half the fun of crypto is how incredibly autistic and irrational it is. I’ve only made a couple grand with an initial investment of a couple hundred bucks and I don’t even give a s*** about losing it because s***posting and ironybuying coins for big gains reaches a specific level of absurdity for me that personally justifies the whole thing. I hope I die soon.
– Anonymous post on a cryptocurrency forum
Not exactly what you want to hear from participants in a market that is supposed to be efficient due to its lack of regulation and centralised intervention…
As I’ve said before, speculation in cryptocurrencies should only be performed by those who can crack a smile over a 100% loss in their investment. But as Sam Volkering has demonstrated to his subscribers, those with a strong sense of humour can win big.
Not long ago, I bought a small amount of a cryptocurrency called Verge (I do not recommend you do the same, for reasons we’ll come to).
My investment thesis was simple. From my perspective, there is a large market for anonymous means of exchange, which will only get bigger over time as surveillance of every aspect of our lives becomes steadily more apparent.
Verge aims to be an untraceable form of money. It is effectively a duplicate of the bitcoin system, but mounted upon the Tor anonymising protocol. Seemed like a good idea, so I made a small investment when the price of 1 Verge was around half a penny.
Verge trended downward in price shortly after I bought it, and ranged for a few weeks. Until suddenly, at the end of last week, the price went and blew the roof off, increasing by 120% one day, and then 170% the next, until suddenly it had soared past 6 pence per Verge.
The reason for this gigantic tear?
While I’d love to take credit for this stupendous performance and say it was exactly what I predicted to occur in line with my thesis, I’d be lying.
Truth be told, I have no idea why this asset has behaved as it has – and I can’t find anybody who can give a decent recent explanation for its behaviour either.
Vendors are not suddenly accepting Verge as a means of exchange.
The Verge development team plans on launching a feature that enhances transaction anonymity called Wraith Protocol – but this has not been released.
The only Verge-related news that coincides with the price action is an endorsement from John McAfee, the colourful founder of Mcafee antivirus software, who recommended it alongside a few other cryptocurrencies. However, he had publicly endorsed Verge before already, to not nearly such a strong response.
The only other reason I can think of is that the currency was the subject of the crudely named “pump and dump” (PnD). This is where gangs of crypto traders all begin buying a chosen cryptocurrency at once, causing the price to spike, or “pump”.
Amateur enthusiasts watching the price rocket assume that the cryptocurrency has some unique feature that will see significant use in the future and buy in. Having drawn enough buyers into a mania, those in the PnD group then sell their “bags” of overvalued currency to the newcomers.
However, pumps generally only last hours, not days. And although Verge retraced to 3 pennies, as I write the price is now above 8. If this was a pump and dump, it must be one of the biggest of all time, by a group or individual with a stupendous amount of capital at their disposal.
I don’t buy it.
But I cannot provide a rational explanation. And that unnerves me.
The fruits of wonderland
Considering the size of my original stake, my position in Verge has made a serious profit. But my ego isn’t being stroked with this one. In fact, my victory leaves me feeling on edge, and distinctly unfulfilled – like a tornado has thrown a gold bar at my feet.
As a beneficiary of this madness, I am in no position to complain. Perhaps just like Alice, if I wasn’t mad, I shouldn’t have come here.
I cashed out some of my profits – with volatility like this, there’s no saying how things will progress.
Following the spirit of the universe, I intend to spend these irrational gains, irrationally.
This irrational spending should contribute to inflation and economic expansion – perhaps this was the plan of the central banks all along!
Boaz Shoshan
Editor, Southbank Investment Research
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Category: Investing in Bitcoin