There is blood in the streets! Quick, everybody sell, or buy, or hold!
How do you feel right now? Are you smug, pleased, relieved, neutral, regretful, panicked? Whatever your emotions, you can be proud to have just completed a semester at the school of Bitcoin. Some paid more than others for the education…
I would like to share with you some of the things that I learned.
1) Nobody is born with financial experience.
When the Bitcoin subreddit started blowing up in January with new subscribers, there was a deluge of questions from individuals who had no financial understanding whatsoever. My reaction, like many others, was to be a bit put-off at first. Go read 20 or 30 books on finance and investing like I did, I thought. Do your own research.
But after a while it dawned on me that everybody starts somewhere. My financial education began when I first opened a stock trading account in 2002, back when people still used libraries. Every book I read, from “Market Wizards” to “A Random Walk Down Wall Street” opened up my mind to new levels of comprehension of markets, finance, and investor psychology.
So after a while I changed my attitude from one of mild disdain to patient helpfulness. While not qualified to discuss the intricacies of mezzanine capital, I was proficient enough to give mini-lessons in “what are these lines for on the chart?”
What should not be underestimated is the generation of young investors who are paying more attention to money and finance than their parents and grandparents combined. The same 15 year old who asks basic questions on web forums today could be tomorrow’s Warren Buffett. When they are interviewed by Forbes in 2045, they’ll say they cut their teeth on Bitcoin, and people will know exactly what they mean.
2) People are not in control of their subconscious thinking, including me.
When Bitcoin hit $20, I said to my wife, “Good gracious, this thing just basically doubled in a few months. Get ready for a big correction.”
Then it hit $50. “Honey! Look at what the price is doing. Holy smokes this thing is out of control! I don’t know who would be buying at this level, but they won’t be happy when the price corrects.”
Then it hit $100…$150…$200
I didn’t even notice it myself, but somewhere between $65 and $200, my psychology changed. I knew that the price had to correct, but at some point, my brain threw up its hands and said “screw it, this thing could just be getting started.”
Rereading my posts from the last week, I was even surprised to notice this change in my writing. I mentioned the fact that the market would correct in pretty much every article, but my mind was clearly twisted into pushing that date further and further away. On bubble-pop day people wrote to me saying “hey, you said there was no bubble.” What? Nonsense, I’ve been calling, almost pleading for a correction since January. The scary thing is that I hadn’t even noticed how my tone had changed.
I reread what I had written and couldn’t believe my eyes. But there it was in front of me. I had changed from “this is going to come back to earth any second now” to “this thing has gone so bonkers that it probably won’t burst for months.”
So I would recommend some self-reflection for everybody. It’ll help during the next Bitcoin bubble.
3) Perspective is important.
When I first learned about Bitcoin, it was late 2011, and I had the opportunity to read posts by disenchanted Bitcoiners as the last bubble deflated. It was a valuable lesson, and one that everybody will probably get a second chance to experience in the coming weeks (months?).
Many people were depressed that they had bought coins at $15 or $20 on the way up and didn’t sell them. “OMFG I have like 3 coins I bought for $15 each and now the price is at $5, FML!” I felt sorry for them. Luckily for me, I showed up right at the point of highest despair. I looked around and thought “Hey guys! Things aren’t so bad. This cryptocurrency thing is still awesome!” But I’m glad I didn’t say it, because I probably would have been told to go [redacted] myself.
But perspective is everything. Those who bought at the very top of the last bubble are looking like smart money today. I won’t try and predict the future, but I do hope for a day when the person who bought at $266 and held is able to feel like a champ.
What were some of the lessons you learned in the last few months?