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How to Get Rich Trading Bitcoin

43 points by zinxq 10y ago

tboyd47 10y ago
You're not going to get "rich" only investing $100 at a time. It's a good strategy if you're buying Bitcoin to hedge against fiat though.
- justinsaccount 10y ago
  $100 of AMZN stock in 2001 is worth about $9,000 today. Investing is easy if you have a time machine or can predict the future.
  - tboyd47 10y ago
    Yeah, and $100 of Bitcoin in 2011 is worth $100,000 today. But like you said, you have to know the future to only invest in wild successes.
    - fdsafEWSFSDFSDF 10y ago
      Or you could be a curious nerd like me who bought coins on IRC at 3$ a pop trying to figure out what the hell this new thing is. A problem for me now is what the hell to do with all these coins since I am fairly sure i would lose half in taxes (Capital gains, Ireland), and I doubt exchanges would accept "I bought them #bitcoin-otc back in the day" as a valid source of funds and not report me to authorities. On bright side can go mad shopping on Amazon and holidaying via Expedia
      - ISL 10y ago
        If the coins were bought and held, the history for the wallet will provide concise backup for your acquisition story.
      - matt_wulfeck 10y ago
        Since you look like a throwaway, how much much is your stake worth? How do you actually spend it?
      - jlgaddis 10y ago
        I've wondered about just that. I bought $11,000 USD worth of BTC (in cash, at a local bar) when it was at $7. I thought I was extremely lucky when I sold them not too long after at $30. If only I had held onto them I would be dealing with the same issue you are (although, arguably, it's a nice problem to have).
      - hackermailman 10y ago
        Use them to start a business, then you can dump the coins into the business and not have to pay personal income tax. Otherwise all other schemes just lead to tax evasion unless you cash some out via localbitcoins.com while on holiday. In Thailand my friends "bank" is a service that converts his bitcoin wallet to ATM codes to withdraw without a card.
donquichotte 10y ago
There is very little substance to this article. This is the core "strategy": "This suggests my new Bitcoin trading strategy, which I admit I have only tried so far on paper. [...] Bitcoins go down in value when the demand for them as transaction instruments decreases. When that Russian oligarch sells his shiftload of Bitcoins for US dollars, Bitcoin value goes down. When that happens — when Bitcoin prices drop by 20 percent or more — BUY! The price will inevitably come back up, I assure you. When Bitcoin prices rise by 20 percent or more — SELL! You just made 40 percent on your money. Rinse, repeat, automate, get rich." This is also known as gambling. I'm not judging gamblers, but if it were so easy, the author of this post would have implemented it in a few lines of code and actually gotten rich instead of writing a muddy, unclear piece of trivialities.
- dalore 10y ago
  Let me summarise it a bit more for you. Buy low, sell high.
  - stephengillie 10y ago
    "Step 1: Be a person who intuitively knows what prices ought to be. Then simply arbitrage accordingly."
  - camus2 10y ago
    Yeah, lol, how low is low? how high is high? I mean this got to be the most meaningless sentence ever.
    - mhluongo 10y ago
      That's the point of the summary. The blog post had no substance.
- mikulas_florek 10y ago
  Example: 1. I have 0 bitcoins, price is $1250 2. Price drop 20% to $1000 3. I buy 1bitcoin for $1000 4. Price rise to $1200 5. I sell at $1200, earning 20%, not 40% Am I missing something?
empath75 10y ago
He discovered reversion to the mean. I made some money doing that. I made more just sitting on coins.
- FabHK 10y ago
  Just sitting on it is predicated on an upward trend, while his "strategy" is predicated on mean reversion. Which one will it be? Who knows.
zinxq 10y ago
The trading strategy aside. The interesting part is that Bitcoin (or crypto in general) represents a limited supply commodity that will (eventually) start to decrease in available supply because it's also used as an active currency. The users of it as an active currency (as opposed to the users of it as an investment) are price insensitive and don't care what they pay to borrow bitcoin for a few seconds. As long as volatility isn't crazy those few seconds, they are in and out of it as a store of value immediately. That activity further limits supply. That's the thesis. Limited and dwindling supply along with having an active use that's price insensitive. Hence his claim that apart from short-term volatility, as long as it increases it's use as a currency, it's long-term value must rise.
csomar 10y ago
I found nothing helpful in this article. The OP talks a lot but then come up to you and say "Buy the Dip, Sell the peak". Yeah, sure. But is it really that simple if you don't pick the dates? Let's say you started very lately on this game: You bought on Oct 08 at 588. You then sold after a 20% gain: That is, you sold at 708 around Nov 12. Now the price of bitcoin doesn't correct, it goes up full retard to 1160. Then correct to 850. You buy there and "Boom", bitcoin still dump again to 740. Now you are faced with a hard choice: Hold the trade until you make profit, or dump it and "get the fuck out". My experience is: Stress and uncertainly will play a huge role and you'll make the mistake of dumping at 740 and only see the price rises later. The OP's suggested trade is simply a retarded market making strategy. If you are down for some business, at least do it right.
- ge96 10y ago
  >...goes up full retard haha I bought late, I'm wondering why watching it real time drop in rice by potentially hundreds, at least I consider it disposable income edit: what I'm considering is selling if it goes up twice what I put into it, to at least get what I put in then keep what I have, and let it fluctuate. But I realize I'd miss out on the "compounding interest" by having more to increase than less.
conductr 10y ago
IMO, also as an observer since it started, Bitcoin is media driven. Every time it reaches new peaks it gains attention in media/blogs/etc until it something bad happens like a hack/etc to trigger a sell off and it falls out of favor of media. Eventually it repeats. It may be getting to a point where it doesn't feel beta. It's a viable alternative when crazy economic things are going on in India/China/etc and it starts actually becoming the thing it's supposed to be: currency. Then, limited trading volume drives prices up.
