Cryptocurrencies

Bitcoin at USD 5,500. Is it too late to get in?

chanman · Oct 18, 2017 · Leave a Comment

I’m a buy and holder (a HODL) of cryptocurrencies.

I don’t use leverage.

I buy the underlying asset and I hold it.

I don’t trade in and out of crypto.

This means that I don’t look at the price on a daily basis.

I hadn’t looked at Bitcoin’s price since early October when it was in the early USD 4,000s.

I looked two day ago and it had breached USD 5,500.

This really is a wonderful journey.

What other financial instrument do you know that is this volatile?!

I’m happy that it’s gone up but I wish that it had held at the lower level for a while longer. I haven’t finished buying enough of what I want yet. It looks like the price is going to keep getting away from me so all I can do is follow my own advice and dollar cost average my Bitcoin buys.

Three questions to ask yourself when considering whether it’s too late to buy in at this price

1) What could push the price lower than this price in the future?

Destructive forks
Other coins winning the battle for cryptocurrency dominance (assuming that only one can win)
A serious problem with the code that hasn’t been discovered yet
A massive hack to a major exchange like Coinbase
An inability to scale Bitcoin on the current blockchain

2) What is the potential upside?

It’s a limited supply resource. There’ll only ever be 21m Bitcoins. But people are waking up to it and more people want in. And even now, it’s not easy to buy and store Bitcoin.

This demand has already taken BTC from USD 800 in Jan 2017 to USD 5,500 in Oct 2017.

It could get to USD 10,000 by the end of 2017. Why not?

It could get to USD 50,000 by the end of 2018. Why not?

If the normal man on the street wants some Bitcoin, why couldn’t the demand massively exceed supply? In which case, it could get to absolutely crazy numbers. Crazy good for holders (HODLs).

3) What is the likelihood of achieving this potential upside?

Who knows?

Anyone who says they’re sure it’s going to go wildly up or crash to zero is chatting bullshit.

Nobody knows.

The wisest man in the room knows that he doesn’t know.

All you can do is to position yourself correctly for each eventuality and weight your position to lean towards the outcome you favour. Edmond Chan Oct 2017 🙂

For me, that means not betting more than I can afford to lose but betting enough that the pay-off becomes life-changingly meaningful.

My friends ask me now, is it too late at these levels? I say that it might look toppy but you’ve got to be in it to win it. I’m still buying. (Obviously the usual disclaimers apply. Do your own research before risking any money.)

The easiest way for you to get into Bitcoin right now

chanman · Oct 4, 2017 · Leave a Comment

I’ve been in the cryptocurrency rabbit hole for a few months now, and people ask me how I’d recommend they buy Bitcoin.

It’s just two steps:

First, you need a wallet to receive your Bitcoins into

The easiest one I’d recommend you use is Exodus.

The safest one I’d recommend is a hardware wallet like Trezor.

But for your first Bitcoins, I’d recommend using Exodus.

Check out my previous post on how to set up Exodus on your machine

Second, you need to buy Bitcoins and send them to your wallet

In the UK, I’d recommend Bittylicious. It’s a bit more expensive than other exchanges, but it has the benefit of requiring less ID verification. You just need to enter your Bitcoin address (from your Exodus wallet) into Bittylicious, confirm the amount of Bitcoin you want to buy, and transfer GBP from your bank account to the Bitcoin seller’s bank account. The seller will then send the Bitcoin to your Exodus Bitcoin wallet.

And that’s it! You now have some Bitcoin! Easy!

Let me know if you buy some this way in the comments below. How do you buy yours?

Should you ever buy ICO tokens on the secondary market?

chanman · Sep 26, 2017 · Leave a Comment

So recently I’ve bought small nibbles of OmiseGo and Augur. Primarily because they were so easy to buy using ShapeShift within my Exodus wallet.

However, I’ve begun questioning whether that was a good idea and whether I’m losing my investing discipline by buying ICO tokens that are on the secondary market.

First off, what is an ICO?

An ICO is an Initial Coin Offering. This is not the same as an IPO or (Initial Public Offering).

In an IPO, you get shares in a company.

In an ICO, you are being asked to crowdfund an interesting project that in all likelihood hasn’t come to even an alpha release yet. Instead of shares, you get tokens.

