Crypto ‘noobs’ learn to cope with wild swings
NEW YORK: After researching digital currencies for work last year, personal finance writer J.R. Duren hopped on his own crypto-rollercoaster.
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,” Duren said about watching his portfolio plunge 40% 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 US dollar, or that Blockchain will revolutionise modern finance or that dentists should have their own currency.
Dubbed by longtime 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. I overhear conversations about cryptocurrencies everywhere, in coffee shops and airports.”
Walch and other experts cited parallels to the late-1990s, when retail investors jumped into stocks like Pets.com, a shortlived 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 like ether and ripple to obscure coins like 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 neverending rally last year.
One bitcoin was worth almost US$20,000 in December, up around 1,900% from the start of 2017. As of Friday afternoon it was worth about US$10,000 (RM39,000) after having fallen as much as 70% from its peak. Other coins made even bigger gains and experienced equally dizzying drops.
“There was that two-month period last year where all the virtual currencies kept going and up and I had a couple of friends that had invested and they had made five-figure returns,” said Michael Brown, a research analyst in New Jersey, who said he bought around US$1,000 worth of ether in December.
“I got swept by the media frenzy,” he said. “You never hear stories of people losing money.” – Reuters