What’s your Crypto Exit/Investment strategy?

L

landlord

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I am looking for a balance between taking profits and taking advantage of the hype before the potential bubble bursts. (Although Bitcoin has had many 80%+ drops in the past and recovered)

My strategy.
  1. Do not invest any more !!!
  2. Take initial seed money off the table permanently (about 1/6 of holdings) Return it to my bank and pay CGT.
  3. Psychologically write off the rest (to sleep better at night)
  4. Diversify portfolio into other top 10 cryptos.
  5. Consider very small bets on other lower ranked cryptos and ICOs.
  6. Remove 50% of any profits weekly. Convert back to Euro and pay CGT.
 
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Hi landlord

That sort of "argument" gives a false sense of rationale to your strategy.

Either you believe that Bitcoin is worth $18,000 or it's not.
If you don't believe it's worth $18,000, then you should sell it.

The only exception is that you believe that you have some insight into the timing of the bubble. If you think that it will rise to $30,000 before crashing to zero, then you might consider holding it until it rises further. The reality is that no one can time the irrational. It could crash to zero tomorrow or it might not happen until June 2018.

I don't think you should even consider CGT reasons. CGT will be 33%. The fall in Bitcoin will be 100%. So you are better getting 67% of your holding than 0%.

Even, if you believe that Bitcoin is worth $18,000, you must also believe in the fact that it is extremely risky. You must accept that there is a possibility, no matter how small, that every economist of note, Warren Buffett et al., are right and the Bitcoin faithful are wrong.

If a fall to zero won't affect your financially, then by all means, hold onto them for the craic.

If, like the thousands of people who back horses every day, you enjoy the thrill of losing money, then hold onto them.

But if you want to make a good financial decision, sell all your Bitcoin now.

landlord said:
  • Diversify portfolio into other top 10 cryptos.
  • Consider very small bets on other lower ranked cryptos and ICOs.
Click to expand...

This makes no sense at all. When Bitcoin crashes to zero, they will all crash to zero. It is not diversification, to buy the same asset.

Brendan
 
Brendan Burgess said:
I don't think you should even consider CGT reasons. CGT will be 33%. The fall in Bitcoin will be 100%. So you are better getting 67% of your holding than 0%.
Click to expand...

Sorry. Brendan. I think you misunderstood me here.
CGT has nothing to do with my decision to buy or sell. I was only pointing out by mentioning it that I have every intention of paying it when I do sell.

Brendan Burgess said:
Either you believe that Bitcoin is worth $18,000 or it's not.
If you don't believe it's worth $18,000, then you should sell it.
Click to expand...

“I” DO NOT BELIEVE BITCOIN IS WORTH $18,000 !!!
But I do believe the mania has only just got going and others believe it is worth way more than $18,000... (Its $20,000 now by the way).
Consider CME futures, TD Ameritrade entering the market and more importantly the massive hurdle presented to residential investors in entering the market, which is the identity verification process which has stalled at many exchanges due lack of staff to deal with this. This potentially could be a coiled spring waiting to explode when the masses are verified and allowed to purchase BTC.

Brendan Burgess said:
This makes no sense at all. When Bitcoin crashes to zero, they will all crash to zero. It is not diversification,
Click to expand...

Different crypto currencies are not the same asset, just like, Microsoft and Apple are not the same, they fall within the same asset class. If you believe as I do that the asset class will not fall to zero then this must be considered a sensible approach.

When i have sold down to my initial seed capital (approx 2 weeks from now). This becomes a zero risk game for me. I will be speculating that the bubble will continue to inflate while continually taking profits.


I put my faith in the more technologically savvy Bill Gates and Richard Brandon, who I believe would have a much better understanding of the crypto blockchain technology than a 90+ year old equity picking veteran.
 
landlord said:
This potentially could be a coiled spring waiting to explode when the masses are verified and allowed to purchase BTC.
Click to expand...

Eh, will they not be allowed to sell it for the first time?

