It might be working

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

Something rather unusual is going on in Cryptoland, at least for me. My usual experience is that there is an inverse relationship between the value of Bitcoins and alt coins. So when Bitcoin is moving up, people who hold alt coins tend to want to sell them off to improve their Bitcoin position and ride it all the way up. This then depresses the value of alt coins. The more Bitcoin rises, the more Devcoins and other alt coins sink

It's because of this inverse relationship that up until now I've found Bitcoin price rises to be annoying. I haven't had enough Bitcoins to really justify much in the way of profit taking when they were worth only $100 each. My perspective is that when Bitcoins go from $100 to $200, they just take more Devcoins to buy. I remember just a few weeks ago wishing/hoping this latest Bitcoin bubble would hurry up and burst so that Bitcoins would be cheap again.

But the story ended differently. Bitcoin blew past $200, $300, $400, all the way up to $1000 where it seems to have leveled out for the time being. Bitcoin has actually stabilized right around $1000 each! Initially the value of Devcoins took a hit, and I've sold small amounts of them off at 14 satoshis–I couldn't ever bring myself to sell massive amounts at that gutter price, but I did sell some of my dividends from the Devcoin currency bond as well as my mcxNOW “interest” earnings.

Recently, as Bitcoin stabilized, the price of alt coins in general started climbing. This trend began right as mcxNOW closed down trading in most of the alt coins on its platform. The price of Devcoin on mcxNOW is frozen at 20 satoshis, and I remember being relieved to see that price–an indication that Devcoin was clawing its way out of the gutter.

Once the announcement was made that mcxNOW would be temporarily suspending its operations, I arranged a transfer of all my accumulated Devcoins to Vircurex. I then proceeded to set up all my ridiculously high sell orders so that I would be poised to take advantage of the next pump, which certainly appeared to be imminent. Vircurex allows me to place as many buy and sell orders as I want–none of this limiting it to ten orders per coin or twenty-five total orders nonsense. So I'm back to having an order at every possible increment in the range I'm willing to sell.

I'd just gotten finished setting up numerous sell orders when it became obvious that the price of Devcoins was climbing–and fast. It went from 20 sat to 30 sat in less than a day. The next day it went up to 40, then the day after that, 50. It briefly climbed as high as 65 but then fell back down to the mid-forties, and today it seems determined to hold on just a bit over 50. While it was closer to the 60s it finally hit me that my DVC holdings represented a few Bitcoins, each one of them worth right around $1000.

There is this strange moment when you suddenly realize that your fun little hobby could actually fund a major expense in your life if you were willing to sell some of your assets. I immediately thought of a particular expense which will come due next month that's in the thousands of dollars. I started calculating whether or not I had enough Devcoins to trade to Bitcoins to then sell off for fiat to cover that expense. I came up a bit short, but the fact that I was even close was a bit of a shock. Now what?

Then the questions started flooding in. Do I take some profits off the table? Do I pull the trigger now? Do I wait and hold out for even more later? What if I hold out for more and it all crashes?

Then my thoughts traveled to my four Bitcoins still sitting inside my frozen CoinLenders account, or more accurately, in the possession of whatever thief hacked into TradeFortress' not so impenetrable online services. The value of those lost Bitcoins at today's prices? Somewhere between $4000 and $5000–closer to the higher end! More money than my household earns in one month doing our day jobs. I can now officially say that I've lost more money than I earn in a month. The annoying thing is that had I just held onto them in my own wallet and then sold them I could have easily covered that major expense. But no, I had to “invest” them. Oh well. They definitely did not cost me that much to acquire!

There is this story about a man who enjoyed gambling at the racetrack. One day he took a friend with him to his normal outing. He brought along a dollar to bet with. The first horse he bet on won, so he increased his pool of cash. He then bet all of it on another horse and that horse won as well. This repeated several times until he was sitting on a large pile of cash. Finally, he bet it all on a horse he was sure would win, and that horse didn't even place. So he lost everything he'd won that day. He went home and his wife asked him how much he'd lost. “A dollar,” he replied. He was nonchalant about it, and his friend's jaw dropped–he was thinking of all the winnings the man had lost. But his net loss was only the dollar he left the house with.