strictnein 10y ago
For the majority of people: How to end up with $5 million trading X: Start with $20 million
nemo44x 10y ago
Perhaps I'm reading this wrong but he would have done better just sitting on the coins rather than trying to trade them. He claims with his method he started with $100 and bought Bitcoins valued at .05 which means he could have bought 2,000 BTC at this time. He claims his method netted a profit of roughly $20,000.00. BTC is trading at $1143.00 right now. If he would have bought those 2,000 coins and sold them right now he would have proceeds of $2,286,000.00, essentially all profit as it started from a $100 investment. Plus he'd be paying a long term capital gains tax and not the many short term taxes he'd have paid by day trading BTC. I suppose buy and hold would have been the better strategy.
- tobyjsullivan 10y ago
  I think he outted himself with this line: > those poor sods who think it’s a store of value and the price will go up for unknown reasons ...followed by an entire article based on the unfounded premise that Bitcoin will continue to rise. The only worthwhile advice in the whole article is nothing more than "buy low, sell high". Beyond that, you could effectively replace the word "Bitcoin" with "AAPL" or "AMZN" and it would be equally accurate. Any security which hasn't crumbled yet certainly looks like a good bet. That said, as one of those "poor sods", perhaps I'm just being a tad defensive.
- tinco 10y ago
  Buy and hold is only a good strategy if you have a diverse portfolio. The goal of the strategy is then to keep the value of your assets, and maybe make a nice percentage associated with growing economies. If you are operating however with an edge on the market, that is to say you have knowledge you think some percentage of the market does not have. For example you profoundly believe that Bitcoin will increase in value, as the author of the article does. In that case, buy and hold is only a mediocre strategy. At most you will make whatever the percentage is that the asset will grow. If instead you make use of the idea that between now and the mystical future bitcoin value increase, it will go both up and down, you can come up with strategies that make you more money than that value increase. I think it's possible to come up with a strategy that are guaranteed to make you more money, based solely off those two assumptions "Eventually it will increase" and "there will be fluctuations". Some simple ones I've come up with I think come close to it, but I've never dared to execute any of them. I wonder if there's people here who have.
anindha 10y ago
The strategy is always either flat or long bitcoin. If bitcoin is only going up in value it's hard not to make money. I'd be interested if his position oscillated between short and long if it would be profitable?
crispyambulance 10y ago
I find it sad that crypto currency with it's really useful interesting features is seen, almost exclusively, as a vehicle for investment thrill rides (ie get-rich-quick bullshit). Wouldn't be nice to have crypto-currency where the focus is simply as a robust and secure medium in which to exchange goods and services? Am I missing something fundamental about currency in wishing this?
- elif 10y ago
  That's the view traditional financial market people have, and also the view that they have of apple. Their perspective is not the only one, but definitely the sexy one that media can profit from. As for the exchange of services, that is the basis of ethereum. Instead of computing Sha(Sha()) over and over again, the mining network is a global turing-complete computer designed around arbiterless smart-contracts.
  - _coldfire 10y ago
    Ethereum is still doing pointless hash crunching, just with Keccak-256 instead. The energy wastage will go away with a move to PoS Regardless, the smart contract computing is still removed from the consensus mechanism.
- hackermailman 10y ago
  Yes, I've been using digital currencies since early 2000s, and when cryptocurrencies first appeared the idea of a decentralized payment system was a godsend but even back then it was investment schemes that received the most attention sadly. One great idea that never materialized was anonymous services could be insured finally, so you could bootstrap your hobby exchange with an insurance guarantee held by semi-trusted people in the scene. For example a small instant exchange requiring no sign up, with a $10k multi-sig insurance fund and since the blockchain is open you can at all times verify that said instant exchange is not exceeding their insurance.
- FabHK 10y ago
  And the sad thing is that Bitcoin is not even particularly good as a medium of exchange, as it is not anonymous, not particularly fast, and getting rather too expensive for small transactions.
praptak 10y ago
I have yet to see a strategy that passes this simple test: does it also work if there are other people, most of them more knowledgeable about the market than you, applying similar strategies? Also, "Why I don't trade stocks and neither should you": https://news.ycombinator.com/item?id=6831461 https://news.ycombinator.com/item?id=6831461
martinko 10y ago
> growing $100 to $21,638.88 (almost a 220X profit) in about 6.5 years. If he had just bought bitcoin and held it, its value (20000 BTC) would be currently worth north of 20 mil. usd.
- swyx 10y ago
  the domain name -is- "cringely.com"...
drivingmenuts 10y ago
Dollars work fine as a transfer currency as well, given the short transaction time. 1. I order A Thing from ThingSupplier for $1000. 2. I direct MajorBank to transfer $1000 to ThingSupplier from my account. 3. Underpants gnomes at ThingSupplier coordinate with Shipper. 4. I receive A Thing (now, The Thing) from Shipper. There's no need to waste money in conversion fees. What am I missing here? Unless you're into high-speed trading, etc., the volatility of a currency is not going to have an effect, because prices don't update that fast, because ThingSupplier is not going to tie their prices to fast-fluctuating currency value. Doing that would Not Be In The Interests of their Customers. (Capped words because why not.)

