I need to apologise for the lack of blog updates recently. So much has happened in the last few months with the launch of my podcast, the building of my mining rigs and starting a crypto company with my best buddy. It has been a hectic time, and the blog has suffered. I have now put in place a structure to ensure that there are more regular updates and my old friend Tom from school is helping me out with this.
So the last two weeks have been pretty grim, but I wouldn't be doing all of the above if I wasn't bullish about Bitcoin and Crypto. With the price of Bitcoin falling and pulling the rest of the market down with it, more than a few friends have been messaging to ask me if Bitcoin is over. My answer is always the same – “I’m not selling.”
Am I worried about the price at the moment? No.
Are the price drops and the impact on my portfolio annoying? Fuck yes! I am annoyed at myself for going against one of my fundamental trading rules, trade without emotion. Things were so good during December and early January that I drank the Kool-Aid myself and dreamed of a $100k Bitcoin. The signs were there to take profit, and I didn't.
Just look at the chart below, the price went parabolic and was clearly overbought, and we know what always happens when something goes parabolic in Crypto right? It corrects.
While I diversified into mining when Bitcoin was at a high price, phew, I should have taken more profit off the table. I didn't, and I can't do anything about that now.
So what then?
The fundamental reason why I invested in Bitcoin and other Cryptocurrencies hasn’t changed. Quite simply, the goal was always the creation of wealth and freedom. Yes, of course, I think the tech is cool, and yes, I love the fight against banks and big government, but in all honesty, this is how I earn a living and price is critical. If you bought Bitcoin in late November, you might be worried. If you bought bitcoin on the 16th of December, well this is an expensive and painful lesson indeed.
As I see it, either one of two things is going to happen:
- Bitcoin and Crypto are over, and we will never see a new all-time high
- The market made a parabolic move and is correcting
I'm going with 2.
You can't undo the blockchain, and you can't divorce Bitcoin from it. Investing in Crypto is a speculative bet on the future of money and tech, either it will change the world or it won't. My investments are speculating that it will. If it succeeds, then a total market cap of $400bn (today's retraced amount) will seem relatively small, it will be a multi $trillion market. As such, I accept market volatility, I accept corrections, and I accept the risk, and I do so over an extended timeframe, 3-5 years.
So when friends are asking me for advice, it is the same as it always has been:
1. Do not invest more than you can afford to lose
Why does everyone in crypto-land give this advice? Because very simply, you could lose it all. That’s obvious, right? But more importantly, when the market acts crazy, it’s human nature to react. When it’s going up we all get super excited: “It’s going up forever, I’m never selling, Lambo, Lambo, Lambo!” When it’s going down, we panic: “Oh no, sell, sell, this is awful, panic, fuck you Crypto!”
2. Markets are simply a reflection of human reactions
Borrowing money to get into crypto is dangerous. If you need access to this money at a specific time, then this is dangerous too. Putting in your £1,000 rent money hoping it doubles could land you in serious shit if it drops 50% during that month. If you took a big gamble and remortgaged your house or invested your kid's tuition, well, you're an idiot. You won't sleep, you will probably panic and play right into the market makers hands.
3. Invest, don’t trade
Trading is bloody hard. Markets are scary, and the majority of us don’t have a clue what we are doing. They are manipulated by powers bigger than us, and however hard we try; they are hard to predict and designed to make us buy and sell at all the wrong times. So just buy a few assets and hold on to them. I don't know a single trader who hasn't learnt painful lessons when their own emotions are tested, especially when their lives are already busy with jobs, girlfriends, wives and all the other crap we have to deal with on a daily basis. Trust me, I know, I lost £20k leverage trading tech stocks a couple of years ago after getting lucky for a few days. It fucking hurt.
4. Go long
And I mean really long. Think three to five years. Why? Well, as I said before, when you invest in crypto you are essentially betting on cryptocurrencies becoming established SoVs (Store of Value), MoEs (Medium of Exchange), and the protocols and decentralised apps going mainstream. They either will fulfil their ambitions, and you’ll be rich as they rise in value, or they won’t, and they’ll be worthless. See point 1 - if it fails, well, you lost some money you could afford to lose.
