A Healthy Mental Philosophy for the Newcoiner – Sean Arthur
How to invest in Bitcoin without wreaking yourself.
I know what you’re thinking, yet another goddamned story about Bitcoin.
Well, yes, it is — but hopefully I’ll be taking us both in a different direction from the standard rocket to the moon, Lambos, price predictions and weird technical analysis that is complete waste of time. On the off chance that you do want to engage in any of the above, I suggest following a more productive use of your time, (or perhaps less productive depending upon how you value your time) and to haunt Reddit or YouTube. For myself, those Wizkids on YouTube sharing their “knowledge” on Bitcoin has burnt more people on the subject of cryptocurrency than any other single factor that I can think of.
Nor will this be a heavy philosophy about Bitcoin, or exploring the great social and cultural benefits that will probably flow from this new idea years into the future. While I agree with the sentiments that many hundreds of years of failed monetary policy has fiscally enslaved ordinary people and undeservedly enriched the plutocracy, that is a subject for another time. Nor am I an expert on the technology. I’m definitely not considered to be a crypto expert or authority in any way. If you wish to learn more about the liberating nature of Bitcoin, I would direct you to anything produced by Andreas Antonopoulos. Today I just want to talk about my experience and learning and it is mainly directed at people who wish to dip their toe in the water. Because in many ways delving into cryptocurrencies can be the first step of madness. There are healthy ways of sliding in and there are dangerous practices. This is not financial advice; I don’t do that. This is just common sense.
I first became interested in Bitcoin about 2015 and the price wasn’t part of my thinking in any shape or form at that stage. Back then the price was about US $230 per coin which is a far cry today’s price (about $11,000 more.) In general, I’m reluctant to nominate prices in the story because Bitcoin’s volatility makes the price nonsensical at any given moment. Suffice to say that in four years Bitcoin’s price increased 11k (not mentioning that it doubled that price in 2017, reaching almost $20,000 USD).
Back in 2015, I read quite a bit about what Bitcoin was trying to achieve. But I was very skeptical because it had a bit of a hippie vibe to all suggesting peace, love and escape from capitalistic servitude. I have been a bit of a lefty socialist my entire life and I am genuine in my despair about how the poor and the lower middle classes have been disregarded by the system. I believed then, and I still do today, that cryptocurrencies have a strong libertarian streak about them. The danger is that one greedy capitalistic class may just replace another. Back in 2015 I decided to hold my fire and keep investigating. In time Bitcoin fell into the background. The price was stagnating but that’s not why I lost interest – the project itself seemed to be going nowhere. It wasn’t Bitcoin’s fault; it was my own lack of imagination. Other people, some very bright people, had never lost faith and were working very hard in the background all the long lost years of Bitcoin’s history since 2009.
It would be another 2 years, in about May 2017, that my interest rekindled. Like every thinking human on the planet I noticed the price just jump and jump. Something was happening in that world but I had no idea what was. I investigated how to get involved and I made my first $100 test buy in September 2017. The price of Bitcoin during that period was just over $6000. Then for the next few weeks as my confidence grew I made more and more small purchases. By the time I really started to take an interest, the damned coin was outstripping my ability to buy it. It was on fire and the price started to be ridiculous. Just prior to that my wife began to get interested and she was contributing as well. It got to the point where owning an entire Bitcoin looked beyond our ability to acquire. In the cryptocurrency world, you will often hear the statement “never buy more than you can afford to lose”. This is not an empty mantra, it will save a lot more than just your money if you follow it to the letter. My wife and I considered, in a very real sense, that every cent we invested in cryptocurrencies was lost to us forever. What that mindset you cannot go wrong because if you mentally believe that you have flushed money down the toilet, and instead it gets returned to you with interest, you’ll never be disappointed. Principally you have to remember every day that your investment could, and possibly will, be lost.
Back in 2017, I wasn’t anywhere near as Zen as I am now. Unfortunately, I’m human. When the price of Bitcoin kept jumping and jumping it boggled my eyes as much is any other Newcoiner. Somehow, we had accidentally latched onto Magic Internet Money. While owning an entire Bitcoin was definitely beyond our reach, our investments were tripling and even quadrupling. We also began to dabble in altcoins believing that while we had missed the boat on Bitcoin, possibly one of these newfound alternatives might hit the mark? It shames me to think how we not only ran out into the minefield but we also kicked every bit of protruding metal we thought we could see. Still nothing blew up and our “investments“ were still pretty small really – so no harm, no foul. What shames me to think is not that we made those investments, it’s just that we abandoned all our steady research and jumped into the gold rush.
