Readings Digest 7.12.17: I Bought Some Bitcoin

I finally did buy me some Bitcoin! Not a lot but just enough to get me a piece of the Bitmania. I just opened an account at Blockchain.com and after a few easy steps, the account was up and running. I bought 0.002 Bitcoin. Who knew, you do not have to purchase a full bitcoin but a fraction of it?

I actually bought it last month and since then, it has been up more than 100%. I feel like an investment genius with the wonderful foresight I had. I can go on a celebratory dance, start a blog dedicated on how to be a millionaire using bitcoin and post all on all my social media on how Bitcoin can make you rich.  But I only know too well this is not about being an investment guru. I am but a learning investor. Did I buy it so that I can be a millionaire soon? Not at all! I bought it not for investment purposes but to get a feel of how it works. Call it speculation.

You see the challenge with such short term investment successes is that they make you feel like a genius. I have read on professional investors being derided for the words of caution they provide on Bitcoin as the price just keep ticking up. Truth is many have made a fortune on Bitcoin and other cryptocurrencies and those sitting on the sidelines feel like they are missing out especially when you see articles titled “if you had invested….you would be having…”  The pain of missing out gets so high until you just say, let me click and buy and make some money too! The fear of missing out is compounded especially since only an hour or so after you choose not to invest, it moves up by 1,000 dollars or more. So you get in at the higher price.

“Somewhere, right this very moment, an investor you know of is having more fun than you. He has just made a lot of money – more than you – thanks to the graphite electrode stock he owns. And you just missed out on it. Not just that, you realize you have missed out on so many other stocks that others own and are making tons of money on, and you aren’t. In fact, you may even know of someone who owns all the stocks that are rising, and you are cursing yourself for not being that person, plus envying him. ” Vishal Khandelwal

The big investment banks and institutional investors are also lining up for a piece of this cake. Next week sees the launch Bitcoin futures for you to trade. Some large investors are piling their cash into Bitcoin too. As renowned blogger Josh brown expounds, it used to be that investment banks are the first to find Gold and then they let in the masses before the bubble bursts. But this time round, the regular people got to the pot of gold first and now the corporate investors are rushing in.

Advertisements on Bitcoin are everywhere now.  Everyone on social media seems to be commenting on Bitcoin these days and the number of experts on Bitcoin has proliferated. No sooner have I logged into Facebook or Twitter these days than  I get bombarded with comments on Bitcoin. It feels like you are the only one missing. The thing just keep hitting fresh highs every hour now down from days a while back. More people are piling into Bitcoin now. Just yesterday, the volume on the Bitcoin ETN Tracker 1 surged past 1 million transactions for the second time in a 9 days. Many people are joining the party. The most-downloaded iPhone app in the US right now is Coinbase. Reality check: You are not the only one thinking of investing in it. And we are truly in the midst of the greatest investment craze of our time truly. As one commentator puts it, Bitcoin is the millennials’ gold.

Meanwhile, security continues to be an issue as hacking continues to be a problem. This week, hackers managed to steal $70 million worth of Bitcoin from NiceHash a Bitcoin mining company in. One young man who had been holding almost 6,000 Bitcoins since 2013 had his Bitcoins stolen and had been beating himself up as he saw the price rise and in the end, he sadly chose to end his life.

“Missing out on the glitter is fine guys….If you have been in the stock market for long, you may have witnessed people who had never invested before piling into stocks, unknown and unworthy, just out of the fear of missing out. If yes, you also know how that ended.” Vishal Khandelwal

“It’s okay to miss out. You cannot lose your mind over an opportunity that zooms past or become upset every time you see other people making millions of dollars.” Josh Brown

History suggests that this kind of investing frenzy might not end well for many. Prices cannot keep rising forever but it is really hard to know when the prices will start falling At such peak periods of interest, many people rush in to buy the asset without knowing what it really is. People tend to take on more risk when the markets have performed well and sometimes by the time most people jump in, the easy money has already been made.

I spent some time this week with Frank Schuil, CEO & Co-founder Safello, who launched a fund that invested in Bitcoin back in 2013 and who is one of the most knowledgeable people I have met on Bitcoin. His assessment is that of the many cryptocurrencies out there, many will flop and some will remain just as many companies failed and some remained around after Dotcom Mania at the turn of the century. It is just hard to assess which ones will or will not succeed. I picked from him that the underlying technology called Blockchain is here to stay as it is game-changing. He cautioned people to read more and spend at least three months digging in before investing.

One has to spend a lot of time understanding something before one invests in something is key if you are going to put your money in it. Being cautiously optimistic might help here also. Temper some of that optimism. If you are going to be investor in Bitcoin, bette be an informed one who understands what it is you’re putting your money into. I close with another quote:

“Anyone who tells you they know where this thing is heading, how to value it, where it ends, etc. is nuts. No one has a clue. This is everything you’ve ever read about the markets all wrapped into one — FOMO, supply & demand, human nature, behavioral biases, volatility, booms, busts, uncertainty about the future, etc. It’s impossible to offer investment advice on something like Bitcoin so I’m not even going to try. This is all so new and foreign to everyone that we’re all just are making things up as we go. Regardless of how it all shakes out, I for one am enjoying the show.” Ben Carlson

Enjoy the show and Invest at your own risk.

Here are some material on Bitcoin and cryptocurrencies that I have found useful in reading on Bitcoin mostly from an investor’s perspective:

1. Hash Power: A Documentary on Blockchains & Cryptocurrencies
2. Chain.Org: A Letter to Jamie Dimon
3. Money and Banking: Bitcoin and Fundamentals
4. Reformed Broker: It just got real , The Case for the bankerless Bubble and Tales From The Crypt
5. Ben Carlson: How Does Something Like Bitcoin Happen?

Sometimes what you need is to tear everything apart and start all over again: A full reset

“Anything that evolves – markets, technology, careers, etc – has to be approached with the mindset that once-great ideas can expire, and when they expire you’re better off walking away rather than attempting to repair them.”

The best place to work combines great teams and a great market.

“Go work at a company with a great team and terrible market for 6 months. Realize that markets sadly matter more then teams in terms of success. Then go work at a terrible company in a great market for 6 months. Realize that markets sadly matter more then teams in terms of success. Finally, go work at an early Google or Stripe and watch magic happen.”

Consider allowing teams to voice dissent but encourage them to commit to the decision they made.  “First, expecting and demanding teammates to voice their disgreement. Second, no matter their point of view, once a decision has been made, everyone commits to its success”

Morgan house argues that we are all innocently out of touch with what others are going through and what makes them who they are: “I don’t have to understand your investing views. But I have to understand that you’re an equally influential part of the economy, and I’ll come closer to understanding your actions by asking what you’ve experienced to make you believe your views, rather than wondering why you don’t agree with mine”

“Basically both the boom and bust were a function of people’s attitude and emotions. This isn’t the answer investors would like but beyond all of the market and economic indicators, it’s likely that simple. Things went too far in both directions because people tend to extrapolate and go overboard. That’s just how we function in large groups. Both the slumps and the prosperity become exaggerated because of this.”