Why I sold nearly $10k of Bitcoin, and don't regret it

1 мар. 2021 г.

I may have an economics degree, but nothing can teach you more than simple experience and common sense - if you're honest with yourself. The truth is that it doesn't take economics knowledge, but rather real-world experience and knowledge of yourself and human psychology, and honestly with yourself, to buy and hold.

Additionally, it takes maturity and strength to give up a position that is not wise even if it means you experience some sadness from FOMO. I don't regret it.

I did not sell all my bitcoin. I kept 2k in bitcoin, and that isn't going to make me rich. It's not going to make me poor either.

Many years ago, I made the very bad decision to become complacent and pass on bitcoin mining. My procrastination and lack of discipline at the time cost me dearly, as I would be a millionaire today had I had the discipline to move forward with it. I got very interested in it in 2013, and bought cards and built a computer that would have mined possibly a few bitcoins per year at the time. Even if it had mined 1 bitcoin, you see what it's worth now. Sadly, I only mined for a couple weeks, and I think I've lost the wallet ID, which I only wrote on paper. I might have it around here somewhere, and I think that may be worth like 10k now, if not more. Nonetheless, it is a loss that I can't get back, and an expensive life learning experience.

Towards the beginning of the month, right before Musk's announcement, I decided to buy some bitcoin. I got overwhelmed and set it aside for a week. During that week, bitcoin went from 38k to 46k. Then at 46k I decided to commit to buying in, since it was that morning I heard Musk's announcement he had bought 1.5 billion dollars worth of bitcoin. It was now or never. I moved heaven and earth and had to even set up a separate bank account to make it happen. I invested over 10k.

This 10k was on the gamble that with institutional investors involved, it could go to the moon. Unfortunately, I had some learning to do. Yes, it still might go to the moon. Maybe 100k, 250k, or more in the coming years. Well, it kind of happened to 57k, but then lost steam. Yesterday it went down to 43k, now a loss. I didn't sell yet, but committed that if it went over 47k or under 43k, then I would sell. This morning it went to 48k, now in the green even after fees. Withdrawing the money meant basically breaking even - this also means no taxes to worry about, even though it's a taxable event, since I basically didn't profit.

Moreover, withdrawing meant two things:
1. I stood to lose thousands if it skyrocketed back to 57k or even 60k. More if it rallied to 70k.
2. I stood to not lose thousands if it went the other direction.

Why would I do this? Well, because that 10k meant too much to me right now. I'm looking to advance my education and my career, and that's about half my cash reserves. I'm not rich, but what's more certain to get rich? Gambling on bitcoin, or investing in myself? Considering my current level of maturity, my position career-wise and educationally, I stand to gain more by self-investment in the long run that by bitcoin even if it reached 250k.

How? Suppose it does reach 250k in the next 1 to 2 years. I bought in at nearly 50k (46k), so 250k would be a profit of 50k on the original 10K. Of course, this also means a huge taxable event, so reduce that by at least 35%, if not more, so possibly around 33k profit over 1 to 2 years. If I sold, then it would be a permanent fixed 33k. Over 10 years, that's an additional 3k per year on average. (On the other hand, if I HODL, then there's no guarantee it won't crash and take greater losses.)

What else could I do with this 10k? I could invest in myself. Suppose that I invested in myself and added even an additional 5k to my annual income after taxes. It's not an unreasonable thing to assume - and the reality is that this income could grow year over year. But let's say it was just 5k on average over 10 years, then my self-investment is worth more (50k net) than the 33k earned by the bitcoin sale.

This is why I don't regret it. It does not feel good or exciting to have sold it. The $10 going up and down by thousands is both exhilarating and terrifying. Without it, life feels a tad duller, but safer. Work feels more important. Self-improvement and career advancement feel more important. My drive to succeed has increased, because now I have transferred the psychological stake from an uncertain bitcoin market into my own self-investment. I won't make the money if I do nothing, so I have moved pressure over to myself to succeed. The long-term rewards can be greater.

I will gain nothing from this sale if I do nothing. But, if I do invest in myself, time, energy, and money, then the long-term rewards are potentially far higher. I might even increase my income by 50k, 100k, 1 million. Possibly 100m, 500m. Sure, bitcoin could do that as well, and I could sit back and let it happen. Or, I could sit back and watch bitcoin fade away and then I have nothing.

Or I could do both, but herein lies the problem: I was overleveraged.

If you feel exhilarated when it goes up, and terrified when it goes down, you have invested too much. It is exciting, yes, but there's a reason that stock investors threw themselves out of windows during stock market collapses.

Smart investors say not to invest more than 10%, or 20% if you want to push it, of your total cash reserves or net worth.

Therefore, I will not stop investing in bitcoin, or any investment, but as I make more money, I will invest more. Never again will I risk such a high percentage of my cash reserves on a financial investment. I have no regrets because it took maturity to overcome the FOMO and the greed of turning half my cash reserves into 100k. Could it be life changing if it happened? Sure! But what's the chance of bitcoin really hitting 500k in the next couple years? What else could I do with the same money over those years? Maybe by that time I'll have 100k in bitcoin because I've used my cash reserves more wisely than gambling on the open market.

It's a risk assessment. What's the greater risk? What's the wiser investment? How much money do you have on hand?

If you have 100k on hand, 10k is fine.
If you have 20k on hand, 10k is not fine, it's dangerous.
If you have 10k on hand, 10k invested in any speculative market is idiocy. Could it double? Yeah, but you could also lose 50% of your net worth in one day.

That said, if you're doing nothing with your life, live with your parents, and plan on just using the money to eat expensive dinners and spend on stupid impulse purchases, then the money is much safer invested all-in on bitcoin. After all, there's no real risk to you at that point, and the money would be wasted anyway. At least in bitcoin, you won't spend it and it has a chance to multiply.

But if you're growing in discipline, education, career, and wisdom, then don't gamble away your money on the open market where you can't use it on advancing your life and career. Invest some, sure, but not to the point that a 50% loss would be life changing.

This is why I decided to pull a relatively large amount of bitcoin out of the market, and instead I will make wiser investments with an extra 1K here and there in the dips as my net worth grows, and I continue to grow my life in the real world, and work hard to achieve success in the only way guaranteed: discipline, perseverance, patience, hard work, and growing myself.

I hope this helps you make wise decisions. Yes, bitcoin could hit 50k today, maybe even 52k or higher in light of recent news today. On the other hand, it could also lose, and it would be out of your hands. But if you only have 10k or 20k on hand, invest in yourself, not in financial markets.

That said, for the investment I do have, and the investments I will add in over time, it will be a HODL strategy, I see bitcoin going high over the long term, and a good hedge against the US Dollar which is at high risk of massive deflation with the trillions spent in 2020 and 2021. 50% of the US money supply was printed in 2020, meaning that the currency has been debased by that much, and it's only a matter of time before the market picks up on this and prices begin to increase significantly.