Perspective and Indirect Response to NY Times Article on Cryptocurrency Investor Loss
Hello and to whom it may concern (presumably co-believers in the future of blockchain and cryptocurrency),
Today I read a sensationalizing sob-piece from the NY Times that, to the say the least, was irritating on account of an abysmal lack of context. Essentially, the article presumed that there is some sort of crypto-unique hard-lesson to be learned from the recent bursting of the crypto-bubble. I, for one, very much think the blockchain and cryptocurrency story is still unraveling and has a long way to go before we draw any such lessons on account of the detailing of the worst investment timings from the pocket of November 2017 through January.
To counteract any such collective “crypto-investor” wisdom that the NY Times is purporting, I’d like to share a bit about my personal experience and detail my takeaways. Furthermore, I’d like to detail how bubble-bursting isn’t at all unique to cryptocurrency and blockchain.
Back in Fall of 2016 I was very interested in the emergence of blockchain and cryptocurrency. I was scared to just jump-in and convert my fiat to cryptocurrency and decided instead to keep an eye on the market and litmus test a few of my ideas. My first prediction was that BTC would rise substantially following the US presidential election. During this time I educated myself a little more and saw my prediction unfold. Instead of diving in head first, I cost-averaged my buys over the coming months and also bought into a very select few altcoin projects that intrigued me. Long story short, although I have definitely absorbed some “on paper” losses recently, I’m substantially above my initial investment. So what lesson have I learned? I didn’t learn much to be honest, I just reinforced my philosophy that investors should take their time and average their buys while knowing that it is always risky to delve into an investment when it is “mid-flight” (i.e. in the middle of a parabolic upswing).
While blockchain investment seems to be going great the same cannot be said of my decisions in the housing market. Back in 2013 I bought my first home in accordance with my life plans. I knew that buying a home was a pretty shit investment on paper when I did the math in an excel sheet and discovered that as a renter paying $800/mo I could easily outpace with my 5 year, “home-owner self” if I managed to save 25% of every pay check and use those savings for annual 2% return. What I discovered on the home owner side was that my home needed to make pretty significant gains in equity and be partially rented out to keep pace with my renter opportunity cost over 5 years — and this was all “on paper” realizing I couldn’t even use the equity in my home unless I sold my home; furthermore in this scenario I hadn’t even deducted the cost of using a realtor making outpacing my liquid, renter opportunity cost highly unlikely over 5 years. It wasn’t until beyond my 10 year projection that it finally started to look like an arguably prudent decision to own a home — but even this conclusion is highly speculative and based on historically low interest rates. Of course, this could all someday be dismantled by a sudden surge in the housing market and an appreciable gain in equity but at this point, looking at a 15% loss on my home after deducting for settlement — reaping this reward will likely be a 20 year game! The worst part? My home made me house-broke for years and I couldn’t really afford to invest in anything else; had I not owned a home it would’ve been very likely for me to have invested in the crypto-sphere much sooner.
That said I now finally have a somewhat manageable strategy with my home that allows me to invest and use my money elsewhere — I moved out of the f*cking thing and rent it out while living in countries that are appreciably cheaper. To make this manageable I had to re-amortize to 20 years of monthly payments after 5 years of double-up payments to stay cash-flow neutral — how ridiculous. So to date my only real regret is this — I didn’t have any money to put into crypto when I first felt compelled to put some in.
All of that being said, I want to quickly detail some of the crashes we’ve seen in other markets and stocks and really hammer home the point that crypto is not at all unique in this regard. Not only that, but crypto has some distinct advantages over some of these other investment classes that have seen bubble-bursts. Let’s take a very quick look:
San Fransisco Housing Market:
Peak average price in 2005: $856,300
Low since peak: $507,900 (40% loss not accounting for settlement fees).
Year of Price Recovery: 2017 (12 years later, not adjusted for inflation)
Worst part takeaway: 0 liquidity, housing market collapse coupled with economic recession forced a lot of homeowners into defaulting. Many people’s lives have been a story of, to this day, trying to recover from this catastrophic crash.
Peaking Price in 1999: $85
Low since peak: $5.97 (93% loss !)
Year of Price Recovery: 2007 (8 years later)
Best part takeaway: Patient investors from 1999 are now looking at a price of $1900 (2200% gain). Brave investors from the low are looking at a 317,000% percent gain (wow).
Peak price in 1999: $38
Low since peak: $12
Year of Price Recovery: 2014 (15 years later)
Takeaway: It can suck when a bubble doesn’t burst quickly but rather dwindles for years — it makes the road to recovery long.
Noteworthy: the only thing that had actual utility out of these three investment examples was the house. That said, realizing that utility during the recession would’ve been immensely difficult. Conversely, the Microsoft and Amazon stocks at least had liquidity should it have been absolutely necessary to convert to fiat.
So what is the differentiation for something like BTC here? To start, you will not have to sell your BTC to be able to use it. There are already vendors accepting BTC and with initiatives like Bakkt getting launched ubiquitous vendor acceptance will be right around the corner. If you absolutely are feeling the pressure to sell because you over-leveraged yourself, at least you will be able to utilize your BTC in a piece-wise fashion at points of purchase in the very near future.
If you put all your funds into a top-tier shitcoin there won’t be solace for you I’m afraid — but don’t be turned off of crypto on account of this. It is also true in stocks that when you invest in shit companies you lose money. I’m afraid there is no safe haven for this. Furthermore, anything can be turned to shit if enough panicky people decide something ought to be sold; such is the inescapable rule of economics.
So speaking for myself, I’m really elated at the pace of this bubble-burst. We are back down to pre-ridiculous-parabolic-upswing levels and from here we can start to build. Not only that, a lot of the capital raised for the good projects from the past year will be put to good use and we can all happily observe these developments as we progress toward mass adoption — which is inevitable.
I don’t know about everyone else here but I know what I’m in it for. I’m waiting to be able to spend my crypto like I would’ve my fiat. In the meantime my life remains largely unchanged — I’m still working here and there to get by. This was my exact position before I got into crypto, this was my same position during the bubble, but that said I’m a lot closer to some meaningful liberty than I was before investing.
I don’t give investment advice but if your life has remain unchanged on account of this bubble burst, I really don’t see the point in salvaging a 90% loss unless you truly have some divine insight to think this whole thing is burning to the ground (not how I would wager). Just keep doing what you were already doing, and as long as your lifestyle is enriching then really all of this money-stuff is just a bonus :).
I’ll leave it at that. Happy Monday Everyone.