Time to buy Devcoins

I have seen it before, this steady decline in the price of Devcoin from over 100 sat to under 20 sat. In fact I distinctly remember the price of Devcoin dropping to as low as 13 sat back when it still traded on mcxNOW. My understanding is that it never dropped quite that low on Vircurex, so that was my first exposure to the concept of trading platform arbitrage.

I traded my first Devcoins for 85 sat, and the price kept going down from there until it hit its low of 13 sat.

20140514 DVC-BTC one year vircurex chartSo when it finally hit its low, I had no personal experience of the price of Devcoin doing anything but tank. One exception to that was a pump to 100 sat in mid July and a later pump to 75 sat in mid October of 2013. Both pumps very quickly came back down. I remember completely missing the first pump and not taking advantage of it, but I was ready with preexisting sell orders for the second one. I remember logging into my trading platform account one morning and finding over one BTC in my account because a couple of the orders had filled before the price dropped again. But once the pumps were over, it was back to business as usual and a steadily falling Devcoin price.

Since I’d never seen the price recover, to me it looked like it was just going to tank forever. Although I hated to sell below 60 sat, then below 50 sat, then below 40 sat, I also worried that if I didn’t sell, then next week the amount of Bitcoin I could get for my Devcoin would only be less than it was this week. I would read posts from people encouraging others to hold onto their Devcoins interspersed among the posts which claimed the end was near. Those encouraging people to hold were the ones who had experienced the price of Devcoin falling and then recovering before. Those crying over the end being near were people who like me had not yet experienced it.

20140514 DVC-BTC all time vircurex chartWhile it’s true that we can all look at the charts and determine that way if indeed the price had ever tanked and then recovered before, the chart doesn’t seem believable or real until you’ve actually had your own Devcoins which you wanted to trade for Bitcoins. I have to confess to at the very least a certain amount of failure to believe that Devcoin history could and probably would repeat itself. It turned out that the part of Devcoin history I’d missed was actually a major price hike which took the price of Devcoin to new heights, and which was waning at the time that I got involved.

Since I was new to cryptos in general, I made quite a few mistakes with my Bitcoins once I traded out my Devcoins for them (needing ever more Devcoins to get the same Bitcoin). I lost most of them in the Inputs/CoinLenders debacle. The biggest mistake, though, was that I never cashed out any of the Bitcoins so what I lost was a very near total loss. Fortunately for me, there were always more Devcoins. Now I take profits along the way so any losses, while still painful, are never total losses.

But even my profit taking has its limits. According to my Cryptsy trading history, the lowest price I’ve sold Devcoins at is 26 sat. When the time came for me to trade out some more Devcoins and ultimately cash out the profits, I couldn’t bring myself to sell at the going bid rate of 18 sat.

Instead, I have been buying Devcoins at the ask price of 19 sat.

Why am I suddenly buying Devcoins even though I earn plenty of them from writing? The answer is, in a word, experience. I’ve seen the price this low before, and I’ve seen the price go from lower than 19 sat to higher than 100 sat in a relatively short period of time. Because I’ve seen it do this before, I expect to see it do this again.

If I could be certain that two months from today, Devcoins would trade for over 100 sat, I would be very foolish to sell my Devcoins for less than 20 sat today. Going from 20 to 100 sat represents a five-fold increase in value.

The reason I might still be inclined to sell at 20, though, is that I do not have that total certainty that the price will go back up to 100 sat. Perhaps this time around the price will drop to less than 10 sat before it starts going back up again. If that happens it will definitely look more like Devcoin Doomsday for everyone who is just now getting involved, or who has only been involved for a couple months. It might even look like Devcoin Doomsday to me, because even after being involved for over a year I personally have never seen Devcoin’s price drop to the single digits. Nor has that before happened in Devcoin’s history according to the Vircurex chart.

However, since I do have actual experience with the price of Devcoin rallying from the gutter, I’m optimistic that it will happen again, even if the price does reach a new record low. And that’s really why I’m not only keeping all my newly earned Devcoins as Devcoins, but I’m also spending nearly every scrap of Bitcoin I can find to buy more Devcoins. I’ve seen Devcoins go from under 20 sat to over 100 sat in a matter of months before. If it does it again, then whatever amount of Bitcoin I spend on Devcoin today will be multiplied by five when I sell those same Devcoins at 100 sat down the road. The possibility seems too likely and too good to pass up.

