Bitcoin FOMO

In 2010, you could buy 10,000 BTC for $42.

That, or 2 pizzas, whatever you wanted more at the time.

Today, BTC is priced at $30k, so 10k BTC is about $300M.

Why 2010 BTC FOMO is BS?

I don’t know about you, but for me, 10 years ago - 42$ was some real nice money.

When I was reading the news about the pizza-purchased-for-10k-BTC event, I wasn’t really looking to spend $42 on something like that. I was a student earning $300 from a part time job. Also it wasn’t as easy as 1 or 2 clicks to buy it back then.

Why 2013 BTC FOMO is BS?

My next interaction with Bitcoin was in 2013, when 1 BTC was around $50. I wrote a masters paper about Bitcoin regulation about the world and … didn’t buy it. Because $50 is way too much for BTC, right?

But, let’s assume for a moment that I did buy it.

Best case scenario is I would buy maybe $1k worth of BTC, which would bring me to 20 BTC.

Today, BTC is priced at $30k, so 20 BTC is about $600,000.

First thing to notice about this number that while a big sum, it’s not a life changing sum. It’s not fuck you money. It’d probably still work the same job, work on the same or similar projects, maybe buy a better apartment.

The problem here is that most likely I wouldn’t HODL. And sell when the price was $100, $200 or $500. Leaving me with a max of $8,000 profit.

If somehow my position survived until 2017, I would definitely sell when my driving instructor and doctor friends from Germany started asking “have you heard about this Bitcoin thing? I want to buy it.” I would rush to sell. Which was in 2017, so 1 BTC was about $8,000.

So selling 20 bitcoin, at $8k price would net me about $160,000 in this scenario. Again, big sum, but not life changing amount.

Dollar-cost-averaging Bitcoin

Now, I heard a phrase that, if you would spend last 5 years dollar-cost-averaging your BTC buys, while binge watching porn and eating Cheetos all day - you’d be rich af right now.

So let’s do some math.

Let’s assume a monthly buy of $100.

Now, I took the historical prices and assumed that we’re auto-buying on the 1st of every month. That leaves you with 3.1535 BTC if the last purchase was on Jan 1, 2021.

Assuming a price of $30,000, you’re now holding BTC worth almost $95,000. Great, but I wouldn’t describe this as “rich af”.

Here’s how the USD value of this portfolio would change over time. Most people would probably sell sometime in 2019.

And if you spend $1,000 instead of $100 per month, you’d hold almost $950,000 worth of BTC. Great, but still not “rich af” territory.

Also, it’s not a realistic scenario for me personally, as I didn’t have $1k to invest every month in highly speculative asset over the last 5 years.

All these calculations change of course, if BTC price goes to $100,000 or $500,000.

The Second death of Bitcoin

Tether.

Probably one of the biggest risks for Bitcoin, and (side-note) /allegedly/ one of the biggest price manipulators of Bitcoin.

Tether is a so called stablecoin.

It’s something used mostly on crypto exchanges. Traders can trade volatile cryptocurrencies for stable cryptocurrencies when they want to lower their risk. For example, if you’re invested in Bitcoin and don’t want to risk the price of Bitcoin falling against the US dollar, you can just exchange Bitcoins for Tether (USDT). Once you want to “get back into the game” and hold Bitcoins, you can just exchange USDT back to BTC or other crypto.

In theory, 1 USDT should always be equal to 1 USD. Each USDT should be backed by a real dollar stored in a bank. Reality is much more complicated.

It looks like Tether is not fully backed by dollars:

As of the date I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totaling approximately $2.1 billion, representing approximately 74 percent of the current outstanding tethers.

There’s no financial audit, they’re changing banks all the time, there’s plenty of lawsuits going around, and only proof of funds is an old screenshot and scan of this letter.

Tell me, does this look like a letter from a bank that verifies you have $1.8 billion on your account? What is this squiggly line signature? Why there’s no name attached to it?

There's a lot of information out there that points to a possible scenario where Tether just burns and goes to 0.

If (when) that happens, couple of things might happen: exchanges will lose liquidity, users and trading volume; fake money stops buying bitcoin and BTC price might go down.

I’m still bullish on crypto and bitcoin.

Why is BTC better investment now than in 2016?

A lot has changed since then.

Bitcoin hasn’t burned and crashed to 0, like was predicted by many.

Moreover, it survived a rebound from $17k to $3k and is now trading at all-time high around $30k.

There are now NASDAQ traded companies with BTC on their balance sheet. Most notably Square (4,709 BTC) and MicroStrategy (70,470 BTC). That’s more than $1B in BTC on a public company’s balance sheet. Something unimaginable in 2016/2017.

There’s someone buying hundreds if millions worth of BTC in a single day.

Only time⌛ until some country buys it to hold in reserves like gold.

Long-term HODL

Most people probably shouldn’t do things like selling their house and investing everything in bitcoin.

But it’s perfect for the barbell strategy portfolio. Where 90% of your portfolio is cash or similar assets, and 10% is extremely risky assets. This way you avoid middle ground where incorrectly assessed risk (by you, analysts and everyone in between) can ruin you.

One scenario that I’m personally considering is to buy X% of monthly income worth of Bitcoin each month. Wait 10, 20 or 30 years, and hope it still exists and has value.

I like that it’s easy to automate BTC investment, so you don’t have to do it manually every month (thus increasing the chances that you will sell when you see a chart that looks like this 📉) .

Coinbase, cash app, robinhood, revolut and others all offer a way to auto-buy more BTC on a recurring schedule. Here’s a guide on how to set this up in Coinbase.

Note on wallets and private keys

When you’re buying BTC on exchanges like Coinbase or through apps like Revolut - while it's easy, it comes with a major drawback - you’re not in control of the coins.

A quick search on https://www.reddit.com/r/CoinBase/ reveals that in early 2021 there were dozens of people, some with $100k and more on their accounts, locked out, with no ability to trade or do anything really.

From bitcoin.org:

You should be wary of any service designed to store your money online. Many exchanges and online wallets suffered from security breaches in the past and such services generally still do not provide enough insurance and security to be used to store money like a bank.

What to do instead?

If you want control of your private keys, you need to send the BTC from your Coinbase wallet to a different wallet that gives you true control.

Learn more about different types of wallets.

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