That's a bit how I feel about losing those four Bitcoins to the Inputs/CoinLenders disaster. When I first got involved with Bitcoin I spent probably a total of $30 or $40 buying some. But I also sold some back when the price increased a bit, and then bought when the price decreased. I'd have to go back over my transaction records to be sure, but I may be out $10 or $20, but not any more. So, if someone were to ask me how much I've lost in my Bitcoin adventures I'd say “about twenty bucks.” I actually recently sold 0.01 BTC for over $11.00–that was the 0.01 BTC that I couldn't send anywhere else so it remained stuck in my Coinbase wallet until I finally decided to sell it and that worked. So at the most I'm out nine dollars to date.

More importantly I've gained some experience and a different perspective.

I have developed a deeper appreciation for the strategy of simply holding on to Bitcoins or Devcoins or whatever other crypto I happen to have lying around. After all, should my favorite crypto double or triple in value in a short time, there are few investments out there which can top that. Bitcoin went up ten fold and at the same time Devcoins tripled. I'm not saying I do the holding strategy all that well. I still really do enjoy investing and by nature I am a risk taker. But lately I've been known to let my newly generated Devcoins sit in my wallet for a while, or even sit on whatever exchange I happen to be using while I carefully consider my options.

It's an added bonus when my holdings increase in value while I'm thinking about it.

I've also decided that I need to be more strategic and intentional about profit taking–going all the way and converting some Bitcoin into cash. I have a few sites which are paying back small amounts of Bitcoin–I have written about some and hope to write more as well. I've decided to reinvest half those payouts but cash out the other half. I may play around with the percentages but half and half is a simple and easy way to start.

I used to listen to Jim Cramar, a former hedge fund manager who has a radio program called Real Money Talk. He had this mantra he would repeat often: “Bulls make money, bears make money, pigs get slaughtered.” This was always in the context of advising people to take some money off the table when they had purchased a stock and its value was climbing. Take some profits while you can because you never know, it could crash the next day or week. It's OK to hold out some for an even higher value, but do take profits on the way. The pigs are the ones who hold on for far longer than they should out of greed. I'm going to make a point to not be a pig and engage in some profit taking along the way. I may periodically sell off some Devcoins for Bitcoin and then sell off the Bitcoin for cash. And I will be taking profit out of my Bitcoin investments as well.

This brings me to a third point, which I've touched on before, and that is liquidity. In one sense it's impossible to truly invest without also tying up your assets. However, there always has to be some portion that is liquid, that can be accessed at any time. Part of my problem with CoinLenders was that I had purchased some CDs and there was no option for pulling out of them early until TradeFortress manually terminated everyone's CDs. I bought the CDs because they were supposed to pay out a higher rate of return, but that meant my Bitcoins were stuck there. Had I gotten some sort of hunch that the theft had occurred or that I should pull my funds, I wouldn't have been able to do so. I'm not against locking up my Bitcoins in various investments, but I definitely have a far better understanding of the risks involved.

Today I got a bit tired of watching the price of Devcoins on Vircurex fluctuate and I decided to try my hand at day trading (or week trading or month trading) again. I sold a million Devcoins at slightly higher than the market rate, and then set out to buy them back again at a lower price. I managed to do this with 1000 of them (sold at 51 sat, bought back at 49). The rest of them have all sold, but then the price took another small climb and my buy orders are stuck in the middle of the buy column and will be for a while unless Devcoin experiences a price dip. My waiting buy orders are ready for it.

And what if that dip never comes? In that case, my sale of a million Devcoins is profit taking, and the half Bitcoin might get turned into cash, or it might get invested elsewhere (or maybe half of it will get invested and half sold). For now I'm keeping the buy orders in place because if those buy orders fill, then the amount of Bitcoin I have left over would represent pure profit, and then I could attempt to cycle those million DVC again.

I'm finding that to really pull off trading in such a way that I get to keep the same amount of Devcoins and add Bitcoin to my balance, I need to have patience. I have more patience than I used to, but not sure if I have quite enough yet. Prices fluctuate in a matter of days when I wish it were in a matter of hours.

Regardless of how this round of day trading goes, the tenfold increase in Bitcoin's value has made it possible to realize some significant earnings by playing around with only a million Devcoins. Perhaps the profit potential is only 0.01 BTC, but that is over ten dollars. A couple months ago it might have been fun but not worthwhile in the long run.

There are other ways in which playing around with a small spread pays off much bigger than it did only weeks ago. I currently have a sell order placed on one of my mcxFee shares. Once it sells I'm hoping to buy it back at around 0.008 BTC lower for a gain of around eight dollars.

Not too shabby… if it actually works.

Devtome writers

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