This week has been very scary for all the Bitcoin investors out there. Actually, from December 18 to the 22nd, Bitcoin went from 19.5k to 12k, that’s a cliff dive. On the other hand, in January of 2017 Bitcoin was around 1000, so 12k is not looking so bad from an investor perspective. Before I go on I just want to understand what an investor is. dictionary.com define an investment as follows: “to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.” That means anything that you put money into with expectation of a return is an investment. Which is odd because who puts money into things with the expectations of a loss. If I go to the Casino I expect to win or I would not bother placing a bet. And, if I buy Bitcoin I also expect to win or I would not bother placing that bet either. This is getting confusing. What if I buy stock in company X ? Don’t I expect a return. Is that gambling? I have to choose one company stock over another. And, if they are similar in all things then I have to make a choice. That’s a tough thing to do! I would have to make up my mind or be persuaded and that requires believing in the literature and indexes and products and all that stuff. Lucky for me I can flip a coin and allow my decision to be made for me. Ironically, thats gambling to make a gamble OR that’s a forced strategy to make an investment decision. hmmm.
Ok. So, now I have Bitcoin and now I am thinking like a real investor. I put in my money with full expectation to ride the price up and sell at a comfortable profit. Of course, I don’t know what “comfortable profit” is because there is this “greed” factor that may cloud my thinking: more is great and all that. I had better mitigate that factor by covering my gains: I think I need a hedge. Now, investopedia.com says “The best way to understand hedging is to think of it as insurance. … Hedging against investment risk means strategically using instruments in the market to offset the risk of any adverse price movements. In other words, investors hedge one investment by making another”. I guess this means that I should take some of my Bitcoins and transfer them into something else that has more stability than the Bitcoins. This is going to take some research. I need an investment that has some limited downside but an unlimited upside. I could just exit Bitcoin and keep my money in cash. The problem with that option is that the government continually lowers the value of our money. If I leave my money as it is it will be less that when I started. Anyway, that’s why I purchased Bitcoins in the first place: to get away from the cash. AHHH, Gold. Of course, I will get Gold. That’s what the world uses as a hedge: its very stable, and has an unimpeachable record. But, how do I get some?
Its not so easy. After some research, I found that buying gold from online coin sources or gold bar suppliers is very expensive. Did you know a gram of gold can be as much or more than 10% above the regulated Market price listed in London. Clearly I have to find cheaper option of getting Gold. And, after more research I have discovered that you can’t buy gold cheaper than the London market price unless you get it from the goldmine or know someone. Anyway, I need a crypto option that works with my Bitcoin investment strategy, and I need to be able to cash out when I want need to. I am going to have to do some more research for this solution.
Well, I am not going to name names here, but none of them will work for my hedge plan except one: XGC – Gold-backed Crypto. It will work as a good hedge for these reasons: 1. Its running at a Pre-ICO Bonus price so I can get in quickly and already have a good amount of value against any downward movements of my Bitcoin investment. 2. XGold will offer below spot as a matter of profit sharing. 3. XGC can be exchanged for real gold. That’s important because all the other crypto currencies have coin to coin exchange OR have to be sold through a broker exchange desk which in turn is volatile. Imagine, with these recent swings in value, if I cash out Bitcoin what price do I get? The price at 9am, 9.15am, 9.30am! Anything is possible and I will have no control. No, that is a poor solution. 4. XGC has a limited downside and unlimited upside, and thats a true hedge. I know what I might lose, and I have a good chance of gaining. Yes, here I am not gambling, I am investing.
I know I am gambling on Bitcoin and you know I am ok with that. I purchased at a low price and have gained “profit” as the value has increased. Now, to protect my gains I have decided to use XGC as my hedge. I feel good about my decisions. What are your plans?