I Earned 1 Million Dollars in 1 week from Cryptocurrency. Here’s how…
Cryptocurrency has never appealed to me.
When the crypto-bro making me my coffee enthuses about how he has turned $100 into $10,000 with his smart trades my response is a resounding “meh”.
As a man in my early 20s I’m pretty much as far from the typical crypto-enthusiast demographic as you can get, and frankly my to-do list already feels pretty full without adding ‘learn about emerging financial technology that may take over the world’ to it.
There are a few reasons why I’m just not that into crypto
I’m naturally sceptical, so anything that is touted as the next big thing, or instant way to multi-millions, tends to result in a highly-raised eyebrow.
And in much the same way as I don’t bet on the Melbourne Cup because I hate throwing money at things which I don’t know enough about, putting money into crypto has always felt more like gambling to me than investing.
But interest and the number of people investing in cryptocurrency has grown exponentially over the last year. The ATO says around 600,000 Australians have invested in cryptocurrencies in recent years (though other estimates are much higher).
According to a June survey by market comparison site Finder (whose founders also run a crypto exchange) a third of Gen Zs now own digital currencies, twice as many as in January.
Cryptocurrency is clearly here for the long term, and as I frequently report on it in my job as ABC News Breakfast finance presenter, I need to learn about it. And the best way I know to do that is to put some skin in the game.
I’m going to spend $100 of my hard-earned cash on a three-month experiment with cryptocurrency, and see where I end up
Where to start?
First problem: I have no idea how to start.
According to that same survey by Finder, that was the biggest impediment for 22 per cent of people who were interested in investing in crypto.
I don’t want to go to one of the YouTube get-rich-quick ‘experts’ (of whom there are about a million, many of which are sponsored by smaller or alt-coins) so instead I turn to Professor Ellie Rennie of RMIT in Melbourne. She’s a crypto researcher at their Blockchain Innovation Hub, and as an early investor has lots of experience.
I like her first piece of advice: “It’s very easy to lose a whole bunch of money.”
“Never, ever spend more than you can afford to lose.”
Ms Rennie helps me to take the first step: setting up an account on a trading platform. She uses an Australian-based one, but there are literally hundreds to choose from.
You can go to a comparison site and see which one suits you best — they all offer different fees for trades, different cryptocurrencies, and different options for ways to put in your own money, like POLi, PayID and bank transfer.
I have to enter personal details and my driver’s license for ID, and that’s followed up with a call a day later from the trading platform to verify my identity before they will set up my account, which makes me feel secure.
Do I need a digital wallet?
Ms Rennie recommends setting up a digital wallet for when you are trading bigger chunks of money as one of the big risks with cryptocurrency is someone hacking into your trading platform and stealing your coin.
“Security is the most important thing when it comes to cryptocurrency. You don’t want to keep your cryptocurrency on an exchange,” she says.
Digital wallets are secure places you can put your cryptocurrency into, much like you would put cash into a physical wallet.
That said, Ms Rennie and I agree that because I’m only trading small amounts I don’t need to bother with this yet, but as soon as you get amounts you’d be sad to lose, this is a critical step.
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Now to the exciting part — my first purchase! What to buy?
Bitcoin is obviously the biggest and best known coin, and there are literally thousands of others, but they come with a warning.
“They all have different levels of security, and we also don’t know how long they will stick around,” Ms Rennie says.
“You need to be a bit cautious, particularly when you are going into things that look cheap on these platforms. They may disappear.”
In the end we settle on the second biggest coin, Ethereum, for the stability of its platform. I also like the idea of it because it is in the process of changing how it operates: it will soon cut down its energy use by 99.5 per cent, according to a blog post from the project.
Bitcoin famously has a carbon footprint the equivalent of Portugal, so the idea of not contributing to that appeals.
Ethereum is trading at $2,804.15, so I after I transfer my $100 to the trading platform, for a small fee, I am now the proud owner of about 1/28th of an ether (the coin of the Ethereum blockchain).
Am I rich yet?
That was a month ago, and I would love to tell you that since then I have learned all about cryptocurrency and made a pretty penny in the process.
That is not what has happened.
Since then I have been on leave with my family, had a couple of big stories, bought a dog and done nothing with my coin. And Ethereum has dropped to $2,578.67.
Turns out just buying crypto isn’t enough to really be invested in it, if you know what I mean.
So my new resolution is to spend at least an hour a week learning about it, and to actively manage my investment more.
Ms Rennie emphasises that research is key to a successful experience with digital coin.
She recommends newsletters from Messari, EthHub and Spencer Noon, and websites Coindesk, The Defiant and Decrypt.
There are also many crypto podcasts. Ellie’s favourites are Laura Shin’s Unchained and Bankless.
These are just her choices, and as with any financial decision, you should do your own research and always consider your own circumstances before making any investment.
To be honest, it feels a bit overwhelming, but also necessary if I’m serious about understanding crypto currency.