I am trying to figure out how to sell it and I imagine that there are many others like me.

Brendan
 
landlord said:
When i have sold down to my initial seed capital (approx 2 weeks from now). This becomes a zero risk game for me.
Click to expand...

No, no, no, no, no.

This is a beginner's mistake.

John owns 10 Bitcoin worth $200,000. Mary owns 10 Bitcoin worth $200,000. Their other assets and liabilities are identical.

Which one is taking more risk? (It's not a trick question by the way.)

Brendan
 
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Brendan Burgess said:
Eh, will they not be allowed to sell it for the first time?
Click to expand...

They don’t own any yet?????

That would be like millions of people who have never invested in shares and don’t own any rushing to open up accounts with Degiro to sell Ryanair shares, due potential industrial action.
 
Hi Landlord

Anyone who felt that Ryanair was overvalued has been able to sell it short for some time.

Those of us who believe the Bitcoin is overvalued by 100% have not been able to sell it short up to now.

I don't own Bitcoin but I want to exploit the value. Ideally, I would like to bet on its value in 12 months time to be zero. Or else a put option for 12 months' time. But, in the absence of these, I will take the very risky step of selling short. So I will agree today to sell 1 Bitcoin for $20,000 in March 2018. If Bitcoin has risen to $30,000 by then, I will lose $10,000. If Bitcoin has collapsed to zero, I will gain $20,000.

Brendan
 
Brendan Burgess said:
I don't think you should even consider CGT reasons. CGT will be 33%. The fall in Bitcoin will be 100%. So you are better getting 67% of your holding than 0%.
Click to expand...

It's statements like the above that make me mentally invalidate everything else Brendan comes out with. This is an example of someone with no idea what he's talking about giving advice in absolutes on the subject.


You might also take on board what innovators like the Winklevoss twins, Peter Thiel, Steve Wozniak, Richard Branson, et al think.
It certainly is risky at current and I would prepare for a harsh correction, but it's extremely unlikely to die at this point and will recover as it has done countless times already.


Brendan Burgess said:
This makes no sense at all. When Bitcoin crashes to zero, they will all crash to zero. It is not diversification, to buy the same asset.
Click to expand...

Rubbish, there are many cryptocurrencys with many different applications. There is a possibility that ethereum, Ripple or the likes of IOTA could surpass bitcoin in the future and diversifying amongst the top 10 makes absolute sense.

'All cryptocurrency are the same asset' - in a few years time these quotes could come back to haunt. It is simply an incorrect statement.
 
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Brendan Burgess said:
Anyone who felt that Ryanair was overvalued has been able to sell it short for some time.
Click to expand...

Folks are not opening up accounts (or trying to at least) in exchanges like Coinbase, Cex.io, Kraken etc.... to short bitcoin. In fact you can’t short bitcoin in theses exchanges. They are desperate to jump on the bandwagon and go long Bitcoin. Most of these investors don’t even know what it means to short something.
These potential investors are being inhibited by the account verification process. Coinbase and other exchanges are desperately trying to recruit staff at the moment to deal with the backlog of account verifications.
 
landlord said:
Consider very small bets on other lower ranked cryptos and ICOs.
Click to expand...

ICO's this year gave incredible returns, I think the SEC will put an end to it in it's current form at some point next year though. Make hay while the sun shines.
 
BreadKettle said:
in a few years time these quotes could end as infamous as Brendan's pre-crash property and bank shares advice.
Click to expand...

Hi BK



My investment recommendations have been pretty much the same over the years and they have turned out to be broadly right
  • Buy your own home and get the mortgage down to a comfortable level
  • When you are investing buy a broad portfolio of directly owned shares
  • A portfolio of shares will generally do better than property and is less risky
You will get a much fuller discussion here

What Brendan Burgess has actually said about property, prices and borrowing

I have made few forecasts as I don't believe markets can be timed

But I was very clear about the dot.com bubble. It was a bubble and it was destined to collapse. And I am watching a re-run of it again with the Bitcoin Bubble. It is a bubble and it will crash. Not sure when. But it is as sure to crash as the dot.com one was.

