About two years ago I became interested in Bitcoin and the underlying blockchain technology. At the time, it was mostly tech and finance circles discussing their potential.
Today, it seems everybody is talking about it. As the price of Bitcoin has soared even mainstream media feel they need to report on it.
Is it a bubble?
Earlier this year, I figured that simply being interesting in crypto-currencies wasn’t enough. In order to talk about it credibly, I wanted to be more invested in it (literally). So I decided a take a few hundred Euros to buy small mounts of Bitcoin, Ether and Ripple, even though they had already increased quite substantially in previous months. I reasoned, if the bubble burst, the financial loss would be bearable, but if it increased ten-fold, I would turn a nice profit. Either outcome seemed equally likely then.
Of all the crypto-currencies out there, I chose these three, because
- Bitcoin was (and still is) the most popular and thus in my mind has the largest chances of being driven up by speculators.
- Ether is the value token of the Ethereum smart-contract platform, which is a technology I thought had a lot of promise as the building blocks of many digital innovations yet to come.
- Ripple is different from other crypto-currencies in that it was not really competing with existing currencies and the banking system, but rather complementing them. In my opinion, it also neatly solves a few of the issues in other real-time gross settlement systems, such as the complexity of managing standard settlement instructions (SSIs).
When to get out?
Initially, my investments languished. But particularly in these last few weeks, interest in crypto-currencies has spiked and I suppose, as the rise in Bitcoin has people looking for alternatives, Ether and Ripple have been driven up as well.
Thus, my investments in Bitcoin and Ripple have now increased four- to five-fold (Ether a little less). Naturally, no one knows when this is going to end (but end it must, I believe). So I decided to limit my down-side risk and sell about a fourth or a fifth of my stake in Bitcoin and Ripple.
This way, I’ve fully recouped my initial investment, but still have hundreds of Euros worth of crypto-currency left. Now, a couple of days later, Bitcoin has continued to appreciate, but I am not worried about the money I did not make by selling early. I can now sit back relaxed, knowing that I cannot lose anything, but still have a lot to gain as I watch the crypto-currency story unfold and hopefully realize its full potential.
[11-Jan-2018 Update]: Looks like I’m not the only one taking money off the table.
Should I invest?
I don’t give investment advice. Not in real life and particularly not on the internet.
But whenever you need to ask someone, whether something is a good idea, you obviously don’t know enough about it to make an informed decision for yourself.