[JD6]

Rather than comment on the main thread, where people are discussing what to buy, I thought I should start another thread.

I just hope that people are aware that the price of any/all of these could collapse without any warning. They may not, but this has similarities with every other bubble that has gone before it. Even holding a basket of them may be no protection, just like with tech stocks in the last major bubble.

Pretty much anything dot com related saw massive rises, doubling and redoubling in a week or a day. People with no investment experience started to share tips amongst themselves. People were extrapolating that if recent rises continued, they could retire within weeks. I knew a few people that were destroyed by the last crash. Some compounded their fate buy buying into the fall.

It may be different this time, and I don't have a good feel for what is going on, but as a seasoned investor, please don't invest more than you can afford to lose.

[Tengocity]

Whilst I do think that Cryptocurrency may have a significant future, it is undoubtedly a speculative bubble. The question is just where in the lifecycle of the bubble it is...

[JD6]

Originally Posted by Tengocity

Whilst I do think that Cryptocurrency may have a significant future, it is undoubtedly a speculative bubble. The question is just where in the lifecycle of the bubble it is...

A good point.

In 1929, with hindsight, a key indicator of the forthcoming crash was when the shoeshine boy started giving stock tips. Perhaps the car valeter, barber, courier... are the equivalent these days.

[ciscopete822]

Originally Posted by Tengocity

Whilst I do think that Cryptocurrency may have a significant future, it is undoubtedly a speculative bubble. The question is just where in the lifecycle of the bubble it is...

yep , just a matter of time. Dont just jump on it cause everyone else is making good returns , I have seen people in my office opening live accounts without understanding basics like margin , safe stops etc. and loosing >1k within seconds (spread betting). Calm down. Be systematic. I have started with 500 and then whenever making profit , that 500 would always go back to savings account.

[Darth Helmut]

don't invest more than you can afford to lose

That is the absolute key important factor.

I think cryptocurrency has legs but as you suggest, it will burst at some point as the current rate is unsustainable. When that point is, who knows and thats the gamble. Refer to your quote if/when that happens and don't spend a speculative amount thats in a cyber wallet and not actually returned to your real bank account.

[Hooded]

Only invest what your willing to lose and if you win .. great!

The best advice is to initially invest in cryptocurrencies no more than 1% of your savings. Everyone can write off 1% without it being that much of an issue

[Tengocity]

Originally Posted by JD6

A good point.

In 1929, with hindsight, a key indicator of the forthcoming crash was when the shoeshine boy started giving stock tips. Perhaps the car valeter, barber, courier... are the equivalent these days.

Yes, that's the often told story from one investor who dodged the 1929 crash, by deciding to sell after he was given the tip by his shoe shine boy.

But the signs were there for them at the time as shares at least have recognised metrics with which to make a relative judgement as to what they are worth. Right now they are at historical highs second only to the major crashes... Quantative easing and loose monetary policy has created bubbles everywhere, not just in Cryptocurrency.... Art, classic cars, shares, property, etc.

The amazing thing about crypto is that there is no real way to truly judge it's worth and yet a bitcoin is worth $15-16000!!!

[Tengocity]

Originally Posted by Hooded

Only invest what your willing to lose and if you win .. great!

Yes, undoubtedly the way to go. I've put £1400 of real cash in to it, and have done very well out of it, and I should take that £1400 back out, so that I can always know I was no worse off should it all crash.

But then that £1400 will go back in the bank earning next to nothing, and I will have FOMO as crypto continues to rise and I could have been making more... it's tough to know what to do!

And ultimately that £1400 I can afford to lose... It's only a few months depreciation on a F30 after all!

But then I had a debate with a friend who said that it's just a trick to judge how well you're doing by what you put in originally, and you should consider what it was worth after rises. In other words, if you put in £2k and it grew to £20k, then dropped back to £5k, you still lost £15k. You could have realised it at that point, so it's still a 15k loss.

[MashinBenzin]

Totally right to only put in what you can afford to lose, I mentioned this in passing in one of my rambles in the main thread.

I deliberately treated what I put in as 'spent' and then immediately banked profits when the first two/three days went way beyond expectations.

