Photo by Icons8 team on Unsplash

The Problem With Bitcoin Is You


Recently, a friend asked me if I still owned crypto. Yes, I answered without hesitation, though it’s not nearly as much as I would like. My budget has been tight, and of course it is not growing like it was before.

Photo shared with permission from Troy Emmi at Fanboy Collectibles

My friend had sold his own stack of Ethereum, at a moderate gain from when he’d initially bought in, but a disappointing drop from the all-time-high. The price dropped much further and he was glad he’d sold, but obviously still thinking about it.

I stopped short of advising he buy more soon, at those low prices. What do I know? I am not a financial adviser, so don’t even think about taking my advice on what to buy. I am, however, a specialist in human behavior. So if you want to succeed in crypto, listen up.

I’m going to tell you something that’s been bothering me since I bought my first bitcoin (technically, my first 0.03 BTC). It began as a little fear we’ve all had at least once: “this isn’t real money.” I am convinced now that it is better than money, but there is still a big problem with Bitcoin.

For simplicity, I’ll use “Bitcoin” to refer to cryptocurrencies in general. Bitcoin still rules the markets, as this month proved yet again. It may well remain the primary exchange unit as crypto catches on.

The real problem with Bitcoin is you

You, me, anyone who reads “you want to succeed in crypto” and thinks, “yep, that’s me.” We have several problems that run deeper than blockchain. Not problems of understanding, but of attitude. We’d better face them if we’re going to realize the true potential of this new technology.

Photo by Andre Francois on Unsplash

Problem 1: You don’t know if you are gambling or investing

If you’re gambling, you are taking a chance on winning big. You decide how much you’re willing to risk, and when it runs out you go home. If you’re investing, you expect a return on the money you put in. Because you expect it to grow you don’t take the money out, at least not for a while. In fact, you usually add more over time. The money you invest is used by someone to produce something of value, and that’s how your investment grows.

My friend and I each started buying crypto last year, well before the peak, but at a time when things were growing it was easy to believe in our investments. As prices fell, we each began to treat our portfolios more like a gamble. My friend hit his limit, cashed in his chips, and went home. I held on, but stopped adding more. Missing the growth I’d seen before, I played at swing trading, trying to catch the highs and lows. I won some and lost some. I learned a bit about altcoins, but my portfolio didn’t get any bigger. I didn’t do what is required to grow an investment; I didn’t invest.

Photo by Mark Finn on Unsplash

Problem 2: You want to get something for nothing

I was waiting for the “right time” to invest more in Bitcoin. Last year, as I watched my investment double, twice, it seemed any time was the right time. 2018 so far has been different. We don’t know what will go up in value, and when. Looking for the best opportunity to grow your money, it’s easy to miss the whole point.

Bitcoin, like all money, represents an exchange of value. Create something that people value, deliver it consistently, and you’ll have money. It might seem complicated in our current economy, but it’s really that simple. There are lots of ways to create value for people, but putting your money in an exchange and watching it daily isn’t one of them.

This was the fear that nagged at me when I started to invest in cryptocurrency. Invest in what, exactly? In other people holding onto hope? This is why the old school financial folks talk about Bitcoin as a bubble.

At some point, somebody has to do something to create value.

It was fun watching money grow with no effort at all. I know you miss those days and long for their return. It happened before, and it could happen again. I hope it does, but hope is not a plan. You can get more out of this crypto economy than you put in, just be willing to put something in. Something of real value, like your time, your creativity, your craftsmanship.

Photo by Nikola Jovanovic on Unsplash

Problem 3: You keep looking for reasons why the markets do what they do

I am no happier with that Mt. Gox trustee than you are. I agree that bitcoin futures trading was a sneaky way for big banks to get a big foothold in an asset they’d ignored for too long. While interesting to read about with my morning coffee, these external factors have almost zero impact on my own ability to build wealth.

It is tempting to place responsibility for your current financial situation outside of yourself; it absolves you of having to do anything about it. Tune in to your reactions when you read about market influences. Does this news affect what you are going to do, or is it a distraction?

Markets are still down. For anyone who believes in the role cryptocurrency has in shaping the new economy, this is a punch in the gut. However, if your strategy for building wealth and ushering in this new economy requires that the markets always go up, I urge you to reread problems 1 and 2.

Excerpt from “Religion for the Nonreligious” on Wait But Why by Tim Urban

Problem 4: You cannot imagine the true potential of cryptocurrency

No one can. Even if you’re excited about its potential, your frame of reference comes from a past where blockchain didn’t exist. When the printing press was invented, new Bibles could be printed and distributed more cheaply and easily than ever. This was important, but it doesn’t even begin to describe the value that grew from that new information technology.

