What I've learned from investing $100 in each Top 100 cryptocurrencies (month 1)

Two years ago, I couldn’t even buy a bitcoin as I simply didn’t get it. No Paypal, no credit card, it seemed to be a long and tedious process. Bitcoin was around $250. I felt a bit like a baby-boomer in front of a VHS: it felt too technical, and I wouldn’t take the time.

A year ago, bitcoin was $400 and I felt stupid I didn’t get any at a lower price. I moved forward jumped into the bandwagon.

A painful two weeks later, my first deposit arrived in Kraken, one of the so-called cryptocurrency exchange, and I began to play with bitcoin, litecoin, ethereum and the likes. I burned myself a bit with the DAO, into which I rushed on week #1 it then got hacked and killed, but in just one year, my returns reached +300%.

I still felt a bit ashamed to have almost no strategy. Buy, hold, do a few trades, which sorted out well, but I didn’t realise that we were in the early 2017 boom where ALL the cryptos did 3-4x, so it was just the luck of being at the right time in the right place.

Two weeks ago, I attended Peter Sin Guili’s intermediate level workshop in Singapore - if you happen to be there, just go, crystal clear, educational and no BS crash course to go further than buy and hold. One slide in particular got my attention. Another Steemit user, Ashr, calculated that if someone had put $100 in each of the top 100 cryptocurrencies (by market cap), this someone would have transformed its initial $10,000 into $100,000.

So that’s exactly what I’ve been doing since then : )

I was immediately convinced of the relevance of this portfolio approach - after all most big early-stage VCs do exactly the same by sprinkling a little bit of money everywhere to be sure they won’t miss the next unicorn.

Learning #1: the three tiers of cryptocurrencies exchange

It’s very easy to identify the top 100 cryptocurrencies thanks to Coin Market Cap. To buy each of them, I simply checked on the corresponding page in which “Markets” it was traded. Here’s my first learning: not all exchanges are equal, and if most are super easy to use, some are already going to give you a bit of headaches.

In the top-tier, I would rank the best-known, easiest to user crypto-trading platforms. Namely:

• Kraken, the one I began with. Easy to deposit (though long as it’s through a international bank transfer through Japan that you can send your USD, EUR, JPY or GBP). Only a dozen cryptos available, most of the biggest ones such as Bitcoin, Litecoin, Ethereum, Ethereum classic, Monero, ZCash, Dash, Ripple…
• Poloniex: the second exchange I went to, where you already enlarge your field to some 30+ cryptocurrencies, most of which are pretty big already, such as Digibyte, Nem/Xem, Factom, NextCoins, Siacoin, Viacoin, Radium or OMNI. You can also lend about half a dozen cryptos there: excellent choice if you don’t trade daily and want to make some % with less risks.
• BitTrex: the third exchange I went, where you get 100+ mid-size cryptos, such as Myriad, Antshares, Verge, Ubiq, CloakCoins, Pivx. More volatility as the volumes for each coin are smaller, and any move makes big variations (I already created a -10% on a coin with a relatively small, below $1000 trade there).

In the second-tier, I would rank the more niche platforms, known & used mostly by traders who bet on smaller caps. Namely:

• Cryptopia: I didn’t count but there’s easily 800+ crypto listed, almost all of which are very small. If you rank the cryptos there by market cap, only 10 of them are above $1bn valuation. Most projects you have never heard about, such as Sky, Insane, Ecobit, ChainCoin, SakuraCoin and other mostly exotic names.
• Bitfinex: sounds bigger than I think it actually is. I got there to buy some IOTA and Omise (OMG) which traders talked a lot about here and there.
• Liqui: a Ukraine-based exchange with about 150 cryptos
• Livecoin: probably the worst UX of all exchanges (yes, even you guys at Kraken!)