Now investing in these tokens is not the same as investing in a coin (whether Bitcoin or an altcoin) and it’s important that we don’t lose our heads in the huge range of possible cryptocurrency investments.

Secondly, what is the secondary market in an ICO?

The primary market is where you participate in the first issue of ICO tokens. I.e. the project issues the tokens in return for money (usually Ether). This is the primary market.

If you then want to sell the tokens to me, then the tokens are said to be trading on the secondary market. The key difference is for the issuer (the project) of the token. In the first case (primary), the issuer gets capital. In the second case, the issuer does not get capital.

Let’s get back to basics.

A good coin investment has certain characteristics:

It has limited supply
It has respected code
It has been around for a few years at least
It has its own unique differentiating features like enhanced privacy
It has a strong market cap

Our ultimate aim in this blog is to make money speculating in cryptocurrencies and make as much of it as possible.

So firstly, to make money, we have to our overall investments/speculations have to make positive returns. So we aim to lose as little money as possible.

And secondly, to make as much of it as possible, we aim to have the greatest upside we can have.

This could play out in a few ways:

Say we were investing £10,000.

£10,000 into Bitcoin and zero elsewhere.
£5,000 into BTC and £5,000 into Ethereum (ETH)
£5,000 into BTC, £2,500 into ETH and £2,500 Monero (XMR)
or £1,000 equally into BTC, ETH, XMR, Litecoin, Dash, OmiseGo, Augur, Aragon, Verge, Decred.

Which of the above do you think will make more money in the long run?

Which scenario do you think has more chance of losing money?

Which has more potential upside?

It’s not easy to answer those questions.

If you’re thinking that Bitcoin has had most of its multiples of growth, then you’re less likely to go with option 1, because, you might fancy that you’d find that growth in another instead.

If you think that most altcoins/tokens (like OmiseGo, Augur (REP), Aragon) are not going to be worth anything in the long term, then you’re not going to go with option 4, because you would lose £3,000 of your £10,000 investment (30%).

I think that there’s a strong chance that these tokens and other ICO tokens, whilst having some great projects that they’re funding, will not be tradable or worth anything in 5 to 10 years time. This is because they don’t stack up well against the characteristics that we highlighted above that good coin investments share such as limited supply.

Remember the last post on OmiseGo? They don’t think they’ll increase the supply. That really isn’t the same as not having guaranteed limited supply like Bitcoin does. Bitcoin will never go above 21 million coins because that’s what’s written in the code.

Remember the post on Augur (REP)? What do you get for your REP? You get some platform fees but that isn’t the same as having a fungible, privacy enabled cryptocurrency like Monero.

What will these ICO tokens be worth in a few years?

So should you never trade ICO tokens?

I’m not saying never. I just don’t think you should hold on for forever, because in the majority of cases, I don’t think they’re going to be worth a great deal, if anything at all.

Sure, you may pick a couple of winners, but how are you going to pick ICO token winners from the 1,000 that are already on coinmarketcap.com?

That being said, I don’t think that there may be good time to risk some money on the secondary ICO token market.

That’s when there’s been a good run-in to the ICO, where there’s heavyweight support for the project (like Augur, Golem etc) and there is real appetite to fund the project for the good of the future.

After the ICO, there may be a run-up to a price many multiples of the ICO price.

Look at the below chart of OmiseGo (OMG):

The ICO in late June has seen a huge run up in price, from around USD 1 to USD 12. That’s an astonishing 1200% return in a couple of months.

With ICO tokens on the secondary market ie post-ICO, I think there’s potential plays where:

The project is supported and well-backed by respected figures in the community like Vitalik Buterin.
You enter near to the ICO date and hopefully price.
You exit this position (or at least some of it to crystallise gains) within a couple of months.

Look at the below chart of Augur (REP):

This play may have worked here:

Well supported project

Enter in late Nov 2015 and exit in Feb 2016 or Mar 2016

So the question is: what are the recent or upcoming ICOs that are well-supported projects where we can try out this strategy?

Let me know what you think in the comments below!

Is OmiseGo a good project and should you buy OmiseGo (OMG)?

chanman · Sep 23, 2017 · 1 Comment

I started to look at OmiseGo because it’s in the Exodus wallet as a supported cryptocurrency (meaning that I wouldn’t need to look at downloading yet another wallet to store it on), and also because it’s has a high market cap (currently 12th on coinmarketcap.com).

