Published on December 12 2017

How to Lose $1.3 Million in Cryptocurrencies

Justin’s note: Many of our readers have written in recently asking about cryptocurrencies. Some of you have even started speculating on them…and are starting to see big profits. But if you’re not careful, you can lose a lot of money.

That’s why today, I’m sharing a new essay from one of the Palm Beach Research Group’s top crypto experts, Greg Wilson. Below, Greg shows you how to avoid some of the biggest mistakes new crypto investors are making right now…


By Greg Wilson, analyst, Palm Beach Confidential

Jay looked down at his crypto portfolio. Six weeks earlier, it stood at 632 bitcoins. Now it was just 215.

His loss at the time… $1.3 million. (As of this writing, $7.2 million.)

This wasn’t just from a fall in prices. But rather one trading mistake after another.

You might be surprised it’s even possible. Bitcoin is up 1,643% year-to-date. And the entire cryptocurrency market is up 9,034%.

So how did it happen? According to Jay (name changed due to privacy concerns):

“It was pure greed.”

As I’ll explain in a moment, Jay made every mistake in the book.

Each mistake compounded the previous one.

And in the end, Jay’s portfolio dropped by two-thirds in just a few short weeks.

I’m telling you his story so that it doesn’t happen to you.

I’ll go over what Jay did wrong. And I’ll show you what we do at the Palm Beach Research Group (PBRG) to avoid those mistakes.

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The Mistakes Add Up

The story starts in May of this year. That’s when Jay started buying bitcoin.

He continued to buy into June. And eventually, he ended up with 632 bitcoins worth roughly $1.7 million.

The plan was to hold forever.

But then, Jay decided to give “altcoins” a try. With no research and no plan, he started buying. (An altcoin is a cryptocurrency that’s not bitcoin.)

His first couple of investments went up right away. So, Jay kept buying.

By the end of June, every last bitcoin had been invested into altcoins. The problem: It wasn’t the greatest portfolio in the world.

Some of the coins I’ve never even heard of, like Crown (CRW). And just three of his positions accounted for 80% of the portfolio.

So, when the crypto market crashed in July, Jay got crushed. And by mid-July, he had lost 66% of his portfolio—about $1.3 million at the time.

The amount of bitcoin he lost is now worth $7.2 million.

Let’s see what Jay did wrong. And how we do it differently at PBRG.

Randomly Buying Is Not Enough

Let’s start with Jay’s plan.

That was to buy and hold bitcoin. But it quickly went out the window once Jay got a taste of altcoin trading. That was his first mistake.

Jay’s next mistake was not doing any research.

How can you make an effective decision when you don’t understand what you own? You can’t.

The mistakes compounded from there. He kept buying more of the altcoins he owned, chasing the prices as they went up. And three of his positions accounted for 80% of his portfolio.

Let’s see how we do it differently.

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The Rational Way to Invest in Cryptocurrencies

In our Palm Beach Confidential service, our goal is to build a diversified portfolio of cryptocurrencies. Our long-term portfolio, for example, has average open gains of over 2,995%.

When we buy, we’re not throwing darts at a board. We put in hundreds of hours vetting our recommendations. We know what we own. And we can make effective decisions that way.

Further, we don’t chase our recommendations. We use strict buy-up-to prices; That way we don’t chase the price; we let the price come to us.

And we use uniform position sizes. In other words, we invest the same amount into each position. We recommend you put no more than $200-$400 into a position if you're a small investor and $500-$1,000 for larger investors. This way one bad position can’t ruin your portfolio.

We do all this because it works. If you had invested uniformly across all of our long-term crypto picks, you’d be sitting on an average gain of 2,995% right now.

Plus, you would have recouped 75% of your original investment from our small, select sales.

The Postmortem

Jay’s story can be summed up in one word: irrational. He got caught up in the hype and then made one mistake after another.

His story is a good lesson in how not to invest in cryptocurrencies. We don’t want you to make the same mistakes.

That’s why we go to great lengths to help you manage risk and maximize your returns.

Just how important is it? Do you remember Jay’s original plan? That was just to buy and hold bitcoin. Had Jay stuck to his plan, he’d be sitting in a portfolio worth $7.2 million.

So, if you don’t want to end up like Jay, do the following:

  • Have a plan and stick to it.

  • Do your research.

  • Don’t chase prices.

  • Build a diversified portfolio.

  • Use uniform position sizes.

Regards,

Greg Wilson
Analyst, Palm Beach Confidential

Justin’s note: Greg is the chief analyst for former hedge fund manager Teeka Tiwari, one of the world’s top cryptocurrency analysts. Together they’ve helped Palm Beach Research Group subscribers make life-changing gains following their recommendations.

They currently have five cryptocurrency Buys in their Palm Beach Letter portfolio, with an average gain of 2,794%. You can access these names—and all of their in-depth research in the space—with a subscription to The Palm Beach Letter. Click here to learn more.


Reader Mailbag

Today, a reader responds to Doug’s recent essay on the new Fed chair:

The Treasury stopped accepting paper dollars for gold in 1971. To whom will those foreigners send the dollars, and in return for what and who's real wealth?

If foreigners want to unload their excess dollars, they will try to buy something with them, not necessarily in the US. If nobody wants them, they will offer to pay more, just to get rid of them. As long as there is someone accepting dollars and exchanging real wealth for them, the dollar will have some value. But concerted efforts at dollar dumping would make so much noise that the last sleeping dog would wake up, and then the dollar would be worth zero. That could all happen outside the US, without trillions of dollars getting sent back to the US. No private Americans would give their real wealth for worthless paper anyway.

The only thing the broke American government could do, if they wanted to save the dollar, is exchange excess dollars abroad for federal land. That's the only thing that could stop the slide in the dollar’s value, since they don't have anything else with real value, and more paper promises probably wouldn't cut it. Just my 2 cents.

—Peter


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