In the third-tier, I would rank the most obscure, niche, technical or just weird exchanges I had to put my BTC in to trade some gems of the top 100:

• EtherDelta: very interesting at all points, first, because that’s where you can get most if not ALL of the so-called ERC-20 based tokens (plain English: all those ICO coins based on Ethereum) such as MCAP, Pillar, Verisarium. It’s directly launched from GitHub, doesn’t take any password or account. Instead you are invited to use a combo of two wallets (MyEtherWallet + MetaMask). And of course since you’re in the Ether realm you need to pay “gas” or “geek” for every transaction. Lots to learn here, you really feel smarter after beating the EtherDelta beast : )
• CryptoDao: Chinese exchange? Nihao! I had to navigate the horrible UX, colours, to get one of my top 100 (XAS). Everything feel awkward, but hey, it’s a top 100, not a top 99 + “1 I miss coz’ it’s Chinese”.
• Lykke: the exchange is actually a smartphone app, where you need first to send your BTC, then transfer them from their “private wallet” to their “trading wallet”, and then buy Lykke (LKK), to then buy half a dozen coins which you can only find their such as the sexy-named ChronoBank (TIME). Great support from their team.
• Waves: a Chrome extension who transforms into a widget. A bit like ERC20 tokens, what you can buy there needs you to pay a few Waves to process the transaction, so not very easy, but great support as well.
• BTER: one of the China-based exchange, but careful, a small test deposit in BTC I did last month was lost, so I won’t be trying again (apparently many had issues, check on Reddit)

I proceeded in the following way:

• list all top 100 cryptocurrencies by market cap with CoinMarketCap
• check on the page of each single of them on which Markets they are traded
• batch transfer enough BTC or ETH to the exchanges to buy the different coins, always trying a small-amount test-transaction before

Time needed: about 25 hours
Difficulty level: mostly easy except on third-tier exchanges

Learning #2: do your own research, and enjoy the beauty of some coins

I initially started the whole thing in a pretty automatic fashion. List top 100. Find exchange. Buy $100 equivalent. Repeat. After a while, I got exposed to more than just the coin ticker, and read articles, comparisons, reviews, founders’ comments on Reddit and more.

You should always do your own research for at least two reasons: check if the coin is not pure scam or dead; and well, use this top 100 opportunity to do your own Crypto MBA because there’s a LOT to learn at every step and corner of this journey!

To run a basic audit of a crypto-currency, you can use the following websites and tools, I’m putting in the links with District0x as a sample crypto to DYOR on:

• CoinMarketCap is your new best friend. All the data on all the crypto, great ways to rank them by MarketCap, Price, % Change, and for each of them, a “profile page” with key informations such as website, markets (where it’s traded), announcements.
• Github and Slack are two spots where you can track the activity of the project (active, dead, re-launching, etc), the size of the community, and the interest of the team to interact with its crowd.
• BitcoinTalk, Reddit, Twitter, and to a lesser extent Quora, are the places where you can read forums, threads, comments, and build your opinion. In many cases, some expert insight lie there, buried into endless conversations.
• CrushCrypto has interesting and more qualitative research on several coins, and a rather honest “pros and cons” list for each of the coins they analyzed to help you understand where it can be headed.
• TokenMarket has a very useful ICO Calendar if you want to be among the first owner of some coins who will make it to the future top100 : )

and more for the trader profiles (which I’m not)

• TradingView and its different indicators such as Ichimoku, RSI, Stochastic and MACD if you’re into charting and like to get some more financial and trading data.
• Investing has a very cool set of aggregate signals for a given currency, to give you an idea of the trends

Some insights I gathered from doing my own research on the top100:

