The Breakdown

Explaining Southern California's economy

How I became a Bitcoin trader

Mark Scott

Readers of DeBord Report will know that I've become embroiled in a controversy/experiment involving Bitcoin, the cyber- or crypto-currency that's captured the hearts and minds of some passionate supporters in the technology world. In response to some commenters on the posts I've written so far, I decided to buy and trade some Bitcoin, just to see how it would go.

I suppose I could call this "Bitcoin Challenge" to parallel the "Bike Challenge" I'm also currently engaged in. 

There are some superficial similarities. I haven't ridden a bike anywhere in more than a decade. I've also never traded currencies — or much of anything else.

However, my sideline career trading BTC is off to a decent start. I don't know why, but the price of Bitcoin has been headed up of late. Because this is just an experiment and not an attempt to make real money, a few weeks back I purchased $10 of Bitcoin. I bought BTC at $3.90 and, a few minutes ago, sold it at $5.40. 

I wound up making $3.70, roughly, on the trade, after the fee charged by Mt. Gox, a Bitcoin exchange. I had to make the trade because I'd set a conservative 20-percent return objective and an optimistic 25-percent objective. A return of 37.5 percent meant that I'd beaten my optimistic goal by more than 10 percent. Just for some perspective, the total real return in the S&P 500 since the 1950s is only 7 percent.

Also, as you can see, I picked the $10 amount initially because it makes it easy for me to do the math. 

What I'll do now is wait until the price either falls to my previous 25-percent goal and reinvest the original $10; or if the price keeps going up, I'll bank the original $10 and invest the $3.70. This will enable me to devise a sort of long-short position — I don't know if you can trade BTC short on Mt. Gox — by putting my profit at risk and letting the $10 sit around waiting for the price to fall to jump in.

I welcome anyone who wants to pick this strategy apart to do so because I have no idea what I'm doing...for now!

Follow Matthew DeBord and the DeBord Report on Twitter.

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