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Go big or go home

Go big or go home

The market expansion in recent months has led to much discussed eye watering valuations of the larger cryptocurrencies. What is talked about less, is that it has dragged smaller cryptocurrencies up too. In the last month alone I have bought:

  • Verify (up c. 1100%)
  • Payfair (up c. 1000%)
  • Sumokoin (up c. 4000% - long time readers will note I've held this since June, but it has only really started to move in the last month)
  • MyWish (up c. 600%)
  • Hawala Today (up c. 350%)
  • Lamden (up c. 1000% from ICO although as discussed here, this was one of the more profitable trades I’ll make this year)
  • Bounty0x (up c. 8000% from ICO, although I foolishly cashed out after 400% thinking it would not go much higher)
  • Encrypgen (I bought this in November and it has subsequently gone c. 6000% - but again I cashed out too early)
  • Hubii Network (up c. 800% although only realised c. 300% of those)

The sole losing bet in recent weeks has been Network Token, which is currently at pretty much the same price it was when I bought it. 

People often talk about the smaller cap cryptocurrencies as being of a greater risk than the large caps. I do not believe this to be necessarily the case. If the market bursts tomorrow then everything is taking a huge hit regardless. There are a lot of large cap cryptocurrencies (e.g. Tronix, Verge, RaiBlocks, Cardano, KuCoin Shares) that have had huge run ups and likely do not have much support should they start to fall. Be under no illusions; the whole market is a risky proposition. 

Obviously small caps will also be affected – but the potential rewards are vastly higher and much quicker. The likes of Verify (CRED) and Payfair (PFR) tripled, quadrupled or more in a matter of days. The small caps can be the easiest way to quickly add to your stacks, particularly if you are new and thus finding everything is very expensive right now. With even the most mediocre of projects valued at $100m+, a project valued at under $5m becomes a very tempting proposition. 

Finding a gem

The easiest way is to find the low cap ICO’s. I count anything under $10m as a low cap ICO in present conditions. Preferably you want one with a whitelist that looks like it will sell out quickly. Something like Ethorse, which will conclude its sale in one day, is perfect for this. It has a $4m cap, a demo version of its working product (albeit not the most convincing) and has the sort of idea that will generate hype (which, as mentioned yesterday, is clearly the biggest driver of prices). I am expecting, should market conditions hold and the project to prove real, to see Ethorse at $30-40m or higher by the end of February.

Another route is to find something that has been undiscovered (ideally under $3-4m, but I’d still include anything up to $10m in this bracket). There are so many cryptocurrencies that it is hard to research them all, particularly at the lower end. As such, cryptocurrencies slip through the cracks. If I see someone mention a cryptocurrency I don’t recognise I will research it. 60 seconds is often enough to confirm I want nothing to do with it, but if it has an idea and there’s no disqualifying red flags I will begin to research in more depth.

At this price it is rare to find a cryptocurrency with no red flags at all. They are cheap for a reason. A prime example of this is Sugar Exchange (SGR). Currently sitting on a market cap of c. $2.5m, the team is anonymous, the whitepaper ambitious, there is no product until May, a lot of the tokens are locked up by the team and there are multiple competitors already in the market. It also has the feeling of a potential scam or something that will never see the light of day. Another only issue with SGR is that it is a long term hold – I prefer to go into small caps which I can sell back to ETH inside of 2-3 weeks.

However, exchange tokens such as KuCoin Shares (c. $1.6bn) and Binance Coin (c. $1.9bn), plus the speed with which they have acquired market share, have shown that exchange tokens are a potential goldmine. SGR adds a number of other features to these. If it delivers on its promises (and that is a big if) then it has the potential not to go 10x or 100x, but to go 1000x. This is the exact sort of cryptocurrency that I like putting a very small amount of my stack in (something like 1%) – if it is a scam then it won't ruin me, but the payoff is potentially huge. And, as ruthless as it sounds and as much as I would like to avoid putting anything in a scam, it could still be a scam or destined to be a product that never sees the light of day and you could still see decent returns provided you sell out ahead of time. 

Buying small caps is not for everyone – it takes something that is already high risk and volatile and increases that. It also requires a fair bit of time and patience to go through a multitude of websites and whitepapers which often veer from the awful to the dreadful, and it significantly increases the chances of running into a scam (hello Confido). The act of buying them off small exchanges is often also a frustration - but the rewards can be well worth the effort.

Final points

I would advise:

  • Only putting a small percentage of your stack into each one, but enough such that if it goes up you benefit (2-10% per one, depending on how big your initial stack is)
  • Being willing to cut ties with them if they show no signs of movement/gain no traction across the various crypto websites
  • Learning how to use EtherDelta (itself a risky proposition these days, so be careful)
  • Reading the EthTrader Altcoin thread which is a useful resource for finding niche cryptocurrencies you may have missed
  • Still doing your due diligence, join the Telegram groups, and don’t only buy because it’s cheap. It could be cheap for a reason
  • Generally avoiding cryptocurrencies that have been around for a long time and are still cheap – there is probably a very good reason
  • Be aware of the liquidity of each cryptocurrency - some of the smaller ones have very restricted buy/sell orders and so you may need to be patient. There is no point getting in early but paying well over the odds. You can often find that a buy order of c. 20% under market value will be filled if you are willing to leave it a while, and equally that a sell order over the market price will equally be bought.
Facilitating access to knowledge and expertise

Facilitating access to knowledge and expertise

Part 1: Is the market in a bubble?

Part 1: Is the market in a bubble?