• you have several families of coins.
  • The biggest is about payments (7 out of the top 10 as Harvey found after he browsed through the top 500 recently. Cryptos such as TenX (PAY), Neo (NEO) or OmiseGo (OMG) are global payment solutions. Some others such as Potcoin (POT) or Bitcrystals (BCY) are about creating a coin for a specific industry such as marijuana (POT) or online games (BCY).
  • Then come marketplaces, and disintermediation of all the centralised marketplaces. It’s a very exciting category where what we take for granted today, the power of Google, Uber, Facebook or Amazon, is challenged by systems where individuals retake ownership of their data, and transact freely with other individuals or organisations. Take SiaCoin for instance, who builds a decentralised cloud storage system (a Dropbox… without Dropbox), Particle (PART) to Amazon-ify all of us, or even SteemIt (STEEM) when it comes to content. AdToken (ADT) is another one whose promise is to clean the pretty dirty online advertising industry of its bots, spoof domains, malvertisement and more. The incentive for all is to lower the huge transaction fees (Uber) or revenues from data (Google, Apple) and give power back to individual users.
  • Platforms are a third category, who build a new transaction system such as smart contracts, and are empowering a wealth of other projects on their infrastructure, not unlike Apple’s AppStore for instance. Ethereum is in this family, as it powers about 43 different ERC-20 tokens, who include most of the recent successful ICOs such as Basic Attention Token (BAT) or Civic (CVC). - Guess what, the crypto exchanges themselves are subject to disruption from some coins. Lykke (LKK), Waves (WAVES) and Binance (BNB) are two new exchanges with different ways of working that Poloniex, say. They both have not only their own tokens, but also other tokens that are traded on their platforms (for instance, I bought some NeoGas (GAS) and Bytome (BTM) on Binance.com, on top of the Binance tokens themselves)

Many of these coins in the top 100 (not even mentioning the following 700+ waiting to enter the top 100) are working on similar projects. It’s very hard to identify which is the best for a given category so except some turmoil.

Things can go fast: teams can change or argue, hack happen all the time (see the demise of the DAO tokens in 2016), forks are scary and confusing (Ethereum ETH and Ethereum Classic ETC, Bitcoin BTC and BitcoinCash BCH), major partnerships can be disclosed overnight (thinking of Ripple or the Ethereum Enterprise Alliance), regulation can come in the game (such as when the SEC rejected the Winklevoss’ twins proposal for a bitcoin ETF)… all of these elements bring new inputs to your research, and make the field of opportunity very open.

I proceeded in the following way:

• check the main website of each top 100 crypto (links on CoinMarketCap)
• 5-10 minutes googling on forums (mostly Reddit) latest conversations
• keep one-two sentence wrap-up / insights in my Excel

Time needed: about 25 hours
Difficulty level: very easy and exciting!

Learning #3: security (online), security (desktop), security (offline)

We always read here and there that cryptocurrency exchanges are not safe - and it’s true. Since MtGox $460 million hack and collapse between 2011 and 2014, any non-beginner crypto trader or holder will opt for additional security layers to protect their coins.

Since your coins are always going to be acquired first on an exchange, be sure to reinforce as much as you can your account there. Two types of hack can happen: on your credentials, or on the platform servers itself (in this case, good luck). Some basic strategies here:

• reinforce your passwords, and use a password generator and/or a password management software such as 1Password or Dashlane. Check the level of strength of those generated passwords (for instance on Dashlane, they’re not very strong - lacking special characters and symbols). Of course, don’t use the same password twice.
• two-factor authentication (2FA): not providing 2FA is like sexual intercourse unprotected, it’s all the more stupid as it’s free to be safe. Google Authenticator or SMS are one extra way to secure your logins, transfers, funding or account setting changes. Each time, your phone will be your authentication buddy. Hint: buy an extra phone with wifi only that you won’t use outside of home (or wherever you operate your top100 from). Write down the tedious QR codes backup codes too, in case your phone gets stolen, you’ll be locked out of every single exchange you were.
• multi-sig, for multi-signature: a very cool feature where three authorised persons must opt-in by e-mail to allow a transfer or action. Makes things slower and safer. Be sure your multi-sig buddies are under control!

But as you will read almost everywhere, your coins should NOT stay on the exchanges you bought them in the first place! This is where some long work will take place, as you will need to remove every single of the 100 currencies to a safer place. These are the most common “safe places”:

• online wallets: just another website where you can store coins. Not much safer in my opinion. Avoid “wallets” who are also “exchanges”, such as Coinbase, as it’s not 100% clear how a hack on the exchange could not lead to wallet breach. Some coins offer online wallets, I’m thinking for instance of Bitcrystals (Google Chrome Add-on), or Elastic Explorer (XEL).
• desktop wallets: much better choice in my opinion as you download the app from the coin developers themselves (usually on their website and/or GitHub). Once installed, you might need to download the full blockchain before your transaction gets registered. Once there, your coins will be safe unless your computer is physically threatened (theft). Most coins have their own wallet, some pretty ugly and slow (for Potcoin it took me 4 weeks to download the blockchain), some super easy to use such as Monero.

