My Crypto Account Dropped by $60K…And I Didn’t Care
I recently had a reader chide me.
Several weeks ago, I shared my positive outlook on bitcoin—as I always do—when it was trading somewhere in the mid- to high-$40K range.
Then bitcoin—as it always likes to do—promptly sank to the low-$40K range when China—as it always does—announced yet another yawn-inducing ban on crypto.
The reader wanted to know, “How could you have been any MORE wrong?”
Well, as I write this, bitcoin has soared back into the mid-$50K range. Will it stay there? Who knows? Bitcoin is jumpier than a swarm of grasshoppers as a mower approaches.
It could easily go back to the low-$40K range…maybe even into the mid- to high-$30K neighborhood.
Or we could still see bitcoin exceed $100,000 by the end of the year—which I think is possible. More on that in a moment.
But I don’t write this column as a clap-back to that reader. I’m writing it because I completely understand where he’s coming from. My bet, though I don’t know this for a fact, is that he bought bitcoin and saw it promptly fall, and he got upset that some of his wealth quickly vaporized, at least on paper.
Instead, I want to use his email as a lesson…arguably the most important lesson for anyone who holds crypto or who is thinking about buying crypto.
Assess your tolerance for risk.
You have to do that.
Don’t buy just because I or someone else says crypto is going to the moon. Otherwise, you’re gonna need to load up on Maalox or Pepto-Bismol, maybe ask a doc for some blood-pressure medication.
And I say that only partly joking.
Crypto, as I have written over and over and over—and over and over again—is not for the faint of heart. You need one of two things (preferably both) to survive as a crypto investor: an iron stomach and/or blinkers for your eyes.
Bitcoin specifically and crypto generally is going to remain a wildly volatile asset class for the next several years.
Crypto as a concept is quite young. Bitcoin is barely a teenager. Many of the most interesting crypto projects are still in diapers.
Globally, just a fraction of the world owns crypto, which means that even comparatively modest buying/selling demand can and does push and pull on crypto prices dramatically. You absolutely, positively, without question, must be able to float above the fray.
You need what the crypto-kids call “diamond hands”—a sturdy hold when crypto has fallen out of bed again.
Want to know if your hands are diamonds or gossamer?
Scribble on a piece of paper the value of the crypto you own or which you want to invest.
Then mark that down 60%.
Think about that number all day as you go about your life. Does that number bother you? Would you freak out if that number—60% below your initial investment—represented the real value of your account?
Would you sell to preserve the remaining 40%?
Would you hold?
Would you buy more?
If your inclination is to preserve capital, then preserve all your capital by avoiding crypto completely. It’s the only way you’re going to keep your financial sanity.
There was a moment over the summer when the value of my crypto account fell to about $45,000 from more than $105,000. Definitely sucked. But honestly, didn’t faze me a bit. And now it’s nearing $100K again.
I am confident in my belief that crypto is the new age of everything. I have spent so much time researching individual crypto projects, and reading why old-line companies are now invading crypto, that nothing can shake me from my belief.
I used some spare cash during that period of steep decline over the summer and added to a couple of projects I think have huge potential—one of which is paying me nearly 90% a year in what are effectively interest payments.
Which brings me back to $100,000 bitcoin…
I was at Czech hockey game over the weekend with my landlord, Peter. He looks to me for crypto advice, if only because a crypto project I told him about has turned his investment of £500 (about $680) into nearly £9,000 ($11,000) in a few months. (Side note: That project is one I aimed to buy last summer, at less than $0.20 per token. But I was lazy and distracted, and I forgot about it. My mistake. The $500 I would have invested would be worth nearly $400,000 today.)
In any event, Peter was worried bitcoin might crash again. I counseled patience—that I still see bitcoin hitting $100,000 by the end of the year. He looked at me as though maybe a hockey puck had doinked my head.
But then he shrugged and said, “You might be right.”
My point: Bitcoin is going to be bounce around like a bucking bronco. You just gotta hold on. If it falls from $50K to $40K, don’t fret. Don’t panic. Don’t think that Jeff’s bitcoin bullishness is bogus or overrated or badly timed.
Just be patient. Bigger price tags are coming.