Current Price: USD 9.07 as at 23 September 2017

What is OmiseGo?

Omise is a company that facilitates payments across borders in South-East Asia.

Omise held an ICO to fund the development of OmiseGo, a project based on the Ethereum framework. The ICO issued tokens called OmiseGo or OMG.

What problem is it trying to solve?

Its target market is people who are left out by traditional banking services in South-East Asia. Think of the migrant worker in Myanmar or Thailand who needs to send money home. Omise wants to give these people the ability to send and receive money.

Omise thinks that 73% of all people in South-east Asia are ‘unbanked’, ie have no access to banking services.

It also targets the remainder by providing a better service than traditional existing banking services.

Does it solve the problem?

Unclear yet. The main product will be an e-wallet that interestingly serves both fiat and cryptocurrencies.

Potential issues

I’m guessing that you would need a smartphone to run the OmiseGo e-wallet.

Would the 73% of unbanked people above have a smartphone? Maybe OmiseGo could partner with a low-cost smartphone provider to give out to people.
For security, maybe you wouldn’t put large amounts of value on your e-wallet, as it wouldn’t be a hardware storage solution like Trezor or Ledger.

Should you invest in the OMG tokens?

The OMG tokens were used as a fundraising security.

According to this Techcrunch article:

Under proposed terms, 65 percent of all coins will be released during the sale. A further 20 percent will be retained by Omise for future costs and expenses with 10 percent left for the company’s team. The remaining five percent is set aside for “airdropping,” which essentially means that small amounts will be given to people who already own Ethereum’s Ether coin to stoke interest and widen engagement.

The company isn’t planning to make another token sale in the future, representatives told TechCrunch, in order to prevent dilution.

So we can infer that there will be a cap on OMG tokens, meaning that the risk of dilution is minimised. That’s not the same as it is with Bitcoin, which will by nature of its code, stop at 21 million Bitcoins.

With OMG, we would have to take the word of the company that they wouldn’t issue more tokens that would dilute and reduce the value of the existing OMG tokens.

This next Techcrunch article is reassuring as to the intentions and integrity of the Omise company:

Hasegawa said the firm could easily have raised more than $100 million from pre-sale interest, let alone with others following on when a public sale began, but it instead wanted to keep the figure low and be “responsible.” Likewise, Omise wanted to guard against a few wealthy backers taking all the spoils, as has appeared to happen with other sales.

In response to that demand, it canceled the planned public sale in favor of a more stable and managed sale. Omise forced all backers to register themselves with a handful of brokerage partners ahead of time in order to participate, while it also limited how much each participant could buy.

“We limited the OMG sale to KYC [people who can be identified] in order to prevent a very real possibility of one or two rich people buying almost all the tokens, as happened with [Brave’s] Basic Attention Token (BAT) sale,” Hasegawa explained in a statement.

“Unlike other sales, we didn’t want to raise our sale cap past $25 million because we don’t expect we need more money to accomplish our goal,” he added. “It is both irresponsible and counterproductive to take more than we think we need.”

Isn’t that great? They only asked for the amount they needed for the project.

What do you get for your coins?

You will get some fees for helping to validate transactions on the blockchain. The size of the fees is yet to be determined. Also, if the tokens are held outside of a node (like in an Exodus wallet), how will you be able to validate transactions?

Why would the price of OMG increase? The key driver of price increase will be its percerption as a store of value (like Bitcoin). This will depend on the supply being limited, which isn’t hard-fixed, unlike Bitcoin.

Will I buy any OMG?

Yes I will but not a lot yet. The price is down currently from its high of around USD 12:

OmiseGo price chart since inception: from coinmarketcap.com

So buying it now, and if it regained to USD 12, would return 33%. That’s a solid gain.

Long-term, I’m not sure about where the price could go with OMG tokens, but it’s fair to say that they could go to a few multiples of its current price of USD 9.

The company raised USD 25m in ETH from the sale of the ERC20 tokens and I’m guessing that most of this was used to fund the development of the project, which would pay for things like salaries and expenses in either ETH or USD or other local fiat currencies. The sale document for the tokens said that 10% of the tokens issued would be held for the team members. It’s hard to see that they would envisage a situation where the OMG tokens were reduced to zero value.

