For all new or relatively new investors into cryptocurrencies, it is easy to think, "ah, if I had only invested in Bitcoin five years ago." Sure, we all wish we could go back in time or better yet, be clairvoyant. Of course, this type of thinking is a waste of time. One can only learn from past actions or inactions. Besides, there is some investment we could make right now that could make us very rich in the future. What is it though?
In this blog, I want to list reasons why it is actually good to start investing in cryptocurrencies right now. Not all stories from early investors are good.
If you are familiar with the cryptocurrency space, surely you have heard of some of the horror stories. Take for example the man who threw away 7,500 bitcoins. He was an early adapter who saved them on his old computer. After some time and with computer upgrades, he eventually would accidentally throw his old hard drive away. How much are 7,500 bitcoins worth today? A lot, check the charts and do the math Coin Market Cap. This is just one story of an early investor losing millions of dollars worth of bitcoin. It is estimated that 4 million bitcoins have been lost forever.
This brings us to the next mistake you can learn from: Don't get hacked. Take the notorious Mt. Gox fiasco where 850,000 bitcoins were "lost". Though some coins would eventual resurface and it is unclear where the others went, a Tokyo security company concluded they had indeed been stolen. Therefore, many Mt. Gox users lost their money. Additionally, this event put the whole cryptocurrency market into an elongated recession that would take years to recover from. This is not that only exchange that has been hacked. In fact, there have been dozens of exchanges hacked since 2011; read Chaos and hackers stalk investors on cryptocurrency exchanges.
Lesson learned: protect your bitcoins. The best practice according to Trace Mayer is the Glacier Protocol. If that is too technologically challenging for you, at least put the majority of your coins on a offline wallet like the Ledger Nano S. or Tezor. By protecting your crypto investments on an offline wallet, you own and control your private keys. By all means, leave your cryptocurrencies off the exchanges. If you are a trader, keep a certain amount available to trade, but keep the majority of your investment offline. Furthermore, when setting up your Ledger Nano S. or Trezor, keep the 24 words seed and PIN. I suggest keeping them written down clearly and put them in two safe locations life a safety deposit box. Don't write this information in too many places though.
Another mistake early investors encountered was selling low. There are stories of early investors selling all their bitcoins when the price was under $100 which seemed like a lot at that time. Remember, according to experts, Bitcoin is in a perpetual bubble. Well, unless those investors bought more later, they are probably kicking themselves right now. Then there is the developer who in 2010 bought two pizzas for 10,000 bitcoins. I sure hope those pizzas were good. More importantly, I hope he stacked up on more bitcoins soon after.
Lesson learned: Even if you bought bitcoin at a high (e.g. $20,000), just be patient and wait. It is true, Bitcoin could someday fail, but by all likelihood, it will reach new all time highs someday. Ideally, it will become peer-to-peer cash that grandma and grandpa will use. More important than being patient and not buying high, only invest an amount of money you are comfortable losing. When the market goes down, you can be at ease (at least, relatively speaking). At the same time and possibly in conflict with the advice just given, taken some profit when the market reaches all time highs is prudent. Some will argue to hold till the end; however, taking back some or all of your initial investment and then possibly some profit on top of that, could place you in a good position. You will only be playing with house money and can invest more when the next dip comes.
The Blockchain Revolution is in its infancy; there is a lot of money to be made. Sure, those who bought and held bitcoin since the early days are living the good life now, but there is a horror story for every fairy tale story. Getting rich is not guaranteed and who know where Bitcoin or the other cryptocurrencies will be in ten year. However, you can learn from of the mistakes of those who came before and make better decisions.
There are several good points in your article. My experience is that I have regretted the selling end: either selling too soon (thinking 4X my investment is good enough) or too late (watching an investment go up radically and come down just as quickly). Same goes for real estate: if you don't have to sell, then keep it.
I do wonder if BTC might go the way of AOL. AOL was really in front of the internet boom. They are still around, but not really the best application of the internet, which I think is Amazon/Ebay. It seems possible that ETH will overtake BTC in popularity and market cap.
I agree. Me personally, I do regret not selling more when the price went close to $20,000. I could have bought back in now or last week. As we all know, it is difficult to time the market, but it was pretty obvious when the price was going up $1,000 within an hour at time. Basically, my strategy is to dollar cost average. I put in a certain amount a month. But when the price goes high, I take some profit to try to regain my initial investment. That way, I can play with house money. However, I'm not sure if BTC will go the way of AOL. Nonethless, I'm in it for the long run because I believe in the technology and what it stands for. However, I also like ETH. Both projects have scaling problems. For that reason, I'm really interested in EOS with it's use of DPoS.