Wednesday, December 18, 2013

The China Crash, Altcoins, Playing the Long Game

Not surprisingly, the currently high BTC and LTC prices simply aren't able to be sustained, especially in light of all the speculation by Chinese investors who have now been told that Bitcoin is basically persona non grata. This has been a relatively large bubble from the $150 range up to around a $1200 high, and now we're back in the $550 range and potentially still have a bit more to fall before we bottom out and start rising again. We've seen it before, and we'll see it again -- and we'll see it with pretty much every popular Altcoin worth mining! While BTC had about an 800% increase from mid to late November, Litecoin was actually even more impressive, going from less than $4 to a high of nearly $50 -- around a 1200% gain. I suspect Litecoin is going to see single digits again very shortly, but if you can, keep your coins and just wait for the next bubble, because it's inevitable.

The reason for China and other countries fearing Bitcoin and these other digital currencies is simple: it makes it too easy to move money out of the country! Oh, you can already do that in a variety of ways, but with Bitcoin/Litecoin/etc. it's trivial -- assuming you can buy the coins in the first place, of course. That's probably a large part of what has sparked this latest tumble, with China making it more difficult to buy BTC and investors getting spooked, but that's just it: governments may not like these digital currencies because they can't fully control them, but long-term this is the future.

Related to this is a comment someone made to me recently when discussing Frozen Coin (FZ). He said in effect, "Well, it's not like all of these digital currencies can survive -- most will fail." I disagree, because just like the distributed computing nature of Bitcoin makes it powerful and useful, the altcoins are just another way of distributing things. Bitcoin is the biggest name by far -- I heard a statistic that something like 45% of Americans have heard of Bitcoin -- and so it's going to be the biggest target for the governments. Heck, maybe they even succeed in shutting BTC down in some way. But if BTC fails, there are dozens of others, and some of these are working to make them even more difficult to kill off (e.g. Peercoin, PPC).

Consider this: governments and corporations have been trying to kill off illegal file sharing for years now. Eventually, they more or less realized that it's a fruitless endeavor and what they really needed was to embrace new technologies. And so iTunes went from heavy DRM music to basically go-anywhere music, Blu-rays now come with free digital copies and even a DVD, etc. And guess what? Not only did they not kill piracy, but piracy didn't kill them either -- arguably the movie industry is as healthy as ever! DRM isn't totally dead, but after all the hand-wringing and fear-mongering ("Please, somebody think of the children!"), technology marches ahead.

Bitcoin, Litecoin, and the other various cryptocurrencies are all marching ahead, some more quickly than others. While some governments are sitting back and just watching Bitcoin happen and China is actively trying to fight against Bitcoin, still others are talking about Bitcoin in a positive way. Big names in the US are discussing Bitcoin, and millions of dollars has been invested, with billions more waiting to come.

So if you bought BTC at $1000 or Litecoin at $40 and are feeling like a fool, just sit back, relax, and go find something else to do for a while. Sit on those coins and check back in five or ten years and you'll be able to laugh with others when you tell how you bought them at $1000 or $40 or whatever and thought you screwed up. Then they'll congratulate you on your good fortune and ask you to take them to a nice place for lunch -- because after all, you can afford it.

Or sell what you have, try to cover your losses in other ways, and bemoan your fate for a few years. Then move on and some day you'll be kicking yourself. Mark my words: you'll be sorry twice!

Disclaimer: This is a blog and is full of my own opinions, based on my experiences with Bitcoin, Litecoin, technology, etc. Could I be wrong? Sure. If you invest your life savings into BTC right now and lose it all, don't come knocking on my door. Be responsible and spread out the risk some. This is why I buy and mine coins rather than just buying $2000 worth of coins on a big drop like today -- I'm bad at day trading! Don't invest more than you can afford to lose, and don't go into massive debt because BTC/LTC look like a major opportunity. Grow your cryptocoin portfolio/mining farm slowly, over time. Start with $2000 and when you've recovered that cost, invest the future profits into more hardware. That's how I'm doing it!

3 comments:

  1. Good article pal! I am doing what you are doing now. I started as a speculator now becoming a miner because Internet and computer are the future of this world! Now one more question about the PSU I have 2x1200W PSU and it says 15A for the A/C input however they come with a 10A cable so I am guessing that I don't need to change any sockets on the wall now? Cheers! I am still waiting for the riser cables to kick start my 6xSapphire 290 RIG!

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    1. They probably cheaped out on the cable. If you actually plug both PSUs into the same circuit-breaker, a lot of houses may not handle the load, especially if there's anything else on the breaker. Basically somewhere around 2000W is about the limit for most houses, unless you have 25A breakers.

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