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The Big Wide World of Crypto-Investments

Author's note: This article is part of an ongoing blog about my adventures in the world of alternate currencies.

Once I figured out some basic things about how Bitcoins worked, and especially once I got going with writing for the Devtome, my goal has been to build up a passive income stream of cryptocoins.

There are many reasons to go for the passive income stream, but perhaps the most compelling reason for me is that in the cryptoworld, it actually seems to be possible. My perception is that in the “real” world of fiat money, it seems to take money, and lots of it, to make money. In the cryptoworld, you can at least theoretically start off with a small amount, that small amount can be easily earned without having to formally apply for a job, and that small amount can be applied to some vehicles with awesome rates of return and grown into a larger amount which can in turn continue to grow. Keep in mind the usual disclaimers about high risk, only invest what you can afford to lose, etc.

Reputable websites for investments

There are several websites which serve as trading platforms for various crypto-stocks. The two I use are Cryptostocks and BTC Trading Corp.

BTC Trading Corp has an awesome user friendly platform with a lot of really nice features. On BTC Trading Corp, you can automatically reinvest dividends, get up-to-the-minute value analysis of your portfolio (which takes into account the trading fees), and easily keep track of every trade you ever made and every dividend you ever received. The site owners screen and personally approve each security; the securities that are listed are reputable and for the most part have an associated thread on the Bitcoin Forum. The prospectus for each security is informative and well written, so it's easy to do your homework before investing.

Cryptostocks is a bit more quirky of a platform and doesn't have all the nice analysis features. Also, the securities don't appear to be as rigorously screened and the descriptions range from lots of details to very little information at all. Some of the securities definitely strike me more as a buyer beware situation, though scams are delisted once they are discovered. Cryptostocks' big advantage is that it supports three different cryptocurrencies, Bitcoins, Devcoins, and Litecoins. It may be the only trading platform that has Devcoin-denominated securities. When you need technical support for using the website, you can PM the owners through the Bitcoin Forum and expect to get a helpful response within 24 hours.

With more than one type of cryptocoin, you may find you need to trade one for another. You might also enjoy speculating on currency exchange rates. The go to website for trading in the various more established cryptocoins is Vircurex. In this case, you actually get a discount on your trading fees by signing up through a referral link, so feel free to use mine.1) Vircurex takes a little while to figure out, but once you do, using it is very easy. Since it supports twelve different cryptocoins, there are many possible combinations, all of which are listed on the home page. You click on the one you want to use and it takes you to a page where you can buy or sell as well as view recent trades and the order book. Before you can trade, you need to obtain an address for both types of cryptocoins. You can generate those addresses on the accounts page. It's run by the same people who run Cryptostocks, and they are just as responsive to PMs.

If you are looking to earn more Bitcoins by lending some out at interest, two websites worth checking out are BTCjam and Coinlenders. I have not used either one of them yet, but plan to try out Coinlenders in the near future. BTCjam is a platform to match up people seeking to borrow Bitcoins with people seeking to loan Bitcoins. It is a peer to peer lending network, which means each lender has to screen potential borrowers so you have to be wary of scam borrowers. Coinlenders is a site where the owner (TradeFortress on the Bitcoin Forum) issues the loans and users make deposits and earn interest–more like a bank, only you won't find that kind of rate of return at a conventional US bank.

Securities to invest in with Bitcoin

Of all the ways to invest Bitcoins, the one I am using most heavily is buying dividend paying stocks. I don't mess around too much with currency exchanges. When I need to trade one cryptocoin into another, I generally take the going exchange rate, make my trade, and move on to the investment I really want to make. In a similar way, when I buy stocks, I'm not into the buying low and selling high strategy. I prefer to buy them when I have the funds, hold onto them for a long time, and collect the dividends. All things being equal, I consider a dividend paying stock to be worth much more than one that doesn't pay a dividend. I also consider predictable dividends to be better than intermittent dividends. The very first stock I purchased on Cryptostocks was one which claimed to pay out a daily dividend. Once I bought a few shares, I got dividends for about three days, and then they stopped coming and only paid out occasionally after that. The value of the shares plummeted and I finally sold them at a loss so I could buy a different security which paid out more regularly. Good thing that was my play money.

This brings me to an important point. Part of doing your homework on investing is to figure out what kind of investor you are. Do you like the roller coaster ride of up and down share values and unpredictable dividends? Or do you like nice boring stocks which don't change much and pay regularly? I prefer the latter, although to be fair, there isn't a whole lot of that in the cryptoworld yet. It's a very risky business all the way around and you could lose everything. But I do believe you can also gain a lot, so I'm willing to take that risk.