43 points by zinxq 10y ago

You're not going to get "rich" only investing $100 at a time. It's a good strategy if you're buying Bitcoin to hedge against fiat though.

justinsaccount 10y ago
$100 of AMZN stock in 2001 is worth about $9,000 today. Investing is easy if you have a time machine or can predict the future.
- tboyd47 10y ago
  Yeah, and $100 of Bitcoin in 2011 is worth $100,000 today. But like you said, you have to know the future to only invest in wild successes.
  - fdsafEWSFSDFSDF 10y ago
    Or you could be a curious nerd like me who bought coins on IRC at 3$ a pop trying to figure out what the hell this new thing is. A problem for me now is what the hell to do with all these coins since I am fairly sure i would lose half in taxes (Capital gains, Ireland), and I doubt exchanges would accept "I bought them #bitcoin-otc back in the day" as a valid source of funds and not report me to authorities. On bright side can go mad shopping on Amazon and holidaying via Expedia
    - ISL 10y ago
      If the coins were bought and held, the history for the wallet will provide concise backup for your acquisition story.
    - matt_wulfeck 10y ago
      Since you look like a throwaway, how much much is your stake worth? How do you actually spend it?
    - jlgaddis 10y ago
      I've wondered about just that. I bought $11,000 USD worth of BTC (in cash, at a local bar) when it was at $7. I thought I was extremely lucky when I sold them not too long after at $30. If only I had held onto them I would be dealing with the same issue you are (although, arguably, it's a nice problem to have).
    - hackermailman 10y ago
      Use them to start a business, then you can dump the coins into the business and not have to pay personal income tax. Otherwise all other schemes just lead to tax evasion unless you cash some out via localbitcoins.com while on holiday. In Thailand my friends "bank" is a service that converts his bitcoin wallet to ATM codes to withdraw without a card.