• multi-currencies wallets: your best friend in this very time-consuming security part. If you have to download the software, the blockchain, of every single top 100 coins, you need Terabytes of free space, weeks of good, continuous connections and a lot of patience as crashes happen frequently. A few wallets offer multi-currency support such as Jaxx (about 15 cryptos including most of the top 10 such as Litecoin, Ethereum, ZCash, Bitcoin of course, + they have Shapeshift built-in to swap coins in a minute), Exodus (about 10 coins), Coinomi (only available as an Android app, offers an excellent array of 50+ currencies), and MyEtherWallet for Ethereum-based ERC-20 tokens (about 30+ of them, most of the recent ICOs are there). With those few, you'll secure at least 50% of your Top 100.

• offline wallets: probably the best, as you put totally offline your codes and private keys. Two strong contenders here: the paper wallets, very easy to use (generate, print, keep safe, and re-use to transfer back from offline to a wallet or exchange), and hardware wallets such as Trezor or Nano Ledger S, who act as encrypted USB flashdisks where you can store quite a few coins (on some, you can also secure some wallets, for instance you can put your My Ether Wallet completely offline on your Trezor)
• Be sure you are on secure connections and websites! Https, the small lock in your browser’s address bar, the security certificate, the right domain name… Rather avoid signing up for a new service (exchange or wallet or else) from a search on Google or links you’re not sure about. I usually click on links found on CoinMarketCap. Also, don’t proceed to all of these security steps on a public, unprotected wifi or on a friend’s computer or mobile.

I proceeded in the following way:

• list storage options for each of the top100 coins (quite some googling needed here for each coin, a future feature for CoinMarketCap?)
• log-in / download / load chains for every of them (need a computer with no other activity for a few days/weeks time, best would be dedicated desktop computer with at least a few hundreds Gb available)
• ALWAYS write down on a separate paper all the codes, log-in, keys, QRcode backup code, passphrase, and keep this paper safe. You can also take a picture of your paper (harder to find for hackers and safer to have a soft copy). NO password manager, password cheat sheet, password excel file obviously.
• ALWAYS test your wallet with a minimal transfer first of 1 coin or equivalent, once you can see that coin on your wallet, you can transfer your total amount
• Backup the wallets once they show your coins are there (Backup wallet -> save the file on your computer)
• Check regularly for updates of the wallets as some can have new terms & conditions, upgrades, … or no more servicing. Some coins do not have wallets yet, such as OmiseGo (OMG)

Time needed: about 100 hours
Difficulty level: easy for multi-currency wallets such as Coinomi or Jaxx, medium for most desktop wallets such as IOTA, NEM, Viacoin, technical for some such as PeerPlays (just didn’t understand), Stellar Lumens (confusing UI).

Learning #4: crypto-currencies are a stormy ocean, and you need an observation deck

As I write these lines, my top 100 has been running for one month (mid-July to mid-August), and even though I know we are in a bullish moment, the stats I get from just 30 days of holding are enough to push me to continue:

**- +73% returns overall

• OmiseGo (OMG) top performer with 9x returns, CoEval (COE) worst performer now worth $13 (and now ranked 285…)
• 85 of the top 100 went up, 15 went down. More strikingly, the 18 first of the top 100 did more than 2x in 30 days**

I also notice that my top 100, initiated mid-July, is not accurate anymore, with about 20 new entries in the top 100, including such strong rockets like NeoGas (GAS), a subsidiary project from the already spectacular Neo (NEO) team, and Lunyr (LUN) who went from $1 to $25 per coin in the last month.

