Crypto & Cardio #3 - Bitcoin vs Everything else and my approach to locking in Crypto Profits
On one of my posts over the weekend , I was asked
When u lock in profits do u go fiat, usdt, BTC or another coin?
In today’s video I talk about my view on what constitute profit in cryptocurrency and how I ‘lock’ those profits in.
Bitcoin vs…
As of today, June 2018, my mindset is very much that it is bitcoin verses everything else; in that I look at every coin in relation to how it is faring against BTC.
This isn’t because I’m a Bitcoin Maximalist.
There are many cryptocurrency projects that I think will succeed. However I’m a realist and I look at market behaviour and based on that it is my assessment that it is Bitcoin vs everything else. There is no crypto that is immune to the fluctuations of Bitcoin, whereas Bitcoin pretty much dances to the beat of it’s own drum right now. It is the pied piper of the crypto world.
So what does this mean in terms of locking in profit?
Bitcoin profits
When I lock in my Bitcoin profit my bitcoin profit, I do so into fiat.
My approach is by-in-large simple; I take out profits whenever the price of Bitcoin doubles. So when Bitcoin hit $1000, then $2000, $4000, $8000 and $16000, I sold a percentage of the Bitcoin I held. When the price dropped I took a view as to when to buy back in.
Overlaid against this, I take a view on (looking at my investments generally) whether I’m over or under invested in cryptocurrency; this my flavour whether I take out a higher percentage, whether I buy back in or whether I start buying more Bitcoin.
Other Cryptocurrencies
However when I look at any other cryptocurrency; I look at it’s value in relation to Bitcoin. My general approach is if it doubles in BTC value since I last bought it; I take some profit.
I do not look at other coins value in relation to fiat. Their fiat value, in my view, is mostly dictated by what Bitcoin is doing. I find that immersing myself in the satoshi value of a coin gives me a truer picture of it’s performance.
For example; a lot of people talk about the bear market in cryptocurrency starting from January. For me that is false. The Bitcoin bear market started in January. For a lot of the other cryptocurrencies the bear market started last June as a consequence of Bitcoin’s pump. Last June saw some of the highest satoshi prices of many of the altcoins. Dropping to a low in December before making a recovery (as Bitcoin dumped) in Jan/ Feb and now falling back a bit as Bitcoin stabilises. To illustrate this, if I look at STEEM, it peaked at over 90k sat last summer before dipping to under 10k sat in December. It then spiked in January to over 50k sat before falling back to around 30k sat, where we are at today.
What to buy
The critical question (and first question I ask myself) whenever I purchase a cryptocurrency (as an investment) is; will this coin outperform bitcoin, in the short, medium or long term?
Should I hold onto the Bitcoin I have or does it make sense to invest in another coin. Thus when I’m analysing the performance of a coin; I’m always looking at what is it doing (or likely to do) in terms of it’s bitcoin price.
A lot of the time; it is easy to fool ourselves into believing that the coin we’ve invested in is doing well; when in reality we would have been better off (financially) just holding onto to our bitcoin. Not to mention some of the risks associated with investing in a new relatively unknown coin. E.g. lack of liquidity, untested in terms of blockchain vulnerability, wallet security - whether you choose to download it or hold on an exchange, price volatility, mental bandwidth etc etc. I find the more I have at stake; the more compelling the reason to invest in a coin that isn’t Bitcoin needs to be.
I’ve heard people celebrating how they made 100% or 200% gains on a coin last year; when Bitcoin went up 7 or 8 fold in that period! I’ve certainly heard ICOs taking in terms of dollar returns when investors would have been better off holding their BTC or ETH and buying when the token hit the exchanges.
TLDR;
In conclusion, when I lock my cryptocurrency profits, I go to BTC. When I lock in my BTC profits I go fiat.
It does mean having to train my brain to think in terms of movements in satoshi’s however I find it’s the best way I have of getting a clear picture of the performance of my portfolio.
Caveat:- This is my approach right now, with bitcoin holding such a large sway over the market… this could change in the future however.
What about you? How do you lock in your profit and assess the performance of coins your invested in?