There is only one Bitcoin denominated stock I'm going to name and recommend. All the other stocks I might want to talk about, I'll allude to without naming. The reason is that while I hold several stocks that are doing well for me, I don't know enough about them to be confident they will continue to do well (I'm one for trying things out even without knowing everything, which does entail more risk) or to recommend them. Even for the stock I do name, it is important that you do your own research about it and don't just go on what I say. I'm pretty new to this kind of investing.

Cryptostocks has a number of Bitcoin denominated securities which do pay dividends several times a week, even daily. I hold positions in two of them and in general have been quite happy with the returns. Neither one of them claims to pay daily dividends. However they both do, at least some of the time. One of them for a while stopped paying out daily, and the share price dropped like a rock until daily dividends were resumed. Even though daily dividends were not promised, shareholders came to expect them because that was their experience, and they panicked when that changed with no explanation. I wished I had some Bitcoins sitting around during that window of time because I could have bought up a bunch of shares dirt cheap. On the other hand, that particular security has scant information so even with the positive experience so far, I hesitate to get into it too deep.

The other security I own I've had for about two weeks and so far the dividends have paid out daily. The share price is low so it's easy to get into–a couple weeks of faithfully viewing ads on BitVisitor and CoinAd or a day or two on BitcoinGet can earn you enough to buy one share as of this writing.

The securities available on BTC Trading Corp. tend to be more reputable and more expensive. I own one security on BTC Trading Corp, and it is TAT.ASICMINER.2) This share is worth 1/100 of the full ASICMINER pass through share3) From everything I've read, ASIC MINER is a rock solid company with a great plan. They are the leaders in developing the Application Specific Integrated Circuit (ASIC) for Bitcoin mining. The company self-mines, rents and sells mining equipment. The owner of the company (who goes by friedcat on the Bitcoin Forum) has been incredibly forthright and honest with timely information on the progress of the company from the very beginning. Reading his posts inspires both trust and confidence. Dividends are paid every Wednesday. The value of the stock has been steadily increasing. ASICMINER is the perfect stock for me–predictable, slowly but surely rising in value, and with good dividends. It has been referred to as the closest thing the cryptoworld has to a blue chip stock. Before you invest, grab a cup of coffee and your favorite treat and read all about it.4)

Investing Devcoins

The concept of investing with Devcoins is a rather interesting one because the entire currency is an investment. Devcoins were developed precisely to be able to reward people for developing projects and ideas which the Devcoin developers have determined to be worthwhile. Writers get paid Devcoins for publishing their work on the Devtome. I recently posted an idea on the Devcoin thread of the Bitcoin Forum and was rewarded with four extra shares in Round 25 just for sharing it. A number of different projects have been rewarded with Devcoin bounties over the past couple years. More projects are under review.

Investing my Devcoins is of great interest to me because I have a lot of them rolling in now that I've been a Devtome author for a couple months. Although I personally am not a Devcoin promoter or anything like that, I do want to as much as possible do interesting things with my Devcoins as Devcoins (as opposed to selling them all off for Bitcoins).

The first Devcoin investment possibility is the Devcoins themselves. Devcoins are currently very cheap compared to Bitcoins and a lot of people believe they will get more expensive as time goes on. They are buying them up now while the price is low or if they are earning them, stockpiling them for a later date. The hope is that in the future they will be worth hundreds or thousands of times more and those holding them will be sitting pretty.

I am saving a certain amount of my Devcoins so that if they should grow in value I can benefit from this as well. However, I'm not content with just stockpiling them. I want to do something with them which will help increase the value of my holdings, not just hide them under a virtual mattress. For this reason I find the possibility of buying and holding Devcoin denominated securities to be quite attractive.

Cryptostocks has a handful of Devcoin-denominated securities. I have positions in three of them. I will name all of them but again, please understand that only you can decide if any of these assets are right for you after you have done your due diligence.

There is the Devcoin Bounty investment (DVB).5) I acquired a few shares of it from faucet earnings–Five DVC here and five DVC there can actually add up. This security in some way involves the investor in the whole bounty awarding system and it pays a small dividend once a week. Beyond that I don't really understand how it works, especially how it profits, so I haven't added any more shares since my Devcoin earnings became more substantial.

I own quite a bit of the P2P DVC Currency investment bond.6) It's a pretty straightforward security. It has a face value of 100 DVC, though it typically sells for 100.5 DVC, and it pays 0.01 DVC a day. The return is not that great, but it's better than no return at all. As long as I'm willing to hold these bonds for longer than twenty days or so and I can sell them for 100.4 or 100.5, my stash of Devcoins held in these bonds should grow by about 3.65 percent a year, more if I reinvest the dividends.

