of cryptocurrency enthusiasts in that decision making power isn’t as centralised as it is in some other currencies/projects. For example, in Ethereum, Vitalik has a huge influence on what happens to the project.

It’s a true coin as opposed to an ICO token

I wrote about why this important to me here.

It looks to have a great team and a great community behind it

Here are the developers behind Decred: https://www.decred.org/contributors/

The advisors are first rate too: Charlie Lee from Litecoin and Jimmy Song from Bitcoin.

For a sense of the community, check out the Decred subreddit. and the Decred YouTube channel.

Where could it get to in price?

It has a limited supply just like Bitcoin, with a maximum supply of 21 million DCR. Check out the screenshot from coinmarketcap.com below:

buy Decred

I love a limited supply because that encourages an upward price move when demand starts to increase.

I can see it getting to USD 500 in 2018 and USD 1,000 in 2019, and USD 5,000 in 2020.

Should you buy Decred?

I’m gutted to miss out on buying Decred at USD 35, when I first started looking at it. The main reason I didn’t get in was because I had cash flow issues in the past few months.

Reasons I would recommend that you buy Decred are:

  • Great development team, advisers and highly engaged community. This gives me confidence that constant improvements and new features will be released in the short, medium and long-term.
  • Because of the limited supply and the organic growth of the project, I can’t see too much on the downside with regards to price.
  • The infrastructure is there is support further adoption of the currency i.e. there is a wallet like Exodus that supports storing it
  • I see solid (if not spectacular) returns in Decred. I see this as a solid addition to your crypto portfolio.

How big should your investment in Decred be?

My holding of Decred is currently 3% of my portfolio (holdings report to follow in an imminent blog post). I plan to increase this to 10% in the next month. I think this is an investment comparable to Monero, Litecoin and Dash.

How can you buy Decred and how can you store it?

I bought it using ShapeShift within my Exodus wallet. I used my tiny piece of remaining Ethereum to buy Decred on 26th December 2017 (£54.44 worth).

AND my wife very kindly gave me 1 Decred (DCR) as my Christmas present, so I took the opportunity to buy more Decred. I bought some Bitcoin on Bittylicious (my preferred way of buying BTC from GBP) and swapped this for Decred using ShapeShift within my Exodus wallet on 28 December 2017 (£323.32 worth).

Further resources on Decred

Official Decred website

Official documentation subdomain on Decred

Linda Xie’s Beginners Guide to Decred

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