Well, that was perfect timing. I wrote this piece about bitcoin and cryptocurrency and then the market tanked.
It didn’t just take a dip; it turned into a bloodbath. And that was great! Keep reading to find out why.
I have spent the last three weeks trying to wrap my head around investing or buying cryptocurrencies. Instead, I’ve walked away with some great insights and realities.
There is nothing like learning how to invest in crypto in a down market. Of course, investing in an upmarket is a no-brainer, but what about when everything is going negative and racking up significant losses.
Crypto Scams Forecast to Rise
The credit reporting people at Experian are warning consumers to beware of cryptocurrency scams. “Digital currencies, such as cryptocurrency, have become more conventional, and scammers have caught on quickly. According to the FTC, investment cryptocurrency scam reports have skyrocketed, with nearly 7,000 people reporting losses totaling more than $80 million from October 2020 to March 2021.
In 2022, Experian predicts that fraudsters will set up cryptocurrency accounts to extract, store and funnel stolen funds, such as the billions of stimulus dollars that were swindled by fraudsters.”
In the fraud or scam category, I’d have to add all the magic courses that marketers are trying to sell for $4,000 or more to teach people how to invest in cryptocurrencies.
Here is a reality — there is little secret sauce to succeed in crypto trading or investing.
My observations tell me you should only get involved in crypto if you believe in cryptocurrency and are comfortable being a Hodler. That’s someone that is willing to Hold On for Dear Life and hope for a future explosion in price. That approach somewhat follows the strategy in my last piece.
The hodler approach seems to make sense with the big boys in digital currency like Bitcoin (BTC) and Etherum (ETH). Other coins might be as stable, but do your research and stay clear of smaller volume coins that are fads and more subject to pricing manipulation.
Traders come in two different categories as well. First, you have the emotional daytrader trying to score a lot of small or big wins to make fast money. This sure feels a lot like gambling and throwing hope against the wall.
The other trader makes decisions to buy and sell using math and algorithms to decide what to buy, when to buy it, and when to get out. I strive to be that person.
I turned to Gainscrypt for some advice for my readers. This company is located in the Netherlands and is a small team of trade analysts/algorithm developers.
I found refreshing about them their openness and honesty that ultimately knowledge is key for success, as even algorithms are not risk-free.
Mark at Gainscrypt said that when it comes to using auto-trading tools to buy and sell, “their mechanics rest on proprietary and conventional TA (Technical Analysis) indicators, measuring market dynamics such as volatility, strength, support, trend, and momentum. Then, combining these indicators with historical data, the algorithms find statistically desirable entry points and exits.”
You see, algorithms do not predict markets but rather respond to them in a disciplined fashion, saving traders emotional involvement and time.”
Without finding a way to lean on math to make the best decisions on buying and selling cryptocurrencies, you are betting on emotion, hope, and whispers. But, unfortunately, that’s not how I like to invest money.
“We can’t stress enough that investors should never trade with money they can’t afford to lose — we wouldn’t want vulnerable people to risk their savings.” — Mark at Gainscrypt
I decided the only way for me and my personality to dip my toe into cryptocurrency investing was to use an automated program. I found Cryptohopper before I found Gainscrypt. There are other automated trading platforms as well but this is what I’ve been using.
I’ve spent the past few weeks using the Cryptohopper automated trading platform to attempt to understand how to buy and sell digital currency.
Their paper trading option lets you set up and configure a trading strategy and let it run against actual market data to see how you’d do.
I thought it couldn’t be that hard. So after a day or so of testing, I started using real money and promptly lost $300 when I turned my head. That scared me and taught me I needed to learn more before putting my money on the line again.
The quick loss was a great lesson that I needed more help in the form of information, advice, and expert I could trust, and that’s how I connected with Gainscrypt.
In the interest of disclosure, I purchased some of the trading strategies from Gainscrypt, and they have not offered me anything free or provided me any incentive to mention them. On the contrary, I just indeed found them exceptionally helpful. Best yet, they are working well.
It is Hard to Know Who to Trust for Advice
There is no shortage of people selling miracle magic dust for beginners, as I mentioned.
I put this question to Mark at Gainscrypt. Mark said, “There is much you can learn by spending little to no money.
In a goldrush like crypto, plenty of savvy entrepreneurs tries to benefit from selling the shovels. Thus it pays off to be skeptical.”
[NOTE: The expression selling shovels refers to the old story that the people that made the most money from the California gold rush were the guys selling shovels rather than mining gold.]
Mark went on to say “My recommendation would be to start with affordable content. Investopedia has decent courses available for roughly $100–200 per course, and open-source learning platforms such as Udemy, decent courses under $100 can be found. Not to mention loads of free information on the internet.”
The Market Downturn is a Blessing
After losing cash quickly, I realized the market downturn could be a blessing. After all, if I could figure out a strategy that worked in a down market, I’d be so much further ahead.
I don’t want to spoil the surprise, but I’m happy to report while others have been losing their shirts, things have been looking up for me and my paper trading testing. I will keep testing and reporting on what is working in a future post.
There is no Pot of Gold Calling Your Name
From chasing the rabbit hole of learning crypto investing or trading, I’ve learned that there is no pot of gold just waiting for you to bend down and pick it up. Anyone telling you that should be questioned or, at the very least, not be your single source of advice.
Investing or trading crypto requires disciple and trust in data. As Mark said, “The only way to succeed with crypto trading is to remain emotionally disconnected. If you are desperate and need to win, you’re unlikely to trade with cool discipline and may as well gamble. But, on the other hand, don’t fall into FOMO (Fear of Missing Out) because of some unverified story that someone somewhere made life-changing gains.
Only get started with crypto if you have time and money to spare and have an intrinsic interest in the underlying technology or its financially disruptive nature.
Without a long-term vision/understanding on the potential of cryptocurrencies, investors will lack the conviction to hold coins for the long run.”
Mark and the other intelligent people at Gainscrypt might be biased towards mathematical and data-based trading because that is what they do. They sell products as well. But their products begin at $8.99 and not $4,000.
Using Data-Based Trading My Results Have Been Much Better
Overall my wins have been beating out my losses using three investing strategies.
I created one that is returning a small positive return but using the automated trading scripts I purchased from Gainscrypt has been very impressive.
For example, this is what my open positions look like right now.
All I can do is continue to let the paper trading run to learn more lessons and gain experience based on logic, math, algorithmic trading, and lean of more intelligent people than me.
The last thing I need is a huckster or scammer wanting big bucks from selling some magic sauce. I need good information and tools to make informed choices and decisions.
Do You Have a Question You’d Like Steve to Answer? Click Here.
I asked Mark the tricky question about people promising instant daily profits and day trading their way to riches.
Mark offered, “Instant daily profits are a reality in a bull (up) market. Algorithms are a powerful tool to find trends and benefit from these market movements in an automated manner.
But if trends reverse (bear market) and prices keep falling, the reality is much different. The narrative is then about retaining profits, no more about gaining.
A mild downtrend can still be profitable by trading bounces, but no one knows how long the downtrend will last or how severe the downtrend will be.
In time, pulling out of the market might pay off more than staying in. Subsequently reinvesting profits at market bottoms or waiting for markets to stabilize.”
More to Come
I’ll keep you posted on my progress and what I learn as I move down this road. There is so much more to come.