I couldn't figure out a way to exploit the dot.com bubble but I am determined to make money out of the Bitcoin bubble, if I can do so without excessive risk.

Brendan
 
BreadKettle said:
It certainly is risky at current and I would prepare for a harsh correction,
Click to expand...

This was my key point. If you are billionaire and you own one Bitcoin, it doesn't matter what you do.

But if more than 10% of your wealth is in Bitcoin, you should sell it down to this level. Of course, you should sell it all. But even if you are a fanatic, and you agree that it is risky, then 10% is the absolute maximum exposure you should have.

Brendan
 
"I put my faith in the more technologically savvy Bill Gates and Richard Brandon, who I believe would have a much better understanding of the crypto blockchain technology than a 90+ year old equity picking veteran."



Is this not a form of "identity investing", I want to be associated with the cool guys . I think Bill gates said a few approving words about bitcoin more about the blockchain technology than about bitcoin. However the bill and melinda gates foundation does not have any money invested. (unless a very small one that they dont have to disclose).
I thought your exit strategy was to invest in the precious metals, just go ahead and do that. I know gold is not a "cool" investment like bitcoin is now. You said yourself anyway that when the bitcoin bubble collapses the money will go back to gold.
 
joe sod said:
I thought your exit strategy was to invest in the precious metals, just go ahead and do that. I know gold is not a "cool" investment like bitcoin is now. You said yourself anyway that when the bitcoin bubble collapses the money will go back to gold.
Click to expand...

Yes I continue to occasionally buy more precious metals, although it hasn’t paid off so far. I now have a fairly even split in value P.M to crypto.

Actually a question to everyone out there ....
When you talk about the percentage of crypto as an asset in your overall portfolio, do you calculate it considering your property equity or property total value? I would imagine equity?
 

That's not really what you said though Brendan, as I wouldn't have issue with that. You've been saying it's worthless and it's correct value is zero, which is what I felt the need to correct.

This isn't the first mega spike BTC has had, and it probably won't be the last. It's due to correct and I'm sure the next bit of bad news with teeth might just set it off. We'll then probably get treated to more articles like this one. It will then recover over time and it's long term trajectory will remain unchanged through the boom and bust cycle. That's my prediction, and why I'm not buying now (and wouldn't really to comfortable telling anyone else to either right now) but I'm not selling 100% either.
 
BreadKettle said:
That's not really what you said though Brendan
Click to expand...
It's exactly what I said.

Brendan Burgess said:
Even, if you believe that Bitcoin is worth $18,000, you must also believe in the fact that it is extremely risky.
Click to expand...

Just to clarify
1) Bitcoin is worthless.
2) Even if you are blind to this, you must agree that it's very risky (which you appear to do)
3) You should not have more than 10% of your wealth in any single asset.

If you can see that Bitcoin is worthless, you should not have any of it at all.
If you can't see that Bitcoin is worthless, you should not have more than 10% of your wealth in it.

Brendan
 
landlord said:
do you calculate it considering your property equity or property total value? I would imagine equity?
Click to expand...

Let's say your balance sheet is something like this:

Family home: €500k
Mortgage: (€200k)
Investment properties: €400k
Mortgages: (€200k)
Gold: €100k
Bitcoin: €200k

Total assets: €1.2m
Total borrowings: 0.4k
Net assets: €800k

Is your question - should I have 10% of €1.2m or of €800k in Bitcoin or Gold?

Brendan
 
OK, let me rephrase the question, which might help you answer it

Let's say your balance sheet is something like this:

Family home: €500k
Mortgage: nil
Investment properties: €400k
Mortgages: (€200k)
Gold: €100k

Total assets: €1.0m
Total borrowings: €0.2k
Net assets: €800k

Your net assets are the same.

Would you remortgage your home to buy €200k worth of Bitcoin?
 
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