I'm keeping it in the cryptocurrency family - Jim Duffy
I’m not a big fan of making recommendations. Like many of you, I’ve recommended a plumber, an electrician or a financial advisor only to discover it has not gone well.
The terrific experience I had was not replicated elsewhere. So, when my family asked me within the last week to “get them on crypto”, I had to think hard about what I would do. As it happens, it’s been a wild ride.
This column has hopefully broadened your horizons on the whole blockchain, cryptocurrency and decentralised finance landscape that is growing at an exponential rate globally.
From Bitcoin as an established “coin” that is attracting new institutional money to newcomers like Cardano, which aims to gives financial identity to the world’s “un-banked”, there is a burgeoning clutch of crypto projects that have big plans to change the world.
Essentially disrupting traditional finance the same way Netflix disrupted video, DVD and a while lot more. But the mainstream media has still very much been playing catch-up. Until now.
So, it took an article in a sniffy newspaper based in London for my family patriarch to sit up and take notice. It seems some people still put gravitas in a newspaper brand, regardless of whether the writer has spent ten minutes reading up on crypto.
She wanted into Bitcoin and she wanted in fast. My dilemma had begun.
As a crypto investor, writer and advocate, of course I should get her signed up, signed in and “stacking sats”.
But there is always that niggle when money is involved and “past performance is no guarantee of future returns” – right? But, seeing as I've made 1,000 times what my financial advisor has made me in the last year, I thought I’d take a chance and get my now enthusiastic parent into the breach.
As many of you know, who follow crypto, the whole market is on fire at the moment. The market cap reached $1 trillion, up from $400m only a few weeks ago. Bitcoin has broken all time highs and the “buy” indicators on my screen are flashing – overbought.
So, maybe not a great time to enter the market as the FOMO is at its peak. Nonetheless, I was over-ruled and I promptly set up two accounts, one on Binance and the other on Coinbase.
All the KYC checks were completed and she was off and running buying some Bitcoin and Cardano. Then she got the first experience of volatility. Boom.
Only one day after buying into the market, Bitcoin decided that it was time for one of those traditional bull-run corrections. And it was bloody.
Moving from a high of $41,000, it tanked to $32,000 over a 24-hour period. Cardano also lost out moving from 33 cents to 23 cents. Big old 25 per cent corrections. It’s not for the faint-hearted.
So, I expected some static from my new family crypto holder. But, nothing came, except a question “should I not be buying the dip?” Blindsided by this, I picked myself up of the floor and tried to sound assured – yep, you actually should. And she did.
As expected, 36 hours later her initial lump is doing well and her buy in on “the dip” has performed swimmingly well. Bitcoin is back up at $36,000 as I write.
But, there is a lesson here for anyone who wants to diversify a portfolio into crypto investment. Although an asset class like Bitcoin is 12 years’ old and far from a bubble, it is still relatively new when compared to equities or precious metals.
It is still finding its feet, I would suggest. And this makes it more apt to violent sinusoidal ups and downs.
It’s only the first fortnight in January and already this exciting, but chaotic market is making waves.
Be careful out there.
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