I’m Christopher Long, from cryptotrader.sg, and I am writing for Dr Wealth for the very first time, with more to come.
I’m here today to talk about the opportunities in bitcoin and altcoins – an area I feel is massively undervalued currently.
As an example, I’d like to present a case study on Zilliqa, and how I was able to make 3473% from it.
Before I dive into today’s topic, allow me to briefly introduce myself. I am currently an investor and trainer of Cryptocurrencies – for those who have not heard of this term, you would perhaps be more familiar with the “King of Crypto”, Bitcoin!
Bitcoin is one of the first cryptocurrencies to be invented and is the world’s largest in terms of market capitalization.
I first heard of Bitcoin when I was still in university (2010) and thought it was a massive scam during that time. This proved to be a mistake as the price went from less than $1, to $7800 today (7th of Oct 2019).
In 2017, I gained fresh interest in cryptocurrencies and left my job to pursue this industry full time.
There were some friends who cheered me and many many friends who told me it was a terrible idea! After all, I was given a career with amazing potential.
During that time, I was working as an Investment Banker, focusing on Debt Capital Markets – we would help corporations like UOB, the Housing Development Board, REITs, to issue bonds and raise funds. While studying in the Singapore Management University, Investment banking was one of the most sought-after careers amongst students.
Why did I leave Investment Banking?
I spotted a trend.
I notice how the world has rapidly, and yet silently, changed over the last 5 years. I’ve seen how shopping malls are giving way to e-commerce, how taxi hailing is moving from the streets to the internet, and how many things in our lives are changing due to the internet.
Could banking & finance be disrupted in the same way?
That was my thought process. And with it, I entered into the cryptocurrency (or blockchain) industry. There are currently more than 2700 altcoins out there, and more are being created.
One of the ways new coins enter the market is via a process known as ICOs (Initial Coin Offerings).
More than 7 billion USD has been raised in 2018 alone via 1250 offerings.
As a form of caution, I’d like to state of many of these coins can turn out to be scams or business ideas that doomed to fail.
Before investing, you should 100% educate yourself, and know what you are getting into.
ICO investing is akin to investing in a startup, and while returns can be tremendous, it is tricky to pick to right ones to buy into. Remember my investment into Zilliqa?
That was through an Initial Coin Offering.
Entering into crypto investments, I am very clear on the risk/return involved. You have to be this way for any investment as well if you want to be certain of making money in the markets.
As with all other investments, if you have a higher return, it is always accompanied by higher risks.
Buying into ICOs, my mindset was more attuned to that of a venture capitalist as compared to a retail investor with low-risk tolerance.
My mindset is this: only invest small amounts that won’t burn my pocket ( Notice how I only invested $876 into Zilliqa? ), and take profits quickly.
The moment Zilliqa got listed, it went up to $30,421. I immediately took profit and sold half of them, taking home $15,210.50. It was exhilarating to be able to get such returns, and it all happened over a period of around 4 months.
From there on, I would leave the remaining unsold Zilliqa in my wallet, and not touch it anymore. This allowed my investment to grow even more at no risk. Even if it falls to $0, I would still have profited $15,210.50 from this trade.
With that in mind, I now search for the next ICO I would like to invest into.
My original bullet of $876, has become 17 bullets ($15,210/$876). I can now invest again into 17different ICOs.
Is there a way to find the valuation of such companies?
In short, no. It is very difficult to have a price valuation as these startups do not have any revenue. There are no financial statements available and many of the analysis is done from a qualitative angle compared to a quantitative one.
I would share 3 main areas to research into when deciding on an ICO.
#1 – Liquidity
When I invest into an ICO, I would be most concern about whether or not I can sell this.
Think of it like being a fisherman.
You can catch really good fish, but if no one knows where to buy the fish, you’ll be stuck with it. So having a big marketplace, and having a spot in that marketplace to sell the fish, is important.
To me, that is the same as ICOs.
I’ve bought into cryptocurrencies that aren’t sold at such marketplaces. These marketplaces are known as cryptocurrency exchanges and being able to get listed on one is vital. When investing in ICOs, make sure to find out where the coins will be listed on.
There’s no point in having a house that appreciated 1000x in price but has no takers.
#2 – Business Model
Bitcoin exists to solve the fundamental problem of friction: fees, transaction costs, etc. Everything can be lessened with Bitcoin.
In other words, Bitcoin solves an actual real-world problem. If it did not, there would be no value to it at all.
That is thus how you should also look at whatever Cryptocurrency is fresh on your mind.
- Does this business really need blockchain technology?
- Does it really need a cryptocurrency to function?
- What are the purported problems it claims to solve?
- Can the solution be substituted by anything but blockchain?
A lot of businesses came onto the blockchain wagon as a way to raise money easily. But upon creating and listing the tokens, we realized that it’s simpler to just use USD or SGD in their operations.
Cryptocurrency exchanges, for example, make good business models for tokens.
They create their own internal economics by allowing tokens to act as discount coupons for trading.
To get listed on an exchange, one might have to purchase tokens to get “listing rights”. As the volume of trading increases, the demand for such token increases as well and the price of the coins would increase.
#3 – Teams
Buffet had a saying.
The world of cryptocurrency is no different. This is the criteria that often make or break the altcoin.
We are looking for a balance of team members with business acumen, as well as technical skillsets.
Since cryptocurrency or blockchain companies are tech companies in nature, I often research into the CTOs and senior tech members. I would find out what are some of the past projects they have done, what other projects they are involved in and the reputation that is tagged to them.
- What are their expertise in?
- Where were they educated?
- What is their track record?
- What have they worked on previously?
- Where did they work at previously?
- Are they titans of their field?
- Does their social media bear out their track record? If they worked at Facebook in 2007, does their Linkedin and social profile say something else?
- What does their twitter record reflect?
- Have they been in the media or have a legal case lodged against them in the courts that you can find?
- Have they been linked to scams previously?
This might be controversial, but I would also take note of their nationalities and what country the company will be based out of.
Certain regions in the world have a higher propensity to create scams. *cough, Russia, cough*
At the start of my journey, I’ve personally lost 20 ETH ( worth $20,000 at that time ) to a Russian project called Mirocana.
It was a painful lesson but well learnt. Perhaps an article can be written of it another time.
Zilliqa is Singapore-based, and despite being such a small country, we have carved out a good reputation in the cryptocurrency world. Singapore is one of the friendliest in terms of regulations, and our government is fairly supportive of this industry.
What does it all mean for new investors?
The cryptocurrency landscape is constantly evolving and moving at an incredible pace.
Although prices of cryptocurrency and Bitcoin have fallen over the last year, I believe there is still much potential in this asset class. Despite a fall in prices, both institutional support and public awareness have increased in 2019.
Markets are reeling from the ICO bubble popping in 2018, but savvy buyers will know this also presents a tremendous buying opportunity since things are cheap now!
If you are considering investing in cryptocurrencies, now is the best time for you to learn and get started.
Chris holds MSc Applied Finance from the Singapore Management University and is the sole recipient of the 2015 Columbia Threadneedle Investment Award. He has been working in the banking industry as an investment banker before starting CryptoTrader.sg in 2017
Chris has a knack for simplifying the complex, identifying trends and helping people obtain investment insights. Always seeking passive income, he has achieved reasonable success investing in equity (~15% per annum), but his foray into Bitcoin and other Cryptocurrencies has reaped returns that are much higher
Chris now aims to share his knowledge and help others achieve the same level of success