donquichotte 10y ago

There is very little substance to this article. This is the core "strategy": "This suggests my new Bitcoin trading strategy, which I admit I have only tried so far on paper. [...] Bitcoins go down in value when the demand for them as transaction instruments decreases. When that Russian oligarch sells his shiftload of Bitcoins for US dollars, Bitcoin value goes down. When that happens — when Bitcoin prices drop by 20 percent or more — BUY! The price will inevitably come back up, I assure you. When Bitcoin prices rise by 20 percent or more — SELL! You just made 40 percent on your money. Rinse, repeat, automate, get rich." This is also known as gambling. I'm not judging gamblers, but if it were so easy, the author of this post would have implemented it in a few lines of code and actually gotten rich instead of writing a muddy, unclear piece of trivialities.

dalore 10y ago
Let me summarise it a bit more for you. Buy low, sell high.
- stephengillie 10y ago
  "Step 1: Be a person who intuitively knows what prices ought to be. Then simply arbitrage accordingly."
- camus2 10y ago
  Yeah, lol, how low is low? how high is high? I mean this got to be the most meaningless sentence ever.
  - mhluongo 10y ago
    That's the point of the summary. The blog post had no substance.
mikulas_florek 10y ago
Example: 1. I have 0 bitcoins, price is $1250 2. Price drop 20% to $1000 3. I buy 1bitcoin for $1000 4. Price rise to $1200 5. I sell at $1200, earning 20%, not 40% Am I missing something?

empath75 10y ago

He discovered reversion to the mean. I made some money doing that. I made more just sitting on coins.

FabHK 10y ago
Just sitting on it is predicated on an upward trend, while his "strategy" is predicated on mean reversion. Which one will it be? Who knows.

zinxq 10y ago

The trading strategy aside. The interesting part is that Bitcoin (or crypto in general) represents a limited supply commodity that will (eventually) start to decrease in available supply because it's also used as an active currency. The users of it as an active currency (as opposed to the users of it as an investment) are price insensitive and don't care what they pay to borrow bitcoin for a few seconds. As long as volatility isn't crazy those few seconds, they are in and out of it as a store of value immediately. That activity further limits supply. That's the thesis. Limited and dwindling supply along with having an active use that's price insensitive. Hence his claim that apart from short-term volatility, as long as it increases it's use as a currency, it's long-term value must rise.

csomar 10y ago

I found nothing helpful in this article. The OP talks a lot but then come up to you and say "Buy the Dip, Sell the peak". Yeah, sure. But is it really that simple if you don't pick the dates? Let's say you started very lately on this game: You bought on Oct 08 at 588. You then sold after a 20% gain: That is, you sold at 708 around Nov 12. Now the price of bitcoin doesn't correct, it goes up full retard to 1160. Then correct to 850. You buy there and "Boom", bitcoin still dump again to 740. Now you are faced with a hard choice: Hold the trade until you make profit, or dump it and "get the fuck out". My experience is: Stress and uncertainly will play a huge role and you'll make the mistake of dumping at 740 and only see the price rises later. The OP's suggested trade is simply a retarded market making strategy. If you are down for some business, at least do it right.

ge96 10y ago
>...goes up full retard haha I bought late, I'm wondering why watching it real time drop in rice by potentially hundreds, at least I consider it disposable income edit: what I'm considering is selling if it goes up twice what I put into it, to at least get what I put in then keep what I have, and let it fluctuate. But I realize I'd miss out on the "compounding interest" by having more to increase than less.

conductr 10y ago

IMO, also as an observer since it started, Bitcoin is media driven. Every time it reaches new peaks it gains attention in media/blogs/etc until it something bad happens like a hack/etc to trigger a sell off and it falls out of favor of media. Eventually it repeats. It may be getting to a point where it doesn't feel beta. It's a viable alternative when crazy economic things are going on in India/China/etc and it starts actually becoming the thing it's supposed to be: currency. Then, limited trading volume drives prices up.

strictnein 10y ago

For the majority of people: How to end up with $5 million trading X: Start with $20 million

nemo44x 10y ago

Perhaps I'm reading this wrong but he would have done better just sitting on the coins rather than trying to trade them. He claims with his method he started with $100 and bought Bitcoins valued at .05 which means he could have bought 2,000 BTC at this time. He claims his method netted a profit of roughly $20,000.00. BTC is trading at $1143.00 right now. If he would have bought those 2,000 coins and sold them right now he would have proceeds of $2,286,000.00, essentially all profit as it started from a $100 investment. Plus he'd be paying a long term capital gains tax and not the many short term taxes he'd have paid by day trading BTC. I suppose buy and hold would have been the better strategy.