In many ways, what followed after the all-time high a week before Christmas in 2017, was the best thing that could ever have happened to us. Bitcoin almost touched $20,000, just shy of it. Then it started to drop — and it kept on dropping. My wife and I decided to follow the advice that we have been hearing over and over again “don’t invest what you can’t afford to lose”. Mentally we considered our entire cryptocurrency investment lost, though technically nothing is lost until you cash out. We were against cashing out, because in those long dark days of crypto purgatory, a magical thing happened. While the price of Bitcoin was interesting to me, I began to have faith in the technology itself. During those long months I started to research Bitcoin properly. Every week the price dropped further down and the less interested I became in the price. Mentally we adjusted. Our investment was in the toilet, so we had nothing much further to lose.
At last, and for the first time, I read Satoshi Nakamoto’s White Paper on Bitcoin. I actually read it probably about a dozen times. If you read it yourself you will notice that it is both technically dense and also, weirdly, easy to understand as a concept. You don’t have to be an IT professional to understand what they are trying to achieve. You will need quite a bit of effort in understanding how they are going to get there. It is not the scope of this story to enter into the technical details. You shall also have to do the same yourself and learn about the blockchain technology. In in doing that that you will also have to learn about Satoshi Nakamoto, the mythical person or group who first had the idea about cryptocurrencies. More importantly why he, or they, saw that it was important for the project’s future development but also in allowing people to uncouple their own money from government and institutions. In doing this research I liberated myself from chasing crypto price and started believing in the project. That said, prices are very important in that it motivates mass involvement. I understand this now, price is the steam that drives the engine, but engine is the most important bit.
So, we watched Bitcoin’s price crash from almost $20,000 in December 2017 all way down to $3400 February 2018. I can honestly say that were completely detached and it seemed that while the entire cryptocurrency world was losing their heads in a chicken abattoir, we felt like we were looking on, uninvolved, through a window. I believed in the technology, I believed in the project, and the fundamentals were still very sound. The price dropping through the floor was a market failure completely divorced from what was happening in the background. Extremely hard work was happening by very talented people and utility adjustments such as SegWit and the Lightning Network were being bolted on, fixing problems that have been caused, in part, by the boosted popularity of the coin.
Also distressing was the infighting and hatred generated by partisans on every side of the cryptocurrency world. If you enter the space you will soon discover that there are many other people who promote their particular crypto by attacking others. In a way this negative action is even necessary to protect Bitcoin because an attack can come from any direction, even internally. If Bitcoin cannot withstand attacks including, Fear Uncertainty and Doubt (FUD), then it is destined to fail anyway. Any ecosystem that is financially incentivised will bring out the worst in human nature. My advice is to read the fundamentals and if the project is worth believing in then disregard the naysayers. For they are financially motivated to bring down your project. That is not the say that you should ignore alternate advice, but you should ignore it once it has been disproved. Do this because it is never, ever going to go away. You’ll hear the same nonsense 10,000 times and after that 10,000 times more.
Apart from the many internal crypto critics, the established financial institutions will come after you. Not you personally, but for the Bitcoin project. This is because if Bitcoin succeeds in its potential, they will have failed and possibly will crumble at some point. Any education into Bitcoin should first start with how existing banking and financial systems work today. I’m not even suggesting you look at banking institutions with a jaundiced eye. Just see how they work as they do now. Money is created out of thin air, governments do not have their paper currencies backed by gold or any other physical value. Big companies exist in a world where debt can be inflated or it can evaporate or get passed around like snacks at a party. Do ordinary people benefit from this situation? Don’t think so.
Anyway, what is so scary about a peer-to-peer transfer of money for an ordinary person? If I owe you $50 and I send you that money directly how can that be terrifying to either of us? But, do you know who does find that terrifying: banks! If you take the blinkers off you will increasingly see that banks, governments and financial institutions have inserted themselves into every single transfer of funds. Even in our everyday and established “cashless society” I cannot even buy a coffee without involving a bank. These financial institutions take a cut from every single transaction. This is why a peer-to-peer cash transaction that doesn’t involve government or banks is truly scary to them. This is why Satoshi Nakamoto came up with the idea of Bitcoin in the first place and why thousands of people around the world have been pursuing this project ever since.