So as a follow-up to my initial top 100, I find myself with a few questions, some answered, some open:

• should I update my top 100?
• if so, at which frequency?
• what about the hundred next currencies, should I put $10 or $50 on each?
• for those in my original top 100 who are already so far now, should I sell them? keep them?
• should I cap my returns per coin at a given %, say above 300% I sell, as suggest this great portfolio strategy
• overall should I put stops so that when a currency gets a -80% trouncing, I give it up?
• for the top 10, should I put more than $100 (ok already did it ^^’)?

I proceeded in the following way:

:

• update of the price for each coin of my top 100 every month. I have yet to create a small .csv import with present-day prices and then create a formula in Excel to make it match each ticker automatically.
• addition of new entrants every month with $100 for each. I’ll probably have to top up my deposits, but if one month serves as a rule, I’ll need $2000 every month to fund the new top 20 entrants, so it should be covered by the overall growth of the cryptocurrency industry.

Time needed: 1h for price update, 10h for 20 new coins to research/buy/make safe on wallet
Difficulty level: very easy, once you do it for 100 coins, all new coins seem very easy to acquire : )

Learning #5: do’s and dont’s that didn’t fit into the four first learnings

• Careful not mixing up coins together, some have similar ticker (BCC standing at some point for BitCoin Cash and BitConnect), some coins have two tickers for some reason (Storj has Storj STORJ, ranked 63 as of day of writing, and StorjcoinX SJCX ranked 842). Likewise our very own SteemIt has Steem STEEM ranked 23 and SteemDollars SBD ranked 281. Same goes for the tricky Vericoin with ticker VRC, when the VERI ticker is for Veritaseum.

• Some transactions take time, don’t freak out! It may take a few days (IOTA) or weeks (POT) whether you use an online or desktop wallet. You can always contact your exchange and your coin support team to check. For me it unblocked at least 3 transactions (IOTA, LKK, WAVES, Bitfinex, thanks all for your very fast support)

• Some exchanges offer you to lend your coins, such as Poloniex (for about 10 coins) and Bitfinex. In practice, almost only Bitcoin is in demand for lending by margin traders who need it on a short notice for their leverage. During the Bitcoin fork episode, I managed to lend some BTC on Poloniex at 4% per DAY. The usual rates are around 0.001 % per day, that makes it 3.65% yearly. Interesting if you don’t do anything of your BTC, but risky as you still keep those BTC on exchanges, which is not recommended.

• LOTS of the conversation on #cryptos happen on Twitter. Careful, the more you read it, the more you fear of missing out and you make stupid bets, which I did. I also subscribed to a few paid “signal services” whereby you get technical analysis info every once in a while. Unless you are stuck to your computer and react in almost real-time to those alerts, I would say it’s not so worth it. But again, I’m a holder, not a trader. You can follow my list with 39 of these profiles, a mix of Technical experts, Traders, Thought Leaders, News & Analysis.

• Don’t forget to zoom OUT of the crypto markets. It’s fast, it’s addictive, it might be the future, and/or your biggest win or loss. I strongly suggest to follow Peter Sin Guili ‘relaxed’ and safe approach: no more than 10% of your total investment portfolio in such a risky field like crypto.

• Don’t do margin trading. Utterly risky, and as the crypto markets are still small compared to ForEx, whales can very, very easily create huge variations and trick you into it (bear traps / bull traps). See, with just $10k and NO trading at all I’m already at +70% in one month. I assume a +20% would be a bad month. Don’t be so greedy : )

• If you trade, don’t trade more than 1% of your total crypto investment at a time, and don’t aim for more than 10%, it’s already good. If you never traded, you will see how HARD it is to sell in a market that grows.

That’s all for now! It’s been overall a very exciting experience, with tons of learnings along the way.

If you like this article, you can like / comment as it will bring me some nice STEEM : ) or tip me on my Bitcoin tip jar : )

Feel free to comment on what you want to know from the next update! Oh, and help me inaugurate my first Bitcoin tip jar: 1CJMWwhCYZ76AMC4eB2Uo1WNtXPDgq7BbW