tobyjsullivan 10y ago
I think he outted himself with this line: > those poor sods who think it’s a store of value and the price will go up for unknown reasons ...followed by an entire article based on the unfounded premise that Bitcoin will continue to rise. The only worthwhile advice in the whole article is nothing more than "buy low, sell high". Beyond that, you could effectively replace the word "Bitcoin" with "AAPL" or "AMZN" and it would be equally accurate. Any security which hasn't crumbled yet certainly looks like a good bet. That said, as one of those "poor sods", perhaps I'm just being a tad defensive.
tinco 10y ago
Buy and hold is only a good strategy if you have a diverse portfolio. The goal of the strategy is then to keep the value of your assets, and maybe make a nice percentage associated with growing economies. If you are operating however with an edge on the market, that is to say you have knowledge you think some percentage of the market does not have. For example you profoundly believe that Bitcoin will increase in value, as the author of the article does. In that case, buy and hold is only a mediocre strategy. At most you will make whatever the percentage is that the asset will grow. If instead you make use of the idea that between now and the mystical future bitcoin value increase, it will go both up and down, you can come up with strategies that make you more money than that value increase. I think it's possible to come up with a strategy that are guaranteed to make you more money, based solely off those two assumptions "Eventually it will increase" and "there will be fluctuations". Some simple ones I've come up with I think come close to it, but I've never dared to execute any of them. I wonder if there's people here who have.

anindha 10y ago

The strategy is always either flat or long bitcoin. If bitcoin is only going up in value it's hard not to make money. I'd be interested if his position oscillated between short and long if it would be profitable?

crispyambulance 10y ago

I find it sad that crypto currency with it's really useful interesting features is seen, almost exclusively, as a vehicle for investment thrill rides (ie get-rich-quick bullshit). Wouldn't be nice to have crypto-currency where the focus is simply as a robust and secure medium in which to exchange goods and services? Am I missing something fundamental about currency in wishing this?

elif 10y ago
That's the view traditional financial market people have, and also the view that they have of apple. Their perspective is not the only one, but definitely the sexy one that media can profit from. As for the exchange of services, that is the basis of ethereum. Instead of computing Sha(Sha()) over and over again, the mining network is a global turing-complete computer designed around arbiterless smart-contracts.
- _coldfire 10y ago
  Ethereum is still doing pointless hash crunching, just with Keccak-256 instead. The energy wastage will go away with a move to PoS Regardless, the smart contract computing is still removed from the consensus mechanism.
hackermailman 10y ago
Yes, I've been using digital currencies since early 2000s, and when cryptocurrencies first appeared the idea of a decentralized payment system was a godsend but even back then it was investment schemes that received the most attention sadly. One great idea that never materialized was anonymous services could be insured finally, so you could bootstrap your hobby exchange with an insurance guarantee held by semi-trusted people in the scene. For example a small instant exchange requiring no sign up, with a $10k multi-sig insurance fund and since the blockchain is open you can at all times verify that said instant exchange is not exceeding their insurance.
FabHK 10y ago
And the sad thing is that Bitcoin is not even particularly good as a medium of exchange, as it is not anonymous, not particularly fast, and getting rather too expensive for small transactions.

praptak 10y ago

I have yet to see a strategy that passes this simple test: does it also work if there are other people, most of them more knowledgeable about the market than you, applying similar strategies? Also, "Why I don't trade stocks and neither should you": https://news.ycombinator.com/item?id=6831461 https://news.ycombinator.com/item?id=6831461

martinko 10y ago

> growing $100 to $21,638.88 (almost a 220X profit) in about 6.5 years. If he had just bought bitcoin and held it, its value (20000 BTC) would be currently worth north of 20 mil. usd.

swyx 10y ago
the domain name -is- "cringely.com"...

drivingmenuts 10y ago

Dollars work fine as a transfer currency as well, given the short transaction time. 1. I order A Thing from ThingSupplier for $1000. 2. I direct MajorBank to transfer $1000 to ThingSupplier from my account. 3. Underpants gnomes at ThingSupplier coordinate with Shipper. 4. I receive A Thing (now, The Thing) from Shipper. There's no need to waste money in conversion fees. What am I missing here? Unless you're into high-speed trading, etc., the volatility of a currency is not going to have an effect, because prices don't update that fast, because ThingSupplier is not going to tie their prices to fast-fluctuating currency value. Doing that would Not Be In The Interests of their Customers. (Capped words because why not.)