The most fascinating Devcoin denominated security is the ASIC MINER DVC Pass through (ASCMDVCPT).7) Worth 1/1000 of an ASIC Miner share, it also pays out weekly dividends. The dividends are paid in Devcoins. It was through asking about this security that I learned all about ASIC MINER and why it's such a great company to invest in, and this knowledge led me to eventually exchange quite a few of my Devcoins into Bitcoins so I could buy up TAT.ASICMINER shares. Being able to own ASIC MINER share fractions without having to sell off my Devcoins is a definite plus.

I initially planned to invest a majority of my Devtome earnings into ASCMDVCPT, but then someone on the Devcoin thread pointed out that the share was overvalued, meaning that you paid more DVC for 10 shares of ASCMDVCPT than the equivalent (based on the exchange rate of the time) cost in Bitcoins for one TAT.ASICMINER share. That bothered me enough to prevent me from buying for awhile, opting instead trade my Devcoins for Bitcoins and buy more TAT.ASICMINER shares. Then a couple things happened.

1. I bought a few shares of ASCMDVCPT at the going rate the day before the dividends were paid out. Regardless of how “overvalued” the shares I bought were, I still got by far the best return for the same amount of Devcoins I'd invested compared to what I would have gotten with that same amount invested in either DVB or P2PDVC. If what I wanted to do was grow the number of Devcoins I had, then this was definitely the security to do it with. My concern of course is that before long the price will adjust and I'll lose on the correction, but that hasn't happened yet. I might earn many dividends before it does. Not only that, the original share will most likely keep trending upwards as its fundamentals are solid.

2. The price of Devcoins collapsed. I sold my first Devcoins on Vircurex for 85 satoshis each. Within a few days I was selling them for 76 satoshis. The following week, 65 satoshis. I finally drew the line at 61 satoshis as the lowest I wanted to go for the time being. The price of Devcoins was falling long before I started earning them so this came as no surprise. However it's quite demoralizing to watch the value of your paycheck erode within days. When round 24 closed I calculated how much I'd earn in Bitcoins for that round based on the price at that time, but of course I am not getting that value since the price has collapsed so much since then.

It occurred to me that when ASCMDVCPT pays out its next dividend, the amount of Devcoin I receive will reflect this, since the original security is denominated in Bitcoins. If Devcoins are cheaper than they were last week, that simply means that I will receive more Devcoins this week than I did last week given the same dividend amount. This suddenly makes this security so much more than a Devcoin version of ASICMINER. ASCMDVCPT is now also a way to preserve the value of the Devcoins I get paid in dividends. If I sell them at the same exchange rate, I will acquire the same amount of Bitcoins that I would have acquired by owning the share in Bitcoins. In other words, a collapsing Devcoin price doesn't matter as much with the dividends. If Devcoins are expensive I'll get less of them, but if they are cheap I'll get more of them. The exchange rate doesn't matter anymore as long as the Devcoins trade for some amount of Bitcoin.

Capital preservation, particularly buffering the worst effects of exchange rate fluctuations, is definitely an added value ASCMDVCPT has over the original Bitcoin denominated ASIC MINER securities. It's worth paying a premium for this. How much of a premium? I'm still trying to figure this out, but I'm more OK with paying a higher price than I was before.

Another problem with this security is that it is not heavily traded. DVC-denominated securities have not caught on yet. This means the ask price is way higher than the bid price. I can offer to buy this security at what I would consider to be a reasonable price (accounting for the added value) but it could take days or weeks for someone to finally be willing to sell to me at that price. I'd prefer to be able to buy the shares instantly, but I'm not willing to pay the ask price (yet). So I put in my buy orders and I wait. When the price of Devcoins recovers I will probably go back to selling them off and buying TAT.ASICMINER shares. On the other hand, it would sure be nice to accumulate more ASCMDVCPT shares as “insurance” in the event of a future price collapse.

I'm hoping that as time goes on I will encounter more BTC and DVC denominated securities to try out. My favorite part of this game is collecting the dividends.

*Next entry: When it all stops

1) Because I already get paid for articles on the Devtome it is my personal policy to not post affiliate links here. However, in this case using an affiliate link to register is an added value compared to registering through the main site. In order to benefit by registering through my link, please use the link to Vircurex found in the original article located here: http://creativecurrencies.cu.cc/2013/07/24/the-big-wide-world-of-crypto-investment/

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