Overall thoughts on OmiseGo

I love the project for what it’s trying to do. It’s a noble aim to try and bring people into the financial world.
If it works, I can see it spread to the rest of the world.
I love the founders’ integrity in not having uncapped ICO, when there was clearly appetite from investors for a lot more than they raised
They have a lot of support from big players in the Ethereum space like Vitalik Buterin.
I can’t wait for the first release of the wallet

Is Augur a good project and should you buy Augur REP?

chanman · Sep 20, 2017 · 2 Comments

Augur is a prediction market platform based on blockchain technology (the crypto token is called Augur REP). It’s got a lot of positive coverage, it has a superstar adviser in Vitaly Buktarin and it’s now available to store in the Exodus wallet (along with its rival Gnosis).

Before we look at whether this is good project and a good speculative play, here is an excerpt from their homepage:

Here is their video introducing REP tokens:

Okay got all that? Let’s look at the project itself.

The main current world competitor to Augur and blockchain-based prediction markets are betting exchanges.

In the UK, the best known of these is Betfair.

Betfair is different to traditional non-exchange gambling platforms.

In traditional gambling platforms, a bookmaker (or the market creator) sets the odds on an event happening. Eg if the bookmaker says that that snow on Christmas Day is even money, that means he thinks it’s 50:50, or at least that the price he’s willing to offer you. If you bet that it will snow, and you are correct, then you win your stake back plus your profits. In this case, the bookmaker will pay you profits equal to the size of your stake.

The problem with this model is that the bookmaker’s odds make not be reflective of the true odds of the event happening. Maybe the real odds are 60:40, but you’re only being offered 50:50. This isn’t ideal.

Betting exchanges like Betfair are different in that there is no bookmaker. The market is made up of people like me who think that it will snow on Christmas and people on the other side of the trade/market who don’t think it will snow and are willing to offer me odds on the event.

This means that the price offered (odds of event happening) can move according to how sentiment changes. So if the weeks into Christmas are unusually warm, then the odds will move accordingly.

This brings us to problem number 1.

Problems with Augur

1. Prediction markets already exist outside of blockchain, and they’re good

For instance, Betfair has markets on politics. Look at the below screenshot:

That’s some serious money placed (GBP 1,011,592) on this market.

The odds at the moment suggest/predict (roughly):

that there’s a one in 17 chance of Trump exiting the Presidency in 2017 (5.88%)
a one in 4 chance in 2018 (25%)
a one in 6 chance in 2019 (16.6%)
a one in 0.88 chance in 2020 (63%)

That’s pretty good as a prediction market isn’t it? That’s real world market participants who’ve arrived at these odds at that’s what they predict.

Does Augur improve on that from a prediction market standpoint?

This is from their beta app:

I know this is in beta, but these aren’t as granular in terms of range of outcomes that Betfair offered. Furthermore, the prediction isn’t anywhere as specific as Betfair’s range above. Augur’s says 50% chance of Bitcoin hitting USD 5,000 by New Year’s 2018. Not very specific.

2. You have to wait a month before getting your winnings

Remember from the video above. For the market in Augur to settle, you have to wait a month for the holders of REP (Augur token) to vote on what the correct outcome of the event was. So you have to wait for REP holders to vote into the blockchain that it snowed on Christmas Day. On Betfair, that would pay out the next day. A month!!

3. Holders of REP have to report on events within the timeframe or lose ‘reputation’.

What a burden this is on the holders of REP. Will anyone want these?

Advantages to Augur

Create your own markets

This something that I can’t get on Betfair at the moment. I can’t invent a new market like ‘will Theresa May wear red shoes tomorrow?’. I could do this on Augur, but it’s another question as to whether this would be an attractive market for other people to bet on.

Should you buy the Augur REP tokens?

There are a limited supply of Augur REP tokens which is good. A finite supply means that the price should rise in the future if demand rises.
There is good positive sentiment about it.
It is on Exodus as a supported altcoin.
It has Vitaly on the board of advisors.

So it’s a tentative yes from me. Even though I’m not sure about the project, I think it’s still worth a gamble on the tokens. But this means that I will buy a smaller amount of Augur REP tokens, say 5% of my total portfolio.

I did this yesterday using Shapeshift in my Exodus wallet. I now have some Augur REP.

What do you think? Do you hold any? Let me know in the comments below!