So in summary, only invest what you can afford to lose, and ignore it for a few years. Simple right? The problem is we humans don’t listen, and we are greedy. We get FOMO, and we do stupid things. All of us, me, you, even the best investors and traders out there.
Take for example the investor who buys BTC at $10k. They probably accept that it might go down to $8k, but when BTC soars up to $20k and then drops back down, they start to panic and sell at $11k. They might even sell at $9k thinking it’s going to keep tumbling but then buy back in at $11k when it starts to rise again. This is human emotion at work and pro traders getting you to do exactly what they want.
Warren Buffet quote alert.
"The stock market is a device for transferring money from the impatient to the patient."
Yep, this happens in Crypto too, and these markets are filled with people who have deeper pockets and more patience than you. If you are thinking of selling, then ask yourself this, do you think Bitcoin has peaked? Do you think that is it? If so, why didn’t you sell at $15k? Or $20k?
So however hard it is, try to follow the rules, not your irrational emotions and not just my rules. These are ones which work for me, find ones which work for you and stick to them. The rules are there for a reason. These are extremely volatile markets, and markets are not designed to make it easy for you.
So why am I so bullish?
1. We need global currencies
We live in a globalised economy so why should we not have global currencies? We need machine to machine payments and the ability to move money around the world at speed, yet we still have sovereign currencies, exchange rates and slow bank settlements.
The Euro has made it fantastically easy to spend money across Europe, but there is no global currency. Why? Because it’s not in the interest of the powers that be to do so. Whoever controls a trade-currency, controls trade. America spent the 20th century shoring up the dollar as the global currency and petrodollar, and now China is having a good go of wrangling it off them. Neither dominant financial superpower has the will or desire to create a globalised currency, and who would trust it anyway.
The only way to have one is for it to be decentralised. It is natural and inevitable that it will happen as the financial industry catches up to the global economy.
2. Bitcoin is a store of value
Stores of value come in many shapes and sizes. Small square sticky labels with the heads of state printed on them are stores of value. Lots of people trust their value to be stored in big lumps of yellow metal found in the ground, that is then dug from the ground at enormous cost, melted down, then stuck in big vaults under the ground.
Have a look at the 10-year gold chart for a roller coaster ride. Is FIAT money a safe store of value? Ask people from Greece, Venezuela or Zimbabwe how they feel about that? The Egyptian pound fell 59% in 2016; fuck even the British pound fell 17% in the same year. So yes, BTC has volatility but so do all stores of value. BTC may have some whales pulling strings but, it is less likely to be impacted by one nation state or one organisation than many other traditional SoVs.
Also look how easy it is to divide and transport. Ever tried to cut a bar of gold in half or move $500m of it across the world? Even if you find a pilot which will take it, will that plane get off the ground? Everything is digital these days, like one investor I met the other day said: "When we are flying around in our Millenium Falcons, do you honestly think we'll be using lumps of yellow metal as a store of value?"
3. First-hand experience of MoE
On a personal level, buying $240,000 of mining gear from China using crypto was a great experience. Transaction and receipt within ten minutes. Can you imagine doing that with FIAT? Can you imagine all the questions you would get from the bank? I got 20 questions the other week when I withdrew £2k to pay the plumber.
The naysayers say that utility isn't here yet; they say that people aren't spending crypto. Seriously? Have you not noticed the mass of transactions every day with people using Bitcoin and Ethereum to transact on crypto exchanges? I am now paying for the majority of my costs for my crypto business with crypto. Paying for my mining power in Crypto is far easier than with the dollar. People are spending Crypto; this is the start, and broader use will come with adoption and infrastructure, but this takes time. We are building an entire new decentralised fintech system and layers of protocols, have some patience dude.
I am bullish; I am bullish because the use cases exist, which is why my original points matter. Focus on the long game, don’t get too emotional and don’t invest more than you can afford to lose. Bitcoin might go down to $6k, and if so, so be it. It may also go to $60k or $600k one day, and this is a bet I am happy to make.
If you’re here for short-term gains, then good luck – it’s harder than you think!