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Good to hear your ideas on taking profits. I am trying to do the same strategy now. In the past there has been times I have focused on the dollar amount of an Alt coin, sold when it seemed "high". If the price of BTC was also "high" I may not have gotten a super great gain.
When you take profits do you have a set percentage of gain you like to take? Like a 5-10% gain? I guess it depends if you are doing a long term or short term investment.
It has been a year since I have gotten into Crypto now. I keep seeing these 5-10% ups and downs. I feel like it would be a good strategy to take these profits every 2-3 weeks, converting into fiat(or something that doesn't fluctuate. The market seems to always do these ups and downs and I want to take better control over this opportunity.
Thanks!
@acromott
My general approach is to take profit when the price doubles, see here for a post I did on this.
Also I don't put a time on taking profits... I take what the market gives me. I try to think in terms of year-on-year returns as oppose to weekly profits however it really depends on what your goals in crypto are.
All that makes a lot of sense. Even now that Bitcoin dominance is around 40% or less.
Do you think whether it would make sense to re-evaluate this approach at some point? What I'm thinking is that if some utility coin were to grow significantly and begin to derive its value from real world use, that is, directly from fiat conversions, wouldn't it make sense to gradually stop focusing on Bitcoin?
How far do you think STEEM is from that? What I'm hoping to see is more pay-to-pay serviced using the Steem blockchain and creating buying pressure toward STEEM and thus increasingly detaching the Steem price from the general ongoing crypto hype. It will take SMTs, the Hive and more onboarding via popular and well-marketed apps. But I think we will get there in the not too distant future.
Yep - I think there will come a time when some coins will grow significantly enough not to be looked at in terms of their BTC value.
It is arguable that pegged assets, like SBD, should be looked at in such terms.
To be honest, I think STEEM (like most other crypto) is a long way from detaching it's price from Bitcoin/ crypto hype.
It is clear that the number of active users of Steem and apps like SteemMonsters are too low to support the current price of STEEM. It would be interesting if valid and reliable metrics were developed for measuring that.
I think speculation as to it's future value is also baked into the STEEM price... as with most cryptos.
This is precisely why it has been wise to keep advertisements out of Steemit and the rest of the apps that people use to access the blockchain. The money would have been a pittance and made it painfully obvious how much the price is dependent on the ongoing hype. This is why investing fiat into the cryptosphere is somewhat questionable at the moment, in my opinion. The year 2018 is the year when crypto will have to begin to put up or shut up. It will take some time before you may be able to pick potential long-term winners. What should be done right now is pay very close attention to the technological potentials and real world use driven value propositions.
Still waiting on the moment to look up some profits. Only stepped in jan 2018! Yep ouch!
So for the moment I am trying to bring the average book price down to an acceptable level.
But I do like theapproach you are using. Will keep it in mind when that moment of profit taking arrives!
Ps Don’t forget to register for my world cup contest. Only 4 days left!
A 🔥 post Bro. Thanks for sharing your views. It gets pretty lonely, out here, having conversations in your own head all the time 😅
Lol... yep, I've been there!
Though many people might not go with your approach including myself but it's a nice approach. The fact still remains that bitcoin is the mother of all crypto
Thank you @nanzo-scoop for your interesting perspective on how you look at crypto's in relation to Bitcoin. I am just curious did you participate and buy any Social Wallet WIRE Tokens on the offering ??
Nope, never heard of it. However I'll keep an eye out when it releases.
It looks like you have a system that works for you. What is nice about this is you know when to buy and sell withou too much emotions involved.
Good advice, a lot of people get caught up in looking at appreciation/depreciation of their crypto vs USD instead of vs Ether/BTC this often results in incorrect analysis of their current profit position.
Hey @nanzo-scoop, just seen this! Thanks for the detailed response, it's a very good strategy you have. Trading over the long term beats day trading, you may as well be gambling with day trading. I've been dumping some of the poorly performing shitcoins and consolidating back into the more mainstream coins. I think I will only purchase top coins and maybe some good projects that I like from now on, there's a good one I have my eye on called Nexo, going to wait for it to be listed on Binance and when it gets dumped there, I will BTFD. That's the theory anyway.
Very nice techniques to maximise profit.You are very proffesional with your investment plan.I like the way you trade.