My Analysis of BTC/Crypto - Need feedback

[miner2002]

For the record, I have only been researching bitcoin/cryptocurrency for 4 days. Below is my analysis of what I believe are the key positives/negatives, and how I plan to trade based on those.  I would love some feedback and for people to point out flaws in my analysis.

In short:
I believe in the long term potential of crypto currency.  There are some potential negatives, but in some form or another I believe crypto will serve a material role in the economy.  I believe we are still VERY early in the world of crypto. The total crypto market cap is 10billion (ish), which is frankly nothing, so I think we're still in the "early adopter" stage even if people have already seen huge returns.

I am not smart enough to trade the market.  Based on my belief that crypto will have a long term role in the economy, my goal is to acquire coins and hold for the long term while reducing the risk of picking the wrong long term winner.  Essentially, I want to pick a strategy that will diversify my holdings among coins knowing that many (and potentially all) of my investments will be worth nothing.  If I invest correctly, and crypto really does take off, those few investments I held long term that were correct will more than offset the loses.

Long version:

BTC  Advantages:
    -No central control over the currency.  Once you have crypto-currency, you control what you do with it
    -Money can be sent anonymously
    -Money can never be frozen or taken away from you
    -3rd world countries with little to no banking access can now transact among themselves and hold currency without the need for a bank
    -Money can be sent all over the world instantly
    -Lower fees will reduce costs for business and lower cost of goods
    -If/when people lose faith in Fiat, crypto will be an extremely natural alternative.  If we get another Cyprus situation, why wouldn't you put your money into crypto? Better risk than leaving it in the bank
    -People who are not getting returns via stock market, etc will be looking for yield, if crypto continue to soar people will jump in
    -There is a natural floor in crypto due to illegal/other types of services. IE drugs, prostitution, hiding assets from a spouse, etc so there will always be some kind of future

Issues facing bitcoin/crypto:
-Government regs (minor risk)
-Large scale competitor enters market (google decides to make a coin)
-Large scale miner (google decides to dedicate a fraction of their power to mining all coins)
-Mainstream market never adopts crypto fully so it's never a transactional currency
-Mainstream market loses faith in the crypto as a currency and it solely functions as illegal/etc types of transactions
-Someone break the encryption / somehow the system doesn't work the way everyone thought and fails entirely

Trading Hypothesis:
-Crypto is still incredibly young and not established.  Bitcoins are more of a store of value than an actual transacting currency.  As cryptocurrency grows, there will be other coins created that lend themselves more towards mainstream transactions.  I believe bitcoins will exist as a store of value (essentially gold), but other crypto's will take over the market because bitcoin can't handle becoming the main stream option for a number of reasons
-Crytocurrency will be used long term in the future in at least some capacity
-Other technologies/coins will likely replace or work beside BTC, need to diversify across coins, but keep bulk in the larger cap coins to reduce risk.
-Buy and hold rather than trade, you could trade yourself out of something that soars and then never be able to get back in at those prices (happened to people in BTC at least so far)
-As the market matures and there's a steady and safe way to get funds in and out of btc/alts, that will substantially increase market cap

Trading Plan:
-75% of purchased coin needs to be in top 10 market cap coins, if a coin falls off don't sell just continue to purchase top 10 until you get the % back in line
    -25% BTC
    -50% other top 10 market cap coins
    -25% alt/speculative coins
-Get into some Alt coins, highest chance for some profit and prices are low so could hit some lucky wins (99% will probably be worthless)
-mine the coins that are easiest to mine with the most potential. Alternate each month/after a big block so that you can build up coins across the board.  (Note: Using high gaming computer to mine, not large scale mining)
-Keep cash in reserve for big BTC price drops

If a large profit in an Alt coin?
Take profits equal to what was invested and move to new investment (new coins) and let the balance ride

[digicoin]

>> -Large scale competitor enters market (google decides to make a coin)
>> -Large scale miner (google decides to dedicate a fraction of their power to mining all coins)

Google will use their CPUs to mine Bitcoin? Good luck to them. If Google wants to spend money building ASIC, that's a problem. However, it will trigger a race in the market. Price will skyrocket.

