I Bought Tens of Thousands of Dollars of Bitcoin in a Single Day
It was my Gordon Gecko moment. Being too sure of yourself can be a formula for financial ruin.
It all started when the interest rate on my savings account expired. It was only a measly 1%, but it was something. A little cash helps you sleep easier at night. I had to transfer the money out of the existing account.
The big problem: where do you put your money in a zero interest rate environment? The answer during these strange times is tough.
I thought I’d put the money from the expired savings account into another one. Unfortunately, there were no options for savings accounts that would pay more than 0.6% in interest — it used to be 5% here in Australia not so long ago. Inflation is currently at a minimum of 2% (this number is heavily debated and thought of to be much higher due to money printing).
0.6% interest on your savings is being bent over.
So, I decided to delay my decision. I transferred the money into my transaction account and said to myself, “I’ll figure it out later.” Delaying the decision wasn’t a good idea. Once the money landed in my transaction account a day later (slow, rusted banking infrastructure), it was sitting there staring me in the face.
I love Bitcoin. She got the best of me.
The shiny coin with a “B” on it has been my savior before. I ended up putting tens of thousands of dollars into Bitcoin in a single day because there was nowhere else to put it.
I’ve learned this lesson before and I learned it again: It’s okay to love an asset class. But when you find yourself going ballistic and acting euphoric, be careful.
People are doing that with Tesla. They’ve loaded up on the hype machine. They’re not looking at “number of cars sold” compared to the stock price and real-world profits. It’s a car made of metal. It can be replicated by any car company. I love Tesla too. Common sense is common sense though.
Reckless investing is a problem humans have to deal with.
I don’t regret my purchase one bit. I regret my behavior.
I was chewing the fat with fellow writer Nicolas Cole. He’s a weird Bitcoiner like me. We hang out on Twitter and retweet crypto talk.
After the conversation with Cole my psychology changed. Dudes in LA were piling in. FOMO smacked me in the face. Looking back, I don’t regret my decision to load up on more Bitcoin. I regret my reckless behavior.
The smartest way to get into an asset class is slowly.
This is referred to as dollar-cost averaging in the financial world. It means instead of investing all your money at once, you invest the same amount of money on a consistent timescale. For example, if you wanted to buy $20,000 of Tesla shares then you could invest $1000 per month for 20 months.
Slowly investing allows you to smooth out any rough patches. Here’s what it looks like:
Month 1: You invest $1000 in Tesla at the top of the market.
Month 2: You invest another $1000 the day after the stock price tanks 10%.
Month 3: The stock price stays flat. You invest another $1000.
Month 4: The price goes insane after an announcement. You invest $1000.
Month 5 and beyond: the stock price continues to go up and down. Some months you buy Tesla shares at a low price. Other months you buy Tesla shares at a high price.
You reduce your risk when you invest slowly. That’s what I have always done with Bitcoin, until my recent lapse in psychology.
When you don’t know what to do, you can do nothing.
That’s what I should have done. Doing nothing is underrated.
Investing comes down to a few things:
- Your financial education
- Your psychology
- Your ability to master your emotions
- Your ability to stay calm
- Your level of research
Do nothing with your money. Slow down. Then make your decision.
Invest for the long-term.
That’s how you bitch slap hype and FOMO in the face.
Short-term investing is for traders — and most traders are disguised as gamblers in a bathrobe at home.
For the rest of us, investing is a long game. You probably won’t become a millionaire from investing in less than a year. And if you do, the overconfidence will be your downfall. You’ll start thinking you’re King Midas himself and everything you touch turns to gold.
I think Bitcoin is the best long-term investment I have ever come across.
I’m in it for a very long time. The difference is I have already been in it for a long time, accidentally, because of my 9–5 job. I’m past the point of research or worrying too much about daily price action.
I use Bitcoin like a savings account. It’s where I park money to relieve stress. To date, I have made more than a twenty times return on the sucker. That may sound great.
The problem is when an asset class has been so good to you, your financial thinking can get the best of you. That’s what happened to me. My past investing performance produced a reckless form of psychology that drove me to make a bigger than normal, one-time purchase, of an asset that is still risky and volatile.
The part I’m grateful for is I noticed this change in thinking. You can make silly investment decisions. But if you learn from them, and notice the dangerous psychology reappear again, then you can do something about it.
Awareness of your psychology will make you rich in the long run.
You work your butt off. You earn money. You invest your money. Whatever your favorite asset is to invest in, and store the output of your time in, it’s wise to reflect. It’s wise to diversify too.
There is rarely a sure thing. That’s why it pays to diversify your money across different assets in case a health crisis comes out of nowhere and locks everybody in their homes. It could happen, right?
Reckless behavior will eventually take your money away.
I learned a major financial lesson by being reckless. Have you learned yours?
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.