Much of the draw in buying cryptocurrencies is the possibility of outsized returns in far less time than equities. For BTC this last happened in 2017 when it went up ≥1,000% in less than a year. Impressive as it is, this pales in comparison to altcoins: LTC went up by ≥5,000%, DASH by ≥9,000% and the best performer XRP by a staggering 36,000%! To give some perspective, that means a $2,800 investment in early 2017 would have made you a millionaire by the end of the year.
This is why many are hoping to find the next XRP and get in ahead of everyone else. Among thousands of projects, there is somewhere between 1-10% of good projects just waiting for their big break.
Unfortunately, it is not straightforward to purchase smaller altcoins as they don’t trade directly against fiat like the bigger cryptos. You have to buy BTC or ETH first, and then use them to exchange for the altcoin. Often, these coins are not traded on fiat exchanges but only on crypto-crypto exchanges. These steps add to buying friction, depressed prices and low market capitalisation, but also mean larger potential upside.
What to buy?
The first and most important step was to identify the right coin to buy. The CryptoKnight Armour series provided the foundation for me, supplemented by articles on basic criteria and red flags here on CryptoKnight.Asia. Although mirroring the portfolio of a respected investor is not a guarantor of success, knowing that my instructor had skin in the game did give me the final push to proceed.
Where to buy?
Since my altcoin was among the top 50 in market capitalisation, it was listed on many exchanges. However, it was not large enough to trade directly against fiat currencies. Hence, the main difficulty was deciding whether to buy on SGD-accepting smaller exchanges, or bigger exchanges with more liquidity. I decided to do a quick comparison.
- Small exchange: Total charge 0.7% = 0.5% fiat-to-crypto trading fee + 0.2% crypto-to-crypto trading fee
- Big exchange: Total charge 0.8% = 0.5% fiat-to-crypto trading fee + 0.2% withdrawal fee* + 0.1% crypto-to-crypto trading fee
To be worth it, the price difference of the crypto has to be greater than 0.1%. Since the prices were almost identical, I decided to save the trouble of transferring and buy on the small exchange.
How to buy?
Having done all the research and preparation, the last step is to find the best time to buy in. Although I’ve learnt I can’t time the market, I still wanted to avoid buying at short term peak prices. Since the coin had gained ~30% in early April, I thought it was a little bit too expensive to buy in. I wanted to wait for a short-term correction before entering. To prevent myself from procrastinating indefinitely, I set myself a 1-month deadline to enter.
I put in a bid for ETH and waited for the prices to drop. After 2 weeks, ETH was still trending up and I started to feel FOMO. I realised I had become distracted by ETH prices, when I should really be focusing on the alt! I adjusted my ETH bid up and waited anxiously even as the clock ticked down towards my self-imposed deadline.
Just when I was resigned to buy at market prices, the long-awaited correction occurred. I pumped my fist in celebration at the vindication I felt. After work that evening, I quickly exchanged for ETH and placed a competitive bid for the alt. By the next morning, I received an email that my order had been filled.
Over the course of that week, my alt fell below the price I bought it, but has now appreciated 10% over a month. Although I wish I bought the 52-week low, I’m gladder to finally own some altcoin. Better to be vested at a fair price than to imagine you are after the bull run is over.
*The exchange where I buy BTC/ETH charges a 0.2% withdrawal fee to transfer cryptos out to other exchanges, but not all exchanges charge this fee.
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