I have a fair bit of belief in the underlying future of ethereum and ripple, but that doesn't necessarily justify the coins being worth what they are. The platforms could succeed even if the coins crashed (I believe).

It's right to treat accumulated profits as real money, after all you can take them 'now'. Doing so has made me money now at a cost of potential future growth.

[MashinBenzin]

Originally Posted by Hooded

Only invest what your willing to lose and if you win .. great!

The best advice is to initially invest in cryptocurrencies no more than 1% of your savings. Everyone can write off 1% without it being that much of an issue

This 1% rule is good advice

[Hooded]

Originally Posted by Tengocity

Yes, undoubtedly the way to go. I've put £1400 of real cash in to it, and have done very well out of it, and I should take that £1400 back out, so that I can always know I was no worse off should it all crash.

But then that £1400 will go back in the bank earning next to nothing, and I will have FOMO as crypto continues to rise and I could have been making more... it's tough to know what to do!

And ultimately that £1400 I can afford to lose... It's only a few months depreciation on a F30 after all!

But then I had a debate with a friend who said that it's just a trick to judge how well you're doing by what you put in originally, and you should consider what it was worth after rises. In other words, if you put in £2k and it grew to £20k, then dropped back to £5k, you still lost £15k. You could have realised it at that point, so it's still a 15k loss.

Completely agree. If you can afford to lose that £1400 .. I'd try and roll the hard six/who dares wins. I'm investing 1k total in cryptocurrencies initially and intend to hold a while and see where it goes.

There is an element of luck to it. If you'd invested a few pounds in bitcoin in the very early days you could have cashed out at a few hundred grand profit a few years ago.. but then if you hadn't it would be worth a few million now if you had left it a few more years, but would you risk leaving it a few more years if your few pounds had risen to a couple of hundred grand.

Some say bitcoin value could reach 500k or more in a few years due to the max coin limit. Theoretically litecoin could be worth 1 quarter the value of bitcoin since it has a max limit of just 4x the amount of bitcoins and its actually a better coin, so it has potential for bigger growth since it's value is currently just roughly 1/60th of a bitcoin. It also grew more in value % last year than bitcoin.

I think sometime in 2020 will be a good time to take your profit and run if the coin values are sky high ... holding much beyond that will start getting much more risky in my opinion.

[Hooded]

Originally Posted by MashinBenzin

This 1% rule is good advice

[Tengocity]

Originally Posted by MashinBenzin

This 1% rule is good advice

The 1% rule has some sense, but then say after a year your Crypto is worth many times more and is now 5% of your savings/assets or whatever... Normal investing rules say you should rebalance your portfolio...

And if Crypto becomes mainstream then it could become a legitimate asset class, the same as cash, gold, shares, bonds, property, so does it require a re-think at some point.

[MashinBenzin]

Originally Posted by Tengocity

The 1% rule has some sense, but then say after a year your Crypto is worth many times more and is now 5% of your savings/assets or whatever... Normal investing rules say you should rebalance your portfolio...

And if Crypto becomes mainstream then it could become a legitimate asset class, the same as cash, gold, shares, bonds, property, so does it require a re-think at some point.

Yes, I was thinking purely in money-in terms. If there is strong growth then I will be taking profit out to place elsewhere, which I suppose means to that i am applying a traditional investment model. Really it's about being very risk averse at this stage of life - if I'm lucky then this punt may help reduce the mortgage a touch.

Since I bought my car, I've considered various cosmetic spends and MPPSK - couldn't really justify the spend to myself. This punt at least comes in much cheaper and has the chance of profit.

[JD6]

A further point worth considering is the effectiveness or otherwise of stop losses. While I would certainly advocate using them, in the event of a collapse, I suspect that the terms of the stop loss will be written in such a way that the company can wriggle out of it in certain circumstances.

Many of the investment companies offering investments in crypocurrencies will be running a largely hedged book, that is to say that they will hold actual bitcoins etc to cover their exposure. No Risk Department worth its name would allow these companies to offer a cast iron stop loss to investors, while not having the certainty of being able to exit themselves. They would be leaving themselves open to vast losses.

As a result I would only hold a position that I could afford to lose if the value went to zero, rather than assume that the stop loss is my maximum exposure.

