Ethereum For Investors #14 – What Is Our Profit Taking Strategies For Ethereum?

Tai Zen: Let’s talk about this. When will you and your buddies discuss? What’s the game plan here moving forward?

Leon Fu: My game plan is, if Ethereum goes up another 4 or 5 times, I think I’m gonna go cash out a couple. I think I put on more. Is that right, Tai? Among our friends, did I buy more than any anybody? So I’m in a good spot here.

I think I put in double what everyone else did. If it goes up like into the 30, I think we’re at 7 to 8 right now, I’m going to cash out.

Tai Zen: So right now as we’re talking, it’s at like 18 and a half mil a bit, so you’re talking about when it gets to 30 mils a bit.

Leon Fu: No, when I’m at $30. I say that in terms of US dollars because at the end of the day, most of our bills are still in US dollars. So I’m saying at around $30.

My game plan is I’m going to cash out, I would say a couple of years of living expenses. Since we’re being recorded, just whatever I’m spending every year times 2.5, something like that. Maybe a couple of years of living expenses, and then I can think about what I want to do.

It would give me the option to look for other opportunities or to travel or take some time off, it’s leaving upon for me. I would still have about 2/3 of my position. After doing that, like in the 30 or something like that.

I think that if that happens and at this rate, it could be next month. But it’s very possible, it could be in by the end of this month or the end of next month. I think that would be a good move that I could take 1/3 off.

It’s too bad because I do have a lot of faith in this project that we don’t have an options market as we do with stocks. Let’s say I need $50,000 over a year, let’s just pick a number. I don’t need it right now, I don’t really need to have like $50,000 in the bank today.

I really need it over the next year. On the other hand, let’s say this was a stock and you could buy options, you can put options on it. I would just basically say $50,000 worth to put on it and depending on the volatility of what their price that might cost me, that would lock in the price that I can tell that for the next year.

So if it goes down in value, I got my put, and if it goes up in value, I still capture all the upside minus what I spent on the put. Let’s just say you had $100,000 in stock, I really am bullish on company XYZ, I don’t really want to sell it but I want to spend this $100,000 over the next year, I think it’s going to keep going up, but it might go down, right? You can say that how much would it cost for me to buy a put option, a one-year put option and you’d have to look up what the premiums on, what is quoted at.

You buy the put, and if the stock craters well, you have your put, right? We’ll go up in value and you can sell the put rather than sell the stock. If it goes up in value or the put eventually expire worthlessly, but basically, the person you bought the puts from gets to keep your money. But you’re holding the stocks so that offsets that, I’m not saying I can do that with Ethers.

Tai Zen: So you cannot do that with Ether. So what’s the game plan is with the way you’re saying is that if it goes up to $30 per Ether, you’re going to cash out and you cash out 2 years worth of living expenses so you have the freedom to go and figure out what you want to do?

Leon Fu: What I want to do next, yes. I’m thinking that doesn’t mean I would quit my job right away, but it would give me the option to do that. That’s my game plan.

I’m just saying that hypothetically because the Ether system’s being developed very quickly right now, and in fact, somebody should just go right a smart contract to know what Ethereum is to actually like write a contract to actually do this. It shouldn’t even be that hard to write Ether option smart contract to actually do what I’m describing, I might actually even try to write it myself.

Because I am a software engineer, I spend 1 month to trusted all of us out how to write these smart contracts. Like I bet so many Ethers based on this USD price if it goes up, I lose those Ethers but if it goes down, somebody who took the other side they’ll have to pay me, and we have more Ethers.

Otherwise, he gets to keep Ethers that I give him to ensure my risk on the downside. You just have to find a way to agree on a price like how many Ethers do you want to ensure me for that risk.

Tai Zen: You know what you’re talking about here is get into the complicated stuff, complex stuff and you’re getting into the derivatives and all that stuff about Cryptocurrency so that might be confusing to some of our audience here.

Leon Fu: If that’s too much work, I might just straight-up sell them and call it a day. But I’m saying, if something like stocks, for example, let’s say you bought Tesla at $30 and it went up 10 times. Then you decided, you know what, I want to take some time off, but I think Tesla is going to keep going higher for example.

So I don’t want to give up the upside but I want to ensure my downside. Because you’re giving up a fixed amount of upside, you’re giving up what it costs you to hedge, but you won’t lose any more than that if it goes up, you see what I’m saying? The question is how much you are willing to pay for that insurance.

Tai Zen: So your strategy is a little bit complex. What was your strategy here?

Leon Fu: My strategy? Right now, I’m looking to pull out a small percentage once I reach my target price. I’ve already covered all my positions, so my target price is 102 when it gets back up to 200. So we’re not crossing that right now.

It’s been jumping around and I’ve been in and out and I made money on the upside. And then when it came back down, I bought back in and it’s going back up again, so I’ve already made money on it twice.

