Don't keep all your eggs in one basket

Author's note: This article is part of an ongoing blog about my adventures in the world of alternate currencies.

It has been less than a year since I got into Bitcoins and I am already losing count of how many web-based services have either completely blown up or have developed some major problems.

Inputs IO and Coinlenders are the most recent fiascoes, and the theft of over 4000 Bitcoins from Inputs is the largest heist yet. But they are not the first nor will they be the last websites that have blown up in my face.

The first site that blew up in my face was of course Mining United. It turned out to be a scam and it started and ended as all scams do.

Next it was the Bitcoin Trading Corp. I didn't lose any money from the site closing–except maybe for my final deposit which was going to be sent to my Inputs address on file (and I can't log in anymore to change it)–but I loved how it was set up, and was truly sorry to learn of its closing. Within the Bitcoin Trading Corp website, I found two securities besides ASIC MINER to invest in, and both were abruptly halted shortly after I bought them.

I tried to have my ASIC MINER shares migrated to BitFunder but that didn't work out, and in the end BitFunder decided to block US citizens from accessing it. Apparently our regulations when it comes to this sort of thing are the most restrictive. Fortunately the most I'd done on BitFunder was set up an account, so it's no big deal.

Before Inputs suffered its hack, there was the matter of the various Inputs faucets. They would come; they would go. Some would stop paying, some would just disappear. While I did collect a significant amount of Bitcoin from those faucets, it quickly got to the point where it was just too much to keep up with.

I've come to the conclusion that no matter what it is, it's probably going to blow up at some point. I feel fairly confident that I'm not as likely to get fleeced by another scam like I did when I first got into Bitcoins. However, I'm equally confident that one or more websites where I have deposited Bitcoins for investment purposes will blow up for any number of reasons ranging from outright theft to the fear of running afoul of regulations to the business model not working out as anticipated.

For this reason I am becoming a much firmer believer in the value of diversification. I've done some in the way of diversification up to this point, but it has been a little frustrating because at the moment I don't have vast amounts of Bitcoin so true diversification tends to spread my assets out quite thin, and the miniscule payouts hardly seem worth it. I am more of a linear thinker. I would much rather build up one particular asset and get it to the point where it is kicking off some substantial income, then start building the next asset. But I really can't afford to do that. There's nothing more frustrating than even the possibility that I might have just lost the vast majority of my Bitcoins due to factors completely outside of my control.

Diversification is simply not optional in the cryptoworld. It is a necessity. An investor like me has to simply assume that one of the baskets where I have some eggs is going to break, dropping the eggs. Therefore the more variety of investments I can hold, the less it hurts when one of them blows up for whatever reason.

I'm still waiting on some word from TradeFortress about my CoinLenders balance, and I'm hoping for the best. In the mean time, I've started to research a few other possibilities and a few I just happened to notice. This is where sites like CoinAd and BitVisitor come in real handy, as websites for up and coming new services are likely to advertise there. Here are a few of the new possibilities I'm exploring.

TAT Investments manages the ASIC MINER shares on Havelock Investments. There are two types of shares you can purchase. One is for a full share and another is for a hundredth of a share. Assuming ASIC MINER is still a solid investment (and do not go solely by what I share!), the current share price makes it a good buy with an estimated annual return of around 25 percent from dividends. I was finally able to purchase a couple full shares because of the low price, alone with more of the hundredth shares, and I look forward to the weekly dividend payments. TAT Investments also has a fixed rate bond with an APY of 18.25 percent based on face value and an estimated annual return of a little over 17 percent. With a face value of 0.001 BTC it is easy to get into, and it trades for right around 0.0011 BTC. This bond reminds me of the LTC investment bond that I briefly had on The Bitcoin Trading Corp before that site shut down, and it has similar redemption terms. I like bonds primarily for their principal preservation qualities. I've begun to invest some of my ASIC MINER dividends into the bond as a way to make those funds grow in a “safer” manner. I will be purchasing more of these bonds if/when I am able to access my funds held in CoinLenders again.

