How It All Began
I remember the first time I heard about Bitcoin; it sounded like a fad that would soon fade away. But then, there was more and more talk about cryptocurrencies and how they were the next big thing. An acquaintance of mine mentioned that her boyfriend had invested a bit in Ethereum, money they planned to use when buying a house. It sounded both risky and exciting. I read up on it and tried to understand the phenomenon.
Complicated with Accounting and More
What deterred me the most was the taxes; it would likely be difficult to report all transactions, with exact amounts and dates, especially if these needed to be converted to Swedish kronor at the exchange rate at the time. I wasn’t at all interested in tracking this separately using a spreadsheet. There was, however, a service that helped calculate the taxes, but it had also been criticized for missing some details, so that didn’t feel like an option either.
There was also uncertainty about whether Bitcoin might be banned. It also didn’t seem entirely straightforward to transfer money between crypto exchanges and Swedish banks.
Certificates for Smaller Amounts
I thought the legislation might become more lenient over time, but I still wanted to learn, so I dipped my toes in by buying certificates in Bitcoin and Ethereum. I bought my first Bitcoin certificate on February 5, 2020. With smaller amounts, I could test the waters, and I bought and sold repeatedly. I purchased my first Ethereum certificates on April 8, 2021, as Ether was cheaper and still followed Bitcoin’s trends.
I Almost Opened a Binance Account
The idea of owning crypto directly with my own wallet was still tempting. The real deal, so to speak. I did some research and was close to opening an account on Binance, but just as I was considering how much money to deposit, they got hacked. This was in the fall of 2022. So, I continued doing what I had done before, trading certificates through my bank.
The Risk with Certificates
There are quite a few risks with certificates. They are volatile, and it can sometimes be difficult to buy and sell them. A certificate can also be halted for various reasons, such as directives and so on. Initially, I traded Bitcoin certificates from Vontobel, but they weren’t always available for purchase when I wanted. I then switched to another certificate, which has worked well for buying and selling consistently so far.
How I Try to Time the Market
So how do I try to time the market? Cryptocurrencies are mainly influenced by two factors: regulations and Bitcoin halvings. Regulations are very difficult to predict, as they depend on elections and other factors. A major criticism of cryptocurrencies is their association with criminal activity, as they are often used by criminal networks for transactions.
At the same time, crypto prices can rise when a country becomes more crypto-friendly, so the pendulum swings both ways. What’s easier to predict are Bitcoin halvings. So, I’ve bought some time before the halvings and also purchased crypto during downturns that seemed like overreactions.
Bitcoin Halvings
In previous cases, Bitcoin and other cryptocurrencies have increased in value around the time of halvings. These halvings will only continue until all Bitcoin is mined, which, as it stands now, is far into the future. The next halving will likely occur in 2028.
Why I’m Not Always Holding Bitcoin and Ethereum
I can’t buy a bunch of certificates and leave them for 10 years—it’s not certain the instrument will still exist by then. Another risk is that if the profit accumulates, the fee should also accumulate on a larger amount. I don’t want to have too much money invested at once. When crypto enters a downturn, it can last a very long time. As you can see from the chart, I didn’t trade Bitcoin certificates for an extended period. If I had held on during that time, I would have just been paying fees for nothing.
Rise and Fall
When the peak is reached, it’s often followed by a significant crash, and it’s better to lock in at least a small profit beforehand. The transaction fees also become very high if I trade with too large amounts at once. So, my strategy involves some damage minimization, and so far, I haven’t incurred losses on my crypto investments. However, I do regret not staying in a bit longer or exiting earlier in some cases. But honestly, it’s hard to stay away from crypto—I quickly get hit by FOMO as soon as I’ve sold off.
The Future
The crypto world faces a number of challenges. The cryptocurrency market has suffered significant hacks where billions of dollars have been stolen, causing considerable concern. At the same time, many governments are developing their own digital currencies (CBDCs), which could offer greater security and lower transaction costs but also compete with decentralized cryptocurrencies. Despite growing interest from institutions, cryptocurrencies are still not fully accepted or understood by all financial players, limiting their use in established economies.
It’s still exciting to see what will happen in the crypto world in the future, and I’m following it with great interest.
I just have to be clear that I’m not a licensed financial analyst so I’m not giving any advice. This blog post is just pure inspiration. Remember that you invest on your own risk!