But you should learn more about it before you do
Photo by Joshua Hoehne on Unsplash
We all have our regrets in life.
I shouldn’t have given up my ticket for Glastonbury 2015 — I missed the opportunity to see the my favourite band, the Foo Fighters, playing at my favourite festival.
I shouldn’t have taken out a lease on a new Audi Q7. For three years it was like having a second mortgage to pay, a millstone around my neck. The novelty had worn off long before the car went back to the dealer.
I should have made the switch from PC to Mac a lot sooner — I could have saved myself hours in the time lost waiting for aged laptop PCs to boot up.
And I should have invested in Bitcoin sooner. If not at its inception, then certainly when I first started taking an interest in it (2017 if memory serves). I was put off as I’d convinced myself it was too complicated to invest in.
I finally got on board the Bitcoin bus this year — I feared I’d bought at the top of its bull run at $23,000 and I’ve invested little sums into it since. I still hold a triflingly small amount, but I’ve been excited by the notional 61% profit I’d have made if I’d sold at its peak, earlier this week.
What goes up…
At the weekend, Twitter (where the Bitcoin cool kids hang out) was filled with buoyant posts of optimism and excitement. The ‘laser eyes’ meme graced many a profile picture — at least it did for the bulls and the believers.
On the side of the skeptics, the mood was muted and dour.
Surely with the price breaching $53,000 and with that landmark, a Bitcoin market capitalisation of $1Trillion the bubble was well and truly fit to pop? What about more recently when it hit $60,000?
And even if it weren’t, what would be the point in investing now when the price was at an all-time record high?
Who wants to buy-high, sell-low?
High profile bulls were keen to emphasise that the time was still right to get involved. Cameron Winkelvoss made a few helpful comparisons to past innovations throughout history:
And this…
Another Tweet from Cameron Winkelvoss
And finally, this…
Just one more Tweet from Cameron Winkelvoss
His point was clear — if you consider Bitcoin to be similarly paradigm-shifting as were the first aeroplane, the first automobile, and some of the biggest tech giants, then there is never a bad time to get educated and to take a stake. It’s still early in the life of Bitcoin.
Those who take a chance on new innovations at the very start will deservedly enjoy the bragging rights and smug satisfaction that come from trailblazing (when it works out).
Those who follow along years later (like me) inevitably miss out on the early gains. They may feel scared of being late to the party, but is that really enough to convince them against getting involved?
It’s down to the individual of course.
I’m determined to be in Bitcoin for the long term and to grow my holding steadily and slowly. My natural impetuousness is held in check by a lack of disposable income to sink into Bitcoin. That said, I’m still being cautious. Being later to start investing than those who bought when Bitcoin was a few dollars or even a few thousand dollars is of little relevance to me.
What I’d actually love as a believer in the long-term benefits of Bitcoin and it’s potential, is a healthy dip in price so that I can buy more at less of a premium.
While the markets obliged on a small scale, I don’t think my dream will be coming true any time soon.
A correction in price (not a bursting bubble)
On February 22nd the price once again dipped beneath $50,000 before recovering slightly. It signalled the inevitable price correction (or crash, depending on your perspective) that seemed overdue.
Even the strongest of bull markets doesn’t continue on a steep upward trajectory forever. Markets move in cycles of up and down. This behaviour is exhibited by all assets, not just cryptocurrency. What matters most is the long-term trend (measured over years, not days or months).
It’s accepted investment logic that hardened skeptics of Bitcoin deliberately misinterpret or think doesn’t apply here. They point to its volatility (inherently a short-term feature) as a unique frailty of Bitcoin that undermines its viability as a long-term asset.
They neglect to acknowledge that Bitcoin too is best judged by long term trends. In the words of investment luminary and renowned Bitcoin skeptic, Warren Buffett:
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
His logic applies solidly to Bitcoin too. Bitcoin has gained a reputation for being the fodder of day-traders looking to make a quick buck or two, but there are many more who are committed to buying and holding for the long-term (or HODLing as it’s known thanks to a bitcoiners in-joke).
The long-term trend in the price of Bitcoin seems evident:
Source: coindesk.com via StatistaIt doesn’t mean that it won’t suffer radical drops in value in future — what matters most is the long-term trend. Institutional investors like MicroStrategy and now Tesla have demonstrated a growing belief in it as a safe long-term store of value.
Financial institutions like JP Morgan, Goldman Sachs, Mastercard, BNY Mellon and many others are joining the ranks of the old-school establishment who are jumping on the Bitcoin bus, or at least entertaining the idea of its long-term existence.
It seems to me that even the most hardened of skeptics must be struggling to maintain their ire in the light of such statements from the ‘grown ups’ of the financial establishment.
The more you learn, the more you earn
Since getting involved with Bitcoin earlier this year I’m doing all I can to get educated about the subject. It seems smart to learn as much as I can, not just about the technicalities but also to understand the opinions and arguments presented by those who love it and those who hate it. To quote another Buffet-ism:
“The most important investment you can make, is in yourself."
In the absence of more disposable cash to invest in Bitcoin I figure that the time is well-spent investing in my learning on the subject. Summarising my learnings so far, particularly regarding the criminality and environmental FUDs, and Bitcoin mining has helped me to embed that learning.
In a further endorsement of my strategy, I just listened and thoroughly enjoyed a recent conversation between Tim Ferriss and the incredible Kathryn Haun
Haun is one of my new favourite people, someone with so many interesting perspectives to share on so many subjects— she sounds like a thoroughly nice person too. In her previous life as a US Federal Prosecutor, she was involved in taking down the Silk Road, a dark net site that’s intrinsically part of the story of Bitcoin. Her knowledge and insight into the world of Bitcoin is enviable.
Her parting request to listeners was to encourage that they take the time to learn more about Bitcoin, Cryptocurrency and Blockchain technology. It echoed my own view, having dabbled in the subjects and having encountered the strength of extreme emotions that exist in the area — it seems like we’d all do well to educate ourselves about Bitcoin, whether we choose to invest in it or not.
Final thought
The conclusion of most of the stories I’ve written about Bitcoin so far has shared a common theme — the need for collective enlightenment.
- Believe it’s worth investing in? — learn more about it.
- Believe it’s environmentally damaging? — learn more about it.
- Believe it’s a tool of criminality? — learn more about it.
- Believe it’s not really a currency? — you get the picture.
The only way of gaining comfort and understanding about any idea that we want to prove, disprove or merely tolerate is to learn more. With greater knowledge and insight we are best placed to make an informed decision at least.
The alternative? To resort to mainstream media and bluster on social media and to be swayed by that.
Those who are anti-Bitcoin will feel that it’s a bad idea to invest now, either as it means buying at top dollar just before the bubble bursts. They may point to recent drops in value as a sign of bigger drops to come.
Those who are pro-Bitcoin will be convinced this is just the start of big things and that future gains are assured, just as downward movements in price are inevitable.
As a HODLer for the longterm I’m largely ambivalent about what happens in the next few months or even years. I’ll continue to buy a little each month, letting dollar-cost averaging smooth the effects of short-term fluctuations. I will secretly hope for a few drops so that I grow my holding without always buying at a premium, and will hope the long-term trend continues. If it all crashes to zero (which I don’t believe it will) then I’ll be willing to admit I was wrong and won’t have bet the farm on it anyway.
If it pays off then maybe in a few years I can buy another Audi, or even pay Dave Grohl to perform at my 80th birthday party if we’re both still alive and kicking by then!
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.