What's my background? Well I was a noob with no trading experience. But I saw the bitcoin chart and read the papers on it in early 2013. I could see the exponential tangent rise in price pretty early based on it's perceived scarcity dynamics and valuation at $30. I swore I'd buy a $7k worth at the time but put it off for various ultimately dumb reasons (lack of knowledge on wallets, FUD from mainstream investor friends).
Around 10 months later I cried in my car on the way home realising if I'd committed to that purchase I could have sold then (or even now) for $200k.
I stopped thinking about money, technology or cryptocurrency for almost 2 years and focused on my day job (being a Doctor).
June 2016 and a random Vox article about Ethereum popped up on my radar critiquing it's rise to $10 from 30 cents following the announcement of 'the DAO' weeks prior to it's infamous fall.
The Ethereum concept of smart contracts had me hooked and I was thrown back into cryptocurrency; a moon-child expecting a meteoric rise. Indeed I bought my $6.4k worth of ETH in at $12 per piece (530 ETH total) and watched in bloom to $11.13k when ETH price hit $21 around 2 weeks later.
I didn't really understand the technology. I ignored an article Emin Gun Sirer pointing out the security vulnerabilities in the DAO; at the time I didn't really understand what 'the DAO' (or even a DAO) was, or it's significance.
I didn't understand what I was buying or the implications on price of anything built on top of it, if something went wrong.
All I cared about was I had a gut feeling. Bought at the right time and felt euphoric knowing I'd made an almost 100% return in 2 weeks.
Days after that article by Emin, the DAO hack occurred. I watched the price of ETH dive.
I had plenty of opportunities to sell at profit; at least 5 in total but I simply held my ETH believing it's better to blindly hold.
What's my regret from this?
Not selling 225 ETH at $21: 21 x 225 = $6.4k i.e the size of my initial investment.
Imagine getting really lucky, making 10x the annual return of most S&P500 investors (10%) in 2 weeks then not removing all risk by selling enough of my winnings to make my initial investment back when I could.
I would have eliminated all risks of trading after since that 305 ETH would have been "free"; there would be zero overall risk to holding it for eternity!
Lesson 1: Don't blindly hold your cryptocurrency investment forever regardless of entry. Choose it wisely and when it does rise, decide a decent enough percentage return (50-100% is perfect for beginners in cryptocurrency or the risk averse) sell enough to make back your initial investment.
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If you don't really understand cryptocurrency or the asset you hold, I suggest a 100% return should prompt you to consider selling half your stack; convert that half back into fiat or use it to invest in another asset which you think is going to grow. You'll wind up diversifying your portfolio quickly. The sell point to recover your principle doesn't have to be 100% return; it can be much lower or much higher but ultimately you should have one because for the vast majority of cryptocurrency tokens, blindly holding forever without checking relevant news, price and developments on them is incredibly risky.
You'll also help keep the price up of the asset in the long term for everyone if you do it this way - I'll explain how in subsequent lessons.
The good news is that after this happened 3 more times I finally realised I had to learn something. That's where the next lessons come in and don't worry, it'll all tie into why I'm posting soon enough.
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References:
Timothy B. Leetim, "Ethereum, explained: why Bitcoin's stranger cousin is now worth $1 billion", May 24, 2016, 10:00am EDT: http://www.vox.com/2016/5/24/11718436/ethereum-the-dao-bitcoin
Emin Gün Sirer, "Thoughts on The DAO Hack", June 17, 2016, http://hackingdistributed.com/2016/05/27/dao-call-for-moratorium/
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