OPINIONS

My Speculative Crypto Investment Journey

My journey in crypto investment.

Tan Choong Hwee

Edited 31 Dec 2021

Solutions Specialist at Providend

Disclaimer: This post is just for educational sharing purposes. Please do your own due diligence on any products introduced in this post.

Background

I started hearing about bitcoin when it had a spectacular rally from sub-USD1k to USD20k in 2017. Imagine 20x returns within a year. It certainly piqued my interests, and I set out to learn about crypto by attending numerous seminars (and later webinars after pandemic claimed physical meetings) on crypto investing, trading and mining. But I didn't invest in crypto then as it was deemed too volatile and speculative for me.

Bitcoin corrected from the peak in 2017 and stayed below USD20k for many years, only to break new highs starting from end 2020. It rekindled my interests in crypto. I happened to attend a webinar by Tokenize Exchange in January 2021, and was given 10 TKX as a bonus by attending. It was the first crypto coin I owned.

TKX is Tokenize Emblem, an ERC20 token based on the Ethereum blockchain, and can be used to pay for discounted trading fees in Tokenize Exchange. You can also get better APR by pair-staking it with other coins with Crypto Earn in Tokenize Exchange.

I resumed my crypto learning journey after attending the Tokenize Exchange webinar. This time round my learning was more extensive by continuously following relevant news, attending webinars, reading articles, watching YouTube and chatting with like-minded crypto investors. Eventually, I made my maiden crypto investment in June 2021.

My View

I view my crypto investment as a speculative investment, not trading, not gambling, not speculating.

It is neither gambling nor speculating because I spent several months (even years considering I started learning in 2017) researching crypto underlying blockchain technology and its application in cryptocurrency and other areas. There are arguments for crypto as an asset class to reckon with.

It is not trading because crypto is indeed highly speculative and volatile. While many traders like high volatility as they can profit from getting in and out of it quickly, it is just too unpredictable for me to consistently profiting from trading it.

It is an investment because I do see potential in its future as an asset class, and I intend to hold it for long term (10 years and above). I adopt a portfolio investment mindset where crypto is the aggressive end of the barbell strategy and I keep my initial investment within 5% of my portfolio allocation. And I invested in multiple coins for risk diversification, another investment concept.

It is still a speculative investment because there are plenty of uncertainty with many factors affecting its future. The stars need to be aligned for crypto to shine, hence the speculative nature of this investment. The small portfolio allocation helps to contain the speculation risk to not more than 5% even in the event that the whole crypto investment is wiped out.

In summary, crypto is highly speculative and risky, maybe a bubble as with all speculative asset, but it is nowhere near gambling (unless you didn't do any homework researching it) and get-rich-quick scheme (if you are investing for long term instead of trading).

Initial Investment

Since I already had Tokenize Exchange account, I decided to fund and invest in crypto through it. I knew this is single exchange risk, but my allocated fund is small, an amount I'm prepared to lose in such a speculative investment. Besides, Tokenize Exchange deposit/withdrawal/trading fees are reasonable, and they have a simple user interface to trade and stake crypto.

The first crypto I picked was Bitcoin (BTC), the natural choice for rookies, as it was the coin that started this whole crypto revolution. The key to its value is limited supply (hard cap at 21 million coins) once it established its dominant position. Another driver is the 4-yearly Bitcoin Halving mechanism, which would slow down the rates at which new bitcoins are released into circulation.

The next crypto picked was Ethereum (ETH), the coin with the second largest market cap after BTC. The key driver is its Smart Contract infrastructure, upon which many decentralized applications can be built, the possibilities are simply endless. And we can look forward to ETH2.0 migration, implementing Proof of Stake (PoS) consensus mechanism over current Proof of Work (PoW) used in BTC and ETH.

Then I was looking at altcoins, and came across Terra (LUNA) introduced by someone in a chat group. LUNA is another coin with PoS consensus mechanism. I did some research, and found an article "What is Terra (LUNA)?" on The Babylonians. I liked what was expounded in the article and decided to put a small stake in LUNA.

That completed my investment in the 3 crypto coins. BTC and ETH are the 2 forerunners that layed the foundation for crypto, and LUNA is the altcoin deemed to have potential in success. The trading fees for these purchases were totally funded by the free 10 TKX I received as welcome bonus in Jan 2021.

Crypto Earn

Once I have selected and invested in the 3 crypto coins, the next step was to look at staking for yield while holding the coins. To take advantage of higher yield based on pair-staking with 100 TKX in Crypto Earn, I needed to load up my TKX holdings.

I managed to stake both BTC/ETH with TKX at 10% APR, and LUNA with TKX at 8% APR. Crypto Earn yield payment day is on the first day of the month, and there is an option to compound yield on payment days. Minimum deposit period is 30 days.

Performance Update

Here is the performance update as of end November 2021:

The "Allocation %" column represents my crypto portfolio value as a percentage of my overall investment portfolio value. It has exceeded my initial 5% portfolio allocation limit by organic growth. I was pondering whether to trim my crypto holdings, but decided to raise the limit to 10% instead, as I viewed the increasing institutional participation having an positive impact on crypto being a viable asset class to stay for a while.

I have included SGD kept in Tokenize Exchange as part of the portfolio. The cash is earning zero yield sitting idle in Tokenize Exchange. The objective of including it in the portfolio is to remind me of its cash drag effect to the portfolio.

Key Observations

XIRR is exorbitant because of short investment timeframe. It will only become meaningful when we have multiple years of investment performance data.
LUNA is the star performer in my crypto portfolio as of end November 2021, more than 12x my initial capital.
TKX is also performing pretty well, probably due to its utility value as discounted trading fee payment and increased APR pair-staking.
BTC and ETH performance were satisfactory.
Overall crypto portfolio value has already more than double my capital.