Do as much research as you can before taking the first steps to invest in digital tokens
In the summer of 2018, I sat on my bed in south-west London and held a piece of paper with the date, my name and my signature next to my face so that I could take a picture with my webcam.
This was just part of the process for signing up to buy cryptocurrency then, which also involved a woman calling me by video to verify I was the person in the picture and that the details all matched my passport.
Only then was I allowed to create an account, deposit money and buy Bitcoin. From this platform I could then transfer it to another exchange where I could use that Bitcoin to purchase what are known as alt-coins.
Alt-coins are as numerous as they are varied. Some you may have heard about have exceptional teams behind them, solving real world problems and aiming to make it into the big leagues.
Others were started as jokes, such as Dogecoin and Shiba Inu, or get rich quick schemes and serve only to make a buck when they increase in value. When the music stops, these are not the coins you want to be holding.
We have come a long way from the days of such thorough and intrusive verification.
These days, just an Emirates ID number is enough to get you started on platforms such as FTX.com, and you can begin depositing money straight from your debit card, although this method comes with big fees.
Over this time, my cryptocurrency journey has led me through quite a few stages, a few of which I will describe here.
Crypto winter
Shortly after buying into Bitcoin, when it was priced about $6,400, we entered what those in the game call the “crypto winter”. This is when all coins, including Bitcoin, took a dive and stayed there for months. The price halved and until the spring of the following year it did not budge.
Jokes rolled endlessly about how Bitcoin would “go to zero”, that it and all other cryptocurrencies were useless. I remember American comedian and political commentator Hasan Minaj mocking viewers who had invested with the taunt, “Bitcoin is at $3,000!”
Needless to say, I held on for dear life, or HODL, as they say in crypto-land. Selling then would have resulted in some loss, but in my head there was an awful lot more to gain by staying the course.
To me, Bitcoin was a pioneer. It was the original gangster of digital currency. Even if it turned out to be terrible, it would still have been first and there is value in that. In my head, it was like owning gold and there was a limited supply.
Fortunately, I am not an emotional investor and I weathered the crypto winter fairly painlessly.
Moons and dumps
Since then, Bitcoin has both “mooned” — surged in price — and “dumped”, which is when a mass sell-off causes the price to tank. Neither of these is a particular concern. Rallies are exciting and a time to take profit should you wish to do so.
A lot of fear comes at times of market correction, after we have hit resistance and head back down to see where the level of support is. It is often at this price that the whales, or the big players with deep pockets, will buy in. Whales love a discount and have the funds — and constitutions — to bet big in anticipation of a rally.
There are various graphs and charts you can use to try to see where Bitcoin currently sits on a scale from dirt cheap to serious bubble.
Of course, these charts are an exercise in mathematical modelling by investors who specialise in that area and are not a guarantee of sound financial advice.
As I write this, that support price is being tested. There is a lot of fear in the market, which our favourite crypto-loathing investor likes to say is the time to be greedy. At this point, I am happy to be seeing the support price moving higher each time we test it.
Bitcoin scalping
Not too long ago, I looked into other ways of making money through cryptocurrency. It was always going up and down, far more than any other asset, and that volatility was enticing.
Scalping is a technique where you place a small leveraged trade and sell when the price moves a percentage point or two in your desired direction. You then put in your stop-loss (the price you will sell to mitigate your loss) to avoid being liquidated if the price moves too far in the opposite direction.
Leverage is when you borrow money to make more profit and is incredibly risky. It should only be used by experienced traders.
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