I've also decided to finally give cloud mining a try, and I believe I have finally found a cloud mining website which is not a scam and which gives excellent updates on how the cloud hashing is going. The site is called It takes a little while to figure it out, but I'm really liking it. You deposit some Bitcoin to your address, and you use it to purchase hashing power. You can purchase any fraction of it that you want, so in that sense it works more like a currency exchange. You purchase hashing shares just like you would purchase alt coins on mcxNOW. Other users put up buy and sell orders which you can fill. Once you own some hashing power it goes to work for you and within a couple hours it will begin to pay you dividends based on mining. I don't have a lot of spare Bitcoin right now but over the past few days I've managed to scrape up enough to buy 0.768 GHS. So far I've noticed that mining dividends are paid out once or twice an hour (it actually varies widely), and a mining reward is comparable to a generous faucet. Of course once the hashing power has been purchased I don't have to do anything further–the payouts are automatic, and fees to cover costs for running the mining farm are automatically deducted from the payouts. I've heard of how difficult it is to mine Bitcoin and I was pleasantly surprised by how good the return still is–of course with, even though I've put in just a few hundredths of a Bitcoin, I still get to benefit from the economies of scale. This definitely beats attempting to run my own equipment. The caviat against investing too much there is that with mining difficulty constantly increasing hashing power is a depreciating asset, so not a good choice for principal preservation. The hope is that it's still possible to recover your original investment, so losing your principal won't be too painful. I'll be keeping an eye on how it plays out for me.

If CoinLenders recovers from the recent attack on Inputs and I manage to recover my entire Bitcoin balance, I will plan to continue to keep some, probably up to half, of those Bitcoins in CoinLenders on the principle that the airline which just had a plane crash is probably the safest, and that as far as I can tell, the owner is honest but simply is faced with an unfortunate situation. In any case, I want to spread my eggs into as many baskets as possible, so no sense in ditching one basket if it still works.

Moving out of Bitcoin investments and into Devcoin possibilities, I recently purchased more shares of the Devcoin currency bond. Because the price of Bitcoin is so high (now it's $315 on Mt. Gox, but had been over $400 just yesterday), it is impossible to get a decent price for Devcoins these days. I hate just sitting on them, so I bought bonds as a way to have those Devcoins working for me while I'm temporarily hoarding them. I do sell off the daily dividends at whatever price I can get.

While I was accumulating bonds, I discovered VIRTUAL, a security for Virtual Mining which is a publication specializing in Crypto news and information. I happened to catch it just a few days after the IPO was announced and decided this was one to jump on. A few million Devcoins later I have several thousand shares of VIRTUAL and although I have one remaining buy order placed below current market value, I think I have purchased all I want to own. I now know more or less what a pump is like from the inside because I basically have been buying up the sell orders one after the other for the last week or so. I finally got to the point where people started pulling their cheaper sell orders and replacing them with much higher ones and I decided it was time to quit. That's when I placed my buy order at well below market price but comparable to what I could reasonably expect to pay for it before I bought up the sell orders today. My purpose wasn't to pump the security, but to snatch up as many shares as I could while the price was still a bargain. My guess is that the price will probably come down over the next few days unless there are lots of other people interested in buying. I figured out at what price I would need to sell a small portion of my shares in order to recover my entire initial investment and then some, leaving the remainder of my holdings to be pure profit. That would be awesome if that worked out. The future sustained share price will largely depend on the success of the investments Virtual Mining makes with the proceeds.

Virtual Mining securities may still be a bargain, though you might give it a few days for the short term effects of my pump to wear off and the price to be better. Then again, it may be all uphill from here on out–it's hard to say. I was just super excited to find a new Devcoin denominated security, giving me another way to invest my Devcoins as Devcoins. Discovering it in such a timely manner is an added bonus for me. I even raided my Devcoin account on mcxNOW just to be able to snatch up more shares, and I was very thankful I hadn't just sold all those Devcoins off.

Next entry: The round 29 bonanza

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