Let’s recap. Last May, I wrote an article about accidentally making a 845% ROI on a free dollar’s worth of Bitcoin I got from Coinbase. (It received the following rave review: “Clickbait.”) I took some of the cash I earned from writing that article and bought more Bitcoin, some Ether and a small amount of Litecoin. I promised to check in on my cryptocurrency investments once I either a) sold my cryptocurrencies or b) lost all of my money as Bitcoin collapsed.
Option A: Selling out
I sold all of my cryptocurrencies last month. I knew I needed to get out of the game when I started seeing people taking out mortgages in order to cash in on the crypto surge. When I wrote my initial article, the idea that a single Bitcoin might be worth $10,000 seemed like a pipe dream. In December, the price of Bitcoin reached a high of $19,783.21. In that moment, it seemed like Bitcoin might keep going up forever, taking the price of Ether and Litecoin up with it.
That moment was short-lived – the price quickly dropped back down to around $10,000, where it’s been hovering for the last few weeks. That isn’t to say that the price couldn’t go back up. The fact that it’s even at $10,000 is ridiculous, considering some experts were saying that valuation wouldn’t come for years.
Realizing this, I decided to take my profits and run with it. Crypto-investors who advocate buying and holding (or “HODLING”) until the price reaches some mythical high will probably scoff at this. If the price does eventually reach $20,000 again, or $30,000, or $40,000, I might be scoffing at myself with them. But right now, I’m just happy to have made a bit of money on a very risky short-term investment.
How much money did I make exactly? Here’s the breakdown:
I bought $100 worth of Bitcoin on June 1, 2017, when one BTC was worth $2440.90. Along the way, I received $20 worth of Bitcoin at various valuations as a gift from Coinbase for referring new users. I also had a small amount of BTC in my account from my free $1 back in 2015.
I sold $451.53 (not including the $6.83 fee) on Feb. 14, 2018, when one BTC was worth $9253.55. Including the gifts as invested money, I made a profit of $330.53. My ROI was 273.17%.
I bought $100 worth of Ether on June 1, 2017, when one ETH was worth $228.20. After a misguided attempt to try to understand Cryptokitties, I moved $36.05 worth of ETH into my Coinbase account.
I sold $403.61 (not including the $6.10 fee) on Feb. 23, 2018, when one ETH was worth $835.79. I made a profit of $267.56. My ROI was 196.66%.
I bought $9.01 worth of Litecoin (LTC) on May 26, 2017, when one LTC was worth $28.31.
I sold $72.58 (not including the $2.99 fee) on Dec. 12, 2017, when one LTC was worth $343.27. I sold an additional $13.50 (not including the $1.49 fee) on Feb. 7, 2018, when one LTC was worth $157.79. All told, I made a profit of $77.07. My ROI was 855.38%.
Future investments (& gambles)
If there’s one thing I learned from this experiment, it’s that I should’ve put all of my money in Litecoin. Why did LTC shoot up so high? Back in December, Coinbase, one of the most popular cryptocurrency exchanges for amateurs like me, only offered three currencies I listed above (though there are many, many other cryptocurrencies out there trying to get your attention). When the price of BTC and ETH skyrocketed, lots of people bought into LTC, too, because amateurs throwing money around had access to it.
Putting all of my money into LTC back in May of 2017 would’ve been a huge gamble, but had I put $200 into LTC and made 855% of my money back, I would’ve made a nice little pot of cash. Looking ahead, I’m curious what other cryptocurrencies may have small little bubbles like this thanks to a flood of new investors coming in.
Robinhood, one of the best apps for first time investors in the stock market, is adding cryptocurrency trading this year. (They added crypto trading before they added even basic retirement accounts, which should really tell you who their target market is.) Robinhood is going to offer buying and selling of BTC and ETH, but they allow you to track many other cryptocurrencies, some of which haven’t quite hit the mainstream. If Robinhood decides to start allowing users to trade Dogecoin or Ripple, it’s easy to imagine those prices might climb.
This is, of course, entirely speculation, and not even that well-informed speculation at that (read: not advice of something you should go out and do), but I can imagine myself putting down a number of small, $10 bets in the hope that I can achieve an 855% ROI again.
In the meantime, Coinbase is trying to take crypto down an even more legitimate path by creating an index fund. Right now, the fund is only open to those who have a minimum of $10,000 to invest, but Coinbase plans to create more index funds in the future with a lower minimum. If you have a good pile of cash hanging around, have a long-term view on crypto and don’t want to worry too much about buying individual coins, buying into this new index fund might be the right choice for you.
Just remember that unlike stocks, none of these cryptocurrencies have any real world value that the price is being discerned from, and even though this index fund looks like a traditional investment vehicle, it’s not worth getting a second mortgage.
Disclaimer: Policygenius’ editorial content is intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.