The 1000€ Holding Challenge

This post belongs to The 1000€ HOLDING CHALLENGE, an experiment that consists of holding 1000€ in cryptos during the whole 2018. If you want to enroll or know more, here are some interesting posts:

Introduction

If you want to enroll in the challenge and you are new to cryptos, I would recommend you to start reading this post before going further. We will explain what cryptocurrencies are, how to buy them, how to store them, how to select the best one, and the most important point, how to avoid scams. In this post you will learn:

What is Bitcoin?
How blockchain works?
Where can I buy cryptos?
How to store cryptos?
What is HODL?
What is a portfolio?

What is Bitcoin?

You will find on the Internet a lot of information regarding to this topic. Bitcoin is a cryptocurrency, a form of digital money that is created and held electronically. It doesn't exist physically and it is not controlled by any government or official authority. It was created in 2009 by Satoshi Nakamoto, but nobody knows his/her real identity. These are its main features:

Bitcoin is decentralized (in theory). This means that it is not controlled by one central authority.
Bitcoin is anonymous. Your funds are stored in a wallet (like your bank account number) but it is not linked with your name.
Bitcoin is transparent: All transactions are stored in the blockchain, which means that if you know the wallet address, you can search how many bitcoin are stored in that address.

How blockchain works?

It sounds cool right? We have digital money that is not centralized (difficult to hack), is anonymous (you can buy stuff without being tracked) and is transparent (all transactions are public). To go further with this, we have to understand the disruptive technology that is behind, the blockchain. The blockchain is a list of records that are linked with each other, where each "block" is linked with the previous one. One block contains the reference to the previous one (hash of the previous block) a timestamp and transaction data (i.e. A send X money to B). By design, all data that is stored in the blockchain, can't be changed.

As you may have heard, Bitcoin is not the only cryptocurrency. According to coinmarketcap there are 1370 different coins. Almost all of them share a common thing, they use the blockchain. Each one has a different price (in $ or €), different transaction fees and different transaction times.

Where can I buy cryptos?

Buying cryptocurrencies is a very easy task, especially, if we are talking about the typical ones like Bitcoin, Ethereum, Dash or Monero. There are webpages called exchanges where you can use your fiat currency ($, € or whatever) to buy coins. Each exchange charges its own fees and uses a different pay method. For example you can pay with credit card or with a bank transfer or a given account number. I would recommend:

Coinbase
Kraken

Both are € friendly, which is a good point for Europe citizens. Kraken is my favorite one. Fees are not very high and you can use a bank transfer to load funds to your account, which takes about 1 or 2 days to arrive. Once you have € in your account, you are ready to buy cryptos.

How to store cryptos

Once you have bought your first coins, it is important to keep them safe. You can leave them at your favorite exchange like Kraken, Binance, HitBTC or the one you prefer, but don't forget that in that case, you don't control your private keys. What is that?

Cryptocurrencies are stored in wallets. A wallet is a pair of keys, where you have a public key and a private key. You can view the public key as your bank account number, that can be used to receive funds. The private one is like your bank account password and you must not share it with anybody, because it allows to transfer funds. So if you store your coins in an exchange (i.e. Kraken) you are not really controlling your private key. Of course you can send and withdraw funds, but who knows what can happen. An exchange can close or get hacked, so if you are going to hold your cryptos during a long period of time, I really recommend you to store them in a wallet that you can control the private keys (see cold storage, hot storage).

What is HODL

Yeah, that is not a typo, HODL stands for HOLD. I don't know why but it is widely adopted for holding. Basically this means buy and forget. You buy some coins, store them securely and forget about them for some months or years, hoping that its price will increase. Why HOLDing is great?

Not everyone has enough time to trade everyday.
If you like and trust in one project, it is great to see how it evolves.
If you are not a good trader, holding might be the best option.

So I would recommend holding to people that is starting in the crypto-world and don't have enough time for trading. Of course, you can also get some profits, but invest only what you can afford to lose. Some coins in 2017 have multiplied its price by 10 or 20, which means that an investment of 10 € would have become 100 or 200 €, which is amazing.

What is a portfolio?

So now that we know what cryptos are, how to buy them and what is HODL, the next step is to select which coins we are going to hold. A portfolio is basically which coins you are holding and which percent of the total investment you allocate to each one. This is mine, and I will use it to hold during 2018, no selling allowed.

Do you want to join the 1000 € HOLDING CHALLENGE? Stay tuned for more!

The 1000€ HOLDING CHALLENGE - Introduction