Cryptocurrency & Blockchain Business

Crypto ‘noobs’ learn to cope with wild swings in digital currencies

Dubbed by long-time crypto-investors as “the noobs”– online lingo for “newbies” – they are ordinary investors hopping onto the latest trend, often with little understanding of how cryptocurrencies work or why they exist.

After researching digital currencies for work last year, personal-finance writer J.R. Duren hopped on his own crypto-roller-coaster.

Mr. Duren bought US$5 worth of litecoin in November, and eventually purchased US$400 more, mostly with his credit card. In just a few months, he experienced a rally, a crash and a recovery, with the adrenaline highs and lows that come along.

“At first, I was freaking out,” Mr. Duren said about watching his portfolio plunge 40 per cent at one point. “The precipitous drop came as a shock.” 

The 39-year-old Floridian is part of the new class of crypto-investors who do not necessarily think bitcoin will replace the U.S. dollar, or that blockchain will revolutionize modern finance or that dentists should have their own currency.

Dubbed by long-time crypto-investors as “the noobs”– online lingo for “newbies” – they are ordinary investors hopping onto the latest trend, often with little understanding of how cryptocurrencies work or why they exist. 

“There has been a big shift in the type of investors we have seen in crypto over the past year,” said Angela Walch, a fellow at the UCL Centre for Blockchain Technologies. “It’s shifted from a small group of techies to average Joes.”

Ms. Walch and other experts cited parallels to the late 1990s, when retail investors jumped into stocks such as Pets.com, a short-lived online seller of pet supplies, only to watch their wealth evaporate when the dot-com bubble burst.

Bitcoin is the best-known virtual currency but there are now more than 1,500 to choose from, according to market-data website CoinMarketCap, ranging from popular coins such as ether and ripple to obscure coins such as dentacoin, the one intended for dentists.

Exactly how many “noobs” bought into the craze last year is unclear because each transaction is pseudonymous, meaning it is linked to a unique digital address, and few exchanges collect or share detailed information about their users.

A variety of consumer-friendly websites have made investing much easier, and online forums are now filled with posts from ordinary retail investors who were rarely spotted on the cryptocurrency pages of social news hub Reddit before. 

Reuters interviewed eight people who recently made their first foray into digital-currency investing. Many were motivated by a fear of missing out on profits during what seemed like a never-ending rally last year.

One bitcoin was worth almost US$20,000 in December, up around 1,900 per cent from the start of 2017. As of Monday morning, it was worth around US$10,200.

Investors who got into bitcoin before its 2013 crash tend to shrug off the recent downturn, arguing that cryptocurrencies will be worth much more in the future. “As crashes go, this is one of the biggest,” said Xavier Levenfiche, who first invested in cryptocurrencies in 2011. “But, in the grand scheme of things, it’s a hiccup on the road to greatness.”

Some retail investors who went big into cryptocurrencies for the first time during the rally last year remain positive.

Didi Taihuttu announced in October that he and his family had sold everything they owned – including their business, home, cars and toys – to move to a “digital nomad” camp in Thailand. In an interview, Mr. Taihuttu said he has no regrets. The crypto day trader’s portfolio is in the black, and he predicts one bitcoin will be worth between US$30,000 and US$50,000 by year-end.

KIN CHEUNG/THE CANADIAN PRESS
REUTERS

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