>> -Other technologies/coins will likely replace or work beside BTC, need to diversify across coins, but keep bulk in the larger cap coins to reduce risk.
I believe that big network effect is what Bitcoin owns right now. No altcoin has such a advantages. LTC?

[digicoin]

>> -Someone break the encryption / somehow the system doesn't work the way everyone thought and fails entirely
Bitcoin algorithms can be changed. If needed, the core developers can hard fork the block chain. Is that a problem any more?

[miner2002]

>> -Someone break the encryption / somehow the system doesn't work the way everyone thought and fails entirely
Bitcoin algorithms can be changed. If needed, the core developers can hard fork the block chain. Is that a problem any more?

This is one I just haven't researched enough. I have no idea what's possible, it's just in the back of my mind since I don't fully understand yet how it works.  With that said, it's concerning the the "core developers" can still have an input. I was under the impression that once a crypto was put into place, it just ran it's own course with no input.

[Mylon]

No its still being actively developed. However any change in the code, that changes its core principles. (or is trivial in any matter) Needs consensus before implementation.

For the rest I think you got most points complete, things to keep in mind, the network effect is important to these coins, so the bigger network affect, the better the coin.

Personally I at the moment still would go 40% BTC 20% LTC 25% other top ten marketcap coins 15% pure speculation. Also whenever a coin start decently picking up I put an equivalent of 100 BTC at max coin in several cold storage wallets. (for example, the 100 btc equiv. of litecoin is 400)

These are my "backups" these will never be traded, and I expect 90% of these to be worth nothing in the future. (hence buying as cheap as possible) Everything else I have, if a coin is seeing a major drop (50% or more) I start considering selling them off. (especially when they still have profit)

Also keep in mind, any crypto currency is still a high risk investment, advised is to never put more than 10% of your net worth in it. (absolute worst case scenario, it could all be worth nothing tomorrow.... then again... that kinda counts for fiat too...)

[niothor]

BTC  Advantages:
    -No central control over the currency.  Once you have crypto-currency, you control what you do with it
yes
    -Money can be sent anonymously
not quite , it is semi-anonymous
    -Money can never be frozen or taken away from you
frozen no , taken away yes
    -3rd world countries with little to no banking access can now transact among themselves and hold currency without the need for a bank
i'm sure you refer to the people in those countries , not to the country itself , so yes
    -Money can be sent all over the world instantly
yes
    -Lower fees will reduce costs for business and lower cost of goods
yes it means lower fees , but will the merchant lower the sale price? it's the economy and the competitors that will dictate this
    -If/when people lose faith in Fiat, crypto will be an extremely natural alternative.  If we get another Cyprus situation, why wouldn't you put your money into crypto? Better risk than leaving it in the bank
well , in Cyprus actually very few is any bough bitcoins , most bought goods or jewelry
    -People who are not getting returns via stock market, etc will be looking for yield, if crypto continue to soar people will jump in
There is no cap in the stock market you can trade what you think it's gonna rise next , while bitcoin will have a cap where it won't go any further
    -There is a natural floor in crypto due to illegal/other types of services. IE drugs, prostitution, hiding assets from a spouse, etc so there will always be some kind of future
yeah , the usual fud , and I never saw escort services accepting bitcoins

[lambdaE]

The truth is that we are witnessing a real revolution that will change, first of all, our perception of money and the whole paradigm of our perception of them. If we are talking about bitcoin price fluctuations for days on end, in response to the bad mouths that will come up with the bubble-ready version, in terms of medium and long term, Bitcoin is one of the very few entities in the financial world that have had exclusively positive randents and increases of at least four figures from one year to the next.