In 2003–2005, cameras were added to cell phones. It seemed expensive and unnecessary at the time. It wasn’t easy for the average user, and it took a while to catch on. Yet within 10 years you were streaming video, and your phone was completely transformed. If blockchain currency seems about as clunky as camera on a phone, consider this: it wasn’t that a camera wasn’t useful on a phone. It just didn’t fit with our outdated concept of what a phone is and what it does.

When blockchain applications are more widely used, I believe we’ll find our entire concept of currency has transformed.

Photo by Quino Al on Unsplash

How To Become Part Of The Solution

If, like me, you really believe we are seeing the birth of a new economy, then let’s work at it. Even as prices seem stagnant, a lot is happening right now. Stop looking at prices and start looking at value. Real value is something you create through your actions and interactions. We don’t know what the crypto economy’s future might be, but one thing it’s not going to be is a future of magical internet money that you get just for logging in.

What can you contribute today towards your own future?

Are you making enough to put some fraction of each paycheck into savings? If not, don’t look to Bitcoin to save you. If you don’t have much to invest, even a 1000% gain cannot compare to a regular, steady investment into something that grows.

I needed convincing of this, so I sat down with the calculator. After 3 years, even a small 2% of my income in monthly investment beats a one-time jump of 1000%. Besides, you and I both know that if I haven’t figured out how to save 2% of each check, I will spend that crypto windfall as soon as it appears.

My fiat savings from 2017.

You can contribute towards your future today through two practices: productivity and discipline. When you are productive, you create more value and earn more. When you are disciplined, you nurture and restore that which makes you productive. You take care of your health, your systems, and your relationships, so you don’t overdraw in any area.

Notice I did not say “spend less.” Sure, it’s unwise to spend what you did not earn. So who is limiting what you earn? No doubt it’s someone from the old economy, who never would have put a camera on a phone. Isn’t that the whole reason you bought Bitcoin in the first place?

How can you contribute to this budding crypto economy?

Bitcoin was your gateway, and it continues to drive prices in part because it is the most widely accepted. Any crypto project you’d like to get into, it is likely you can buy in with Bitcoin. There are well over 1000 cryptocurrencies out there. Not all of them will make it, but some of them are giving rise to all sorts of innovations. Here is where we begin to diverge from our traditional notion of currency as “money.”

People are meeting, sharing, building on each other’s ideas. In other words, they are doing the things that create value in an economy. The value is being created now, regardless of which coins “win.” In fact, one way I believe cryptocurrency will change the landscape is that we don’t need one coin to rule them all.

“A bright neon on a brick wall in a store” by Austin Chan on Unsplash

Three currencies have my attention right now: STEEM, MANA (Decentraland), and EOS. Though they differ in their approach and application, they share an important distinction: the value is not created solely by “mining,” but through the meaningful interactions of their users. They invite users to build, create, and share. Their value depends not just on hodling and hope, but on people doing something worthwhile.

Speaking of doing something worthwhile, I’ve long had a hobbyist interest in programming and so far I know nothing of DApps (decentralized apps). This summer, I plan to embark on a beginner’s course in coding with some creative input from my 6-year-old son. The course is CryptoZombies, offered by the Loom Network. I’m sure I’ll write about it.

Bitcoin skeptics would surely call these investments risky. They are, from a worldview that says “money is finite and you either gain it or lose it.” This misses the real value that crypto’s diversity offers.

I can invest money, attention, and skill, and gain returns from each.

It is possible, though unlikely I’ll lose all of the money I put in, but even so I will retain the knowledge and skill, maybe even some of the relationships built through my efforts. Relationships and skill can be used to create value, which makes them more valuable than money. It’s the difference between having a fish and learning to fish.

Photo by Andre Francois on Unsplash

There is someone in your community, right now, who will gladly accept payment in Bitcoin for their services. In my town it is the local music shop. This summer, I’m signing my son up for some lessons. Likewise, there is something you can offer in exchange for the coin of your choice.

If there is one thing you take away from this article, I hope it is this distinction between “money” and “value.” It will serve you well in the Crypto economy, and perhaps spare you the pain of anxious waiting for Bitcoin to rise. You have opportunity all around you, regardless of the BTC/USD exchange rate.

Be part of the solution.

There’s a saying that “if you’re not part of the solution, you’re part of the problem.” We can do better than that. Better than give in to fear, uncertainty, and doubt. Look within yourself for the potential for growth, and you will find you haven’t missed out on anything. But you can still become part of the solution.