Tai Zen: So he actually made 2 trades on it already. So he got in at the IPO and then took profit and then when it pulled back to 10 mils a bit. He got back in and now up to 17, almost 18 mils a bit, I’ve already taken profits again.

My intention was to make more profits. It’s going pretty quick here. At that point in time, as far as all my investments in Cryptocurrencies, I’ve already covered my positions, and on top of that taking profits.

Now I’m at a point where I’m slowly playing with the markets money, I’ve already profited from my personal investments. I’m able to take a little bit more risk, there are more things happening with the Ethereum, there are more releases and I build up the structure where I feel would be a good safe point for the remainder of my investment.

Leon Fu: Do you plan to reinvest it into those profits back into Crypto? One of my colleagues at work, for example, he brought some Ethereum, only a couple Bitcoins, but he took it out and half of it, and he’s going to put that money on a house. It’s going to be part of his down payment in the house.

Is that money going to stay in the Crypto space or if you plan on putting into the stock market or putting on a house or doing something else with it or just spending it buying yourself something nice? I mean what do you plan on doing with it?

Tai Zen: Well, I don’t intend to use that money for personal living, type of stuff. All the money that comes out of that is going to be for investment purposes. I think a good portion of that is going to remain in Crypto so long as I feel comfortable with it.

So long as I feel like I’m getting information online through contacts, through just watching the market and there’s nothing great that’s coming out. Sometimes when you feel like you’ve got an investment and then you start to feel fishy about it, then you know you might be better safe than sorry and take your wings off the table.

I’m fine with that because I’m already playing with the markets money so I’m not attached to it now. But at the same time, it is still profits, so we’re all kidding ourselves to say that we’re not attached to watching that little ticker go red and green. Once you got money in the markets, they’re pulling your emotions with it.

Leon Fu: You’re not going to convert the Bitcoins to cash, to US dollars? Like you sold Ethers for Bitcoins and they’re going to stay in Bitcoins, is that what it is?

Currently yes, but there is some point where until the Cryptocurrencies are at solitude. Right now they’re all very volatile, they’re all moving. And even if Bitcoin is slowed down and settle down a bit, it’s still on the move quite a lot more than the currency market like dollars, the answer for standard currencies.

So I think that until the Bitcoin market, the Crypto market, not in terms of stability, but in terms of reliability. There’re a lot of people that are still very skeptical about having something that’s not tangible. And the further it gets away from being something we can hold in our hand, the more likely it is that people are afraid.

Some people are not really technologically advanced and their knowledge of how the technology works. Let’s say they make something that’s solely on the computer and then their computer crashes, they can’t access their keypad or whatever their password manager is. Now they have no way to access anything.

So there’s a lot of people that like to have things in a tangible form and until the Crypto world reaches some kind of level where the average person can have that kind of reliability in the Cryptocurrency just like they have it in a tangible dollar bill, then I think there’s going to be a lot of reluctance. That’s my personal take on it. At some point, I do view it as an investment.

Secondary, I view it as a currency. So the investment party is when you make a good trade in the stock market, whatever you have, it was an investment. It’s not cash until you close your trade.

Leon Fu: You sold Ethers for Bitcoin but you haven’t sold your Bitcoins for US dollars yet. I mean you haven’t completely closed out your trade. It’s still sitting in Bitcoins, Bitcoin could crash tomorrow.

Tai Zen: That’s what I’m coming from. I think there’s a lot of levels of this game that people have to think about when they’re getting involved in it, that’s just my personal view.

I view it as an investment first, as far as progressing to be the currency that we use every day and that the average person uses, we still have a way to go for the average person just doesn’t have access. They may have their iPhone, they may have a computer. How many people do you talk to on a daily basis that are new conversations?

Leon Fu: They have no idea of what Bitcoin is. I think 2 years ago, 3 years ago when we first started getting into this, as no one had ever heard of it. Now I think today it’s on CNBC, it’s on Fox News, it’s on CNN, I think people at least have heard of it now, but they probably don’t quite know what it is yet, or they know it’s some kind of internet magic.

They know it’s some kind of magic internet money. But that’s changing, that’s something you can actually take your Bitcoins and turn them into a Starbucks gift card and go buy yourself a coffee at Starbucks with it.

You can buy anything on Amazon at 20% off or more on first.io, you can put your Bitcoins up for sale on BitQuick and then somebody will go and deposit dollars directly into your bank account.

Tai Zen: Everything you’re saying right now is the reasons that I feel comfortable, we still leave them in the form of Bitcoins. So that’s like the base Crypto that myself, but other people also trade and they will invest in other Cryptocurrencies, but it always comes back to the base.

Just like the original model, I’ll say you’d have US dollars or whatever dollars in a bank account, and that brokerage account would go in and enter the stock market, and then exits the stock market into your brokerage account. So for my purposes, Bitcoin is my broker account.

Leon Fu: Basically your equivalence of cash at this point, even though it’s way more volatile and like you could be our currency. It’s still way riskier.

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