Back when Bitcoin was hitting the $20,000 mark you could not read a single news story without seeing how cryptocurrency was destroying the world through runaway electricity demand. This was a joke given that capital’s classes have never cared one iota about protecting the planet. Suddenly banks became a self-interested version of Greenpeace. If it wasn’t that it was about bubbles, Ponzi schemes and tulips and how Bitcoin was the worst of all frauds. Banks, governments in the media railed against Bitcoin uses as predominantly for drug traffickers. It was impossible to go over the top, the hyperbole against Bitcoin was the norm. You can guarantee it that should Bitcoin ever become as popular as was in late December 2017 you will see more of the same, but on steroids. The establishment hates the idea of a currency that is not washed through its own grubby hands. It will attack it tooth and nail, but Bitcoin was designed to resist such attempts.
But that is not to say that the establishment has not had a few wins against crypto. You would look in vain through Satoshi Nakamoto’s White Paper for the existence of Bitcoin exchanges. These capitalist creatures have developed and flourished in the crypto space. They are banks in any other name, and like banks they get their cut of any transaction in a number of different ways. This is scarcely a peer-to-peer transaction if it goes through an organised and controlled ecosystem where permission and authority is uppermost. I’m certain that Satoshi, whoever he or they might be, would be scandalised by the inclusion of such institutions who have wormed their way into the bedrock of his invention. Still, we are told that we cannot have a main-line connection into the old financial world without some sort of banking interface. The jury is still out on this as far as I am concerned. Is that the point of Bitcoin? That we can easily on-board onto the old corrupt world of financial institutions? Or, is it to liberate ourselves from the hooks that they have embedded into our skin? Genuine peer-to-peer transfers are still possible, but they are becoming increasingly difficult to engage in. Governments fear tax evasion — unless you are a big corporation. That happens organically with traditional financial systems. It seems that ordinary people evading tax cents is more of a problem than big companies evading billions.
The lessons I have learned in the last few years is that being involved in the project has been worth the while. You have to have the imagination to stick with it though. If you are interested in buying cryptocurrency just for the trades and the chance of a dangerous quick buck, good luck to you. If your bag is juggling knives you will certainly get the excitement you desire, and then some.
The lessons of Bitcoin have taught us that not only is crypto volatile, it is also largely unpredictable. The complex Technical Analysis (TA) charts that you will see everywhere will tell you nothing helpful. TA will reliably tell you what just happened, but it is almost useless in predicting what will happen in the future. No doubt that advocates of TA will howl me down on this point, probably on many others as well, but if TA made dependable predictions, we’d all be bloody billionaires. TA charts are always predicting bull and bear runs that never happen, and in every case, they can also justify after the event why their prediction never came to pass. Sometimes a TA prediction and reality will even coincide which demonstrates that flukes can happen. Don’t bet your money on flukes.
If you want to invest in Bitcoin, that’s entirely up to you, but I recommend that you use a 5 or 10 year time-frame. For while the price goes up and down like a bride’s nightie, there is a logarithmic line that – predictably — only ever goes up if you scale it out far enough. Even the great drop of 2018, allowed us to buy the dip. I have bought some Bitcoin dust every dip since then, because why not? After all that’s what you do during Bitcoin sales. I very much doubt that Bitcoin will ever allow us wealth and independence from the established financial sector. However, I do think our best interests lie in removing ourselves from their clutching fingers as much as we can.
Besides which, you only lose if you sell at a loss.
Lastly, don’t be put off by the fact that you may never get to own an entire Bitcoin. The beauty of Bitcoin is that it a deflationary asset which means that whatever you have now will probably increase in value over time, unlike regular inflationary currency. It may be volatile, but the trend is available for everybody to see. I try and buy Bitcoin “dust” at every big drop because today’s dust may be tomorrow’s pay-dirt. Who knows?
Play safe out there folks, and best of luck.
Remember this is not financial advice. Trading your hard earned cash requires careful thought. Many people have lost all they have making rash decisions chasing “easy wealth”. There is no such thing, so don’t join their number.
Published at Sun, 14 Jul 2019 04:36:31 +0000
Bitcoin Pic Of The Moment
Another day, another all-time high for bitcoin.
Connect with me at jimmakos.com/photography
By Jim Makos on 2017-10-21 09:52:38
