This morning I was checking one of my crypto portfolios to get a general idea of how things were going, and there was one investment in particular that I think generated the metrics needed to prove a successful investment model (at least to me).
I already knew I was winning a lot on that one particular investment, but I didn’t know exactly how big the win was yet – numbers still needed to be calculated.
Before I break down the particular “winning” investment, I think it’s important to first outline my general investment strategy when it comes to crypto currencies.
I would consider my strategy to be largely based off the “black swan” angel investment philosophy which is described in detail by Paul Graham here: http://www.paulgraham.com/swan.html
I invest anywhere from .3 to 1 BTC in every single new crypto I find that has unique technical merits.
Most of these cryptos get pumped & dumped, fizz out, or the founders just take your money and run away… and all of these losses are already calculated into the overall strategy.
Essentially, we’re looking to invest a small amount into many high risk / reward investments. What happens is we’ll lose 9 out of 10 of the “bets”, but one of those high risk / reward bets turns into a “win” , and when it does, you’re not making 10% return on your money, you’re making a 100x return.
That single 100x win covers all of your losses and mistakes, and even a little extra for profit.
In order to pull off this type of strategy in crypto land – you need to be everywhere, and you need to be extremely early in order to fully leverage your small investment size.
The earlier you invest in a crypto, the more risk you’re able to take, and the more risk you can take, the higher your reward is if it turns out successful.
Your ultimate goal is to maximize your wins, not minimize your losses.
When you lose, it should be expected, and when you hit, it should be game over.
In this particular instance, NextCoin (NXT) was a black swan investment for my portfolio.
NextCoin (NXT) is one of the most interesting version 2.0 crypto currencies out today. It’s not a copycat coin built off the bitcoin code, it’s a completely unique codebase developed by community member BCNext.
Beyond the basic features (100% POS, forging, etc.), NXT also has a built in p2p exchange, colored coins, aliases, and a bunch of other protocol level features that really set it apart from everything else out there.
I happened to be on the BitcoinTalk Altcoin forum when I saw the new announcement thread for NXT coin. I jumped in, read about the coin, and downloaded the client. After playing around with the client for a few minutes and getting familiar with the brainwallet – I was sold.
I private messaged one of the founding members on BitcoinTalk and asked to purchase 300k NXT directly from him for .3 BTC.
Basically, I sent a random stranger .3 BTC and hoped that he would be nice enough to send 300k NXT back. It worked.
A few days later I ended up purchasing another 100k NXT for .1 BTC from a different member on BitcoinTalk, and that transaction was a surprising success as well.
Early in its lifecycle, you could only purchase NXT directly from founding members, which was very hard to navigate – a huge leap of faith was involved in these early transactions.
A few weeks after the genesis block was released, DGEX.com was created – the first exchange NXT, and it led to the first major price bump because of how much easier & secure it made trading NXT.
The price jumped from around .000001 (100k NXT for .1 BTC) to .00001 (10k NXT for .1 BTC), a 10x increase.
Since then, there have been several amazing features added to the codebase, the community has exploded, and the protocol itself has finally been open-sourced.
Today, NXT is valued at around .00009 btc, which is 10,000 NXT for .9 BTC
At it’s height, NXT was priced at .00012 BTC per NXT, or 10,000 NXT for 1.2 BTC.
Using todays rate, my initial investment of .4 BTC (~$400) for 400k NXT is worth around 36 BTC (~$29,520), a 75x increase.
It’s important to note that technically no money has been made until I’ve sold my NXT for BTC or USD. As long as I hold my investment, any profits are on paper – they’re “imaginary”.
If I didn’t believe in the NXT protocol I would probably sell all of my coins now, but I truly believe that my money is safer in NXT than in USD or BTC.
NXT has a tremendous future, and I’m either riding it to the moon or going down with the ship.
Over the last few weeks I’ve sold roughly 45,000 NXT to break even on all my other crypto-investments (meaning I’m playing with profit across the board now), funded a 2 day trip to Vegas during CES (awesome), and possibly buy a new macbook pro (we’ll see).
Who knows what the future holds – but if you’re interested in NXT and want to see what the community is building, check out this thread on BitcoinTalk.org (1,000+ pages): https://bitcointalk.org/index.php?topic=345619.0