Edition #16: Psychology of Money, Altcoin Season, and the Coinbase IPO

Plus: Crypto Bonus Bonanza

written by oz chen

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Today’s compliment: you are quick on your feet.

  • Last week: Surface Area of Your Knowledge and if you should ever pick individual stocks.
  • Today: Psychology of Money Highlights, Altcoin Season, Coinbase IPO, and Crypto Bonus Bonanza.

Psst—help me out. Vote on newsletter topics to tell me what you want to read. It’ll take just 30 seconds of your time.

📚  Psychology of Money: Lessons & Highlights

Want to read the book that inspired the creation of this newsletter? I’ve recommended it before and I’ll recommend it again: read Psychology of Money. It’s not a boring finance book. Rather, it’s full of interesting stories that’ll flip the way you think about money upside down.

I cover 7 of my favorite chapters out of the 20, and provide my personal takeaway from each one:

The stories about greed, history and our cognitive biases will really make you think twice about money.

>> Check out my book highlights from Psychology of Money

🗓  Altcoin season is upon us

In 2017, the world was swept by its first “altcoin season,” powered by Initial Coin Offerings (“ICOs”). Seemingly overnight, any new crypto with a half-legitimate website exploded in value… in the short term. The party ended with a screeching halt, leading to a crypto winter.

It’s 2021 and altcoin season is upon us again:

2017 taught me that market psychology looks something like this:

  • See incredible gains
  • Feel FOMO, buy in (usually at a high price)
  • Ride the high; feel smug
  • Market corrects. Don’t get out fast enough
  • Get burned or be left holding the bag

Altcoins are better suited for short term speculation. This is a game not many people are great at, myself include. You have to make the right pick out of thousands of coins and be quick about getting out. I think of it similarly to trading penny stocks.

The only thing worse than losing money is being left with an asset you don’t understand, or even worse—one you don’t even like. I certainly felt this way after buying shitcoins I shouldn’t have bought. This stands in stark contrast to long term plays like Bitcoin and Ethereum, trusted projects which I feel comfortable holding on through ups and downs.

Are things different this time? The cryptoeconomy has vastly matured since 2017. Investors have higher standards and baseless ICOs have been replaced by real projects. Institutional adoption of crypto is at an all-time high.

And yet…the crypto market is still younger and much more volatile than the stock market.

Those two worlds collided this week. Let’s talk about Coinbase’s IPO.

💹 Coinbase’s Volatile IPO Debut

My first day trading Coinbase was full of ups and downs:

  • Logged into Robinhood at 6:00am, created limit orders at $250 and $300
  • Waited til about 10am, then bought 1 share at $398.79, and 2 shares at $380.00 when it dipped.
  • The trading day ended at about $340, after touching a high of $429 and low of $310

My 3 shares have already lost value in its first day of investment. You best believe I’m holding onto those limit buys at lower prices. I speculate that within a few quarters the IPO price will come down to earth and more modest valuations will be had.

In a previous one-pager on Coinbase, I posited that buying COIN shares could represent buying a crypto index. Coinbase is a crypto exchange through which the value of many crypto projects will flow through.

While I feel good about what Coinbase represents, I’m also conflicted with its valuation. Kyla Scanlon of Data Data Data compared Coinbase to traditional exchanges. For context, $100B would be higher than the Nasdaq and the Intercontinental Exchange—combined.

That valuation also puts Coinbase at around 5% of the total crypto market. There’s some chance Coinbase could double that, but could Coinbase 10X from such a high valuation? Is Coinbase worth the valuation of Google, Microsoft, Facebook, and heck—Bitcoin itself?

Cathie Woods of Ark Investments comments (starting at 5:57) that Coinbase will experience huge volatility—yet she has high conviction in the long run. The fund bought nearly 90k shares of Coinbase today:

I’m in the for long haul. Either way, Coinbase’s IPO is an amazing signal to the world that crypto is a serious asset class.

💸  Money tip of the week: Crypto bonus bonanza

Those who are shy or skeptical about cryptocurrency should just buying a teeny, tiny bit of it. Why not sweeten the pot with new account opening bonuses worth up to $100?

I updated a list of all the crypto referral bonuses in one place:

This list details the bonuses, requirements, and links to each referral program. Some of them, like Celsius Network, have rather big promotions paying out $40 in Bitcoin bonuses.

If you don’t mind jumping through some digital hoops to open accounts and fund them (e.g. buy $100 worth of Bitcoin, get $10), you can get a bunch of free bonus crypto. Hit me up if you have any questions.

Note: should you choose to use my friend referral links (thank you), you’ll have to use the direct links to sign up. If you click around around each page or leave, you might lose the referral bonuseven after returning to the site. And that makes both of us sad.

😅 Before you go…reader survey round 2:

I was too optimistic about getting enough reader responses last week.

Help me out by taking 30 seconds to vote on the topics you want to read about:

Thanks friends.

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