[MashinBenzin]

Originally Posted by JD6

A further point worth considering is the effectiveness or otherwise of stop losses. While I would certainly advocate using them, in the event of a collapse, I suspect that the terms of the stop loss will be written in such a way that the company can wriggle out of it in certain circumstances.

Many of the investment companies offering investments in crypocurrencies will be running a largely hedged book, that is to say that they will hold actual bitcoins etc to cover their exposure. No Risk Department worth its name would allow these companies to offer a cast iron stop loss to investors, while not having the certainty of being able to exit themselves. They would be leaving themselves open to vast losses.

As a result I would only hold a position that I could afford to lose if the value went to zero, rather than assume that the stop loss is my maximum exposure.

This is correct. Etoro have actually suspended SLs on cryptos now as they couldn't guarantee them. Previously I had a trailing one catch me a 65% profit on a trade.

[Tengocity]

Originally Posted by JD6

A further point worth considering is the effectiveness or otherwise of stop losses. While I would certainly advocate using them, in the event of a collapse, I suspect that the terms of the stop loss will be written in such a way that the company can wriggle out of it in certain circumstances.

Many of the investment companies offering investments in crypocurrencies will be running a largely hedged book, that is to say that they will hold actual bitcoins etc to cover their exposure. No Risk Department worth its name would allow these companies to offer a cast iron stop loss to investors, while not having the certainty of being able to exit themselves. They would be leaving themselves open to vast losses.

As a result I would only hold a position that I could afford to lose if the value went to zero, rather than assume that the stop loss is my maximum exposure.

On Etoro they've stopped allowing stop losses on Crypto trades for that very reason. They said better to take away this, rather than hide in obscure T&C's that in certain market conditions then they couldn't guarantee them.

[gr4z]

I am dabbling with £500 worth at present to see what's what. Won't go much more than a £1k I doubt.

[JD6]

Originally Posted by Tengocity

Yes, that's the often told story from one investor who dodged the 1929 crash, by deciding to sell after he was given the tip by his shoe shine boy.

But the signs were there for them at the time as shares at least have recognised metrics with which to make a relative judgement as to what they are worth. Right now they are at historical highs second only to the major crashes... Quantative easing and loose monetary policy has created bubbles everywhere, not just in Cryptocurrency.... Art, classic cars, shares, property, etc.

The amazing thing about crypto is that there is no real way to truly judge it's worth and yet a bitcoin is worth $15-16000!!!

Certainly a fair point.

However, I think the key point of the shoe shine boy example, is the greater fool theory which still applies. If even someone at the bottom of society holds a position in anticipation of a profit, who else is left to buy?

[Tengocity]

Originally Posted by JD6

Certainly a fair point.

However, I think the key point of the shoe shine boy example, is the greater fool theory which still applies. If even someone at the bottom of society holds a position in anticipation of a profit, who else is left to buy?

Yes indeed. So how to judge this in relation to cryptocurrencies? The reason I think it's got a long way to go is that it's actually very early days - only a few weeks ago could any kind of institutional investor put money in.
If some of the cryptocurrencies can be recognised as legitimate stores of wealth (more like gold, as it pays no interest or dividend) then it only needs a small percentage to be held and the values will sky rocket a lot further.

It's easy to say they are worthless, but many items are only valuable because of a wide enough societal perception of their value for example gold, precious stones, artwork, linked to their limited supply...

It's going to be an interesting journey whatever!

[JD6]

Originally Posted by Tengocity

It's easy to say they are worthless, but many items are only valuable because of a wide enough societal perception of their value for example gold, precious stones, artwork, linked to their limited supply...

Very true, but I note the common theme - your examples are all tangible and have a history of value going back thousands of years, about 40,000 years in the case of gold. There is a pretty good chance that people will still be keen on them next year...

[Darth Helmut]

I guess for a few of us, its an interesting little dabble. Never been a gambler as the odds are always pretty much stacked against (never see a poor bookie or casino). As with all new speculations, there is risk. I'm enjoying it for now and haven't put any more real money in since my first punt 3 months ago. Thats how it will remain.

Banks give fuck all back and we've seen that they can be as stable as Lobb going cold turkey in recent years.