I don’t have a lot of Bitcoin lying around. I get most of my Bitcoin from selling Devcoins, which means I don’t get much when I’m not selling Devcoin. However, I did make a few decent investments with previous Bitcoin so I have a couple other sources of small amounts. My main source is the Bitcoin Commodity Exchange. Although mining difficulty has gotten much worse, I have still amassed enough GHS to kick off around 0.01 BTC a day. Each hundredth of a Bitcoin can now buy me 50,000 Devcoins. If those 50,000 Devcoins then can be sold for 0.05 BTC, then at today’s price of hashing power, I can buy a whole lot more GHS down the road. Or, as is more likely, I’ll simply cash out the Bitcoin–I can’t neglect profit taking, especially when the price is right.

My goal is to save and acquire as many Devcoins as possible while the price is low, and then sell them when the price gets much better–at least 100 sat. But I want to go beyond just selling them and pocketing, spending, or cashing out the Bitcoin proceeds. Just as I’ve experienced the price of Devcoin soaring to 100 sat from a low more than once, so I am reasonably certain this will happen again, when it does happen again, I can also remember what I’m experiencing today and last summer with the price dropping all the way down to 20 sat and lower.

With that in mind, my plan is to hold some of the Bitcoin proceeds back on Cryptsy once I do sell DVC for 100 sat or more. I want to hold back just enough Bitcoin to be able to completely replace all the Devcoin I just sold by buying them back at 20 sat. Suppose in a few months I manage to sell one million Devcoins at 100 sat. I’ll leave out the trading fees just to keep the math simple. This will yield me one Bitcoin. In the past I have simply withdrawn the entire Bitcoin and then done various things with it. But the next time I’m going to only withdraw 0.8 BTC. The remaining 0.2 BTC I will tie up in a buy order for one million Devcoins at 20 sat. Then when the buy order fulfills (likely months later), I will have replaced all the Devcoins I sold earlier.

I can totally imagine the thoughts that will go through my mind as I set up a buy order of 20 sat when I’ve just sold at 100 sat. That’s one very weird thing I’ve noticed about exchange rates. No matter what it was yesterday, two weeks ago, or even several months ago, it feels to me like what it is right now is what it will always be. In other words, I psychologically find it hard to believe that the price of Devcoins can fluctuate as much as it actually does over the course of a year.

But I think I will do my best to overcome the psychology and place and maintain these low buy orders. Then I will need to just be patient and at the same time hope they never fill. Honestly I would prefer it if Devcoin maintained a steady price of 100 sat, then I could always count on my Devtome earnings to see me through. But as long as the price does fluctuate so much, I really ought to use it to my advantage. If I can replace the Devcoins I sell today for one fifth the cost, then over time, the amount of Devcoins I have to work with increases. After a few years it could get to the point where I have enough Devcoins on hand that I no longer need the Devtome earnings and can count them as gravy. It might take several years, though. This isn’t day trading. More like year trading.

One issue with the above scenario that I don’t have a good answer for yet is the question of what do I do when the price lies somewhere in between 20 and 100 sat, which is going to be most of the time. Do I sell as low as 50 sat? As low as 40 sat? When I do sell that low, then how much Bitcoin should I hold back to replace the Devcoins at 20 sat? Half the Bitcoin? Or settle for replacing a portion of the sold Devcoins? When the price of Devcoin is lower, then I need more of them to scrape together the amount of Bitcoin I want, and I probably won’t have any to spare for replacement purposes. What do I do then?

Eventually I’d like to get to the point where I don’t sell any Devcoins unless the price is 100 sat or higher. In order to also respect my policy of taking profits along the way, I would need to have enough Devcoins on hand when the price is right and basically sell all of them, then have the proceeds I designate for profit taking last a while, especially when the price starts dipping below 100. When the price plummets to below 20 I would be replacing the DVC I sold and then holding on to additional Devcoins I acquire.

I imagine that every alt coin out there which has existed for longer than a few months has or will develop similar patterns. Some people can figure the patterns out by studying the charts. I really understand it only after I’ve closely monitored it for a year as I’ve done with Devcoin. Since there aren’t any other alt coins out there which I have any desire to study as closely as I have studied Devcoin, there isn’t any alt coin that I am as confident in investing in as I am with Devcoin. I really know the highs and lows of Devcoin from having experienced them firsthand. And now I’m looking at putting that knowledge to good use–taking my Devcoin game a step beyond simply earning them and selling them to pay bills. Now I see a pretty solid investment strategy unfolding, one which has the potential to not only yield me a decent Bitcoin then fiat return on my Devcoins, but which will also keep the amount of Devcoins I have growing over time.

No doubt there will be bugs and modifications along the way, and I’m sure I won’t follow this basic strategy 100 percent. But regardless of what I do in the future, now is not the time to sell Devcoins, but rather, to buy them.

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