Much Lambo, very moon.
Who Wants to Be A Bitcoin Millionaire?
If you’ve substantially increased your wealth by “hodling” Bitcoin, many people will be quick to say that you were lucky. From the outside, it looks like you blindly pulled the handle of a slot machine and hit the jackpot. In reality, a combination of knowledge, skill, and curiosity likely informed your Bitcoin investment decision. Some hodlers were there in the early days (2010) back when a Bitcoin cost a quarter. A small investment net those investors a lot of Bitcoin. On the contrary, some “whales” made their first purchase early in 2017, when Bitcoin was around $1,000. With Bitcoin at $8,500 in May 2018, even the “late” investors made a quick 8.5x on their investment.
What caused some investors to get in well ahead of the heard? What was it that convinced those with huge fiat bankrolls to finally jump in? Is timing and cash-on-hand the only requirement to become Bitcoin-rich? In today’s post, we’re going to break down the anatomy of a hodler and have a little fun with a Bitcoin investment game.
The Anatomy of a Hodler
Every hodler took their own unique path to Bitcoin. There’s the original “cypherpunks” on Satoshi’s email list. Then you’ve got the “sound money” libertarians and students of the Austrian School of Economics who were on the search for better money. Of course, we’ve got the psychonauts who bought Bitcoin to use on the Silk Road for mind expansion purposes. Finally, we’ve got the Lambo boys who are just here to speculate on an asset with an asymmetrical return profile. In reality, most investors don’t fit snuggly into a single group, but many share some key characteristics.
Curiosity – Above all else, most Bitcoiners are curious people. It’s astounding how many adults have never asked, “What is money?”. While this question is popular amongst inquisitive seven-year olds, it seems to have escaped most adults. At a very minimum, Bitcoiners have asked this question, and decided that Bitcoin is money. Some never asked this question until Bitcoin had a ticker on CNBC. Some, however, have been asking this question their whole lives. The more tech-oriented likely followed the progress of B-money and Hashcash. The gold bugs likely saw the rise and fall of The Liberty Dollar. Curiosity may have led you to Bitcoin early, when it was cheap.
Read up, baby
Understanding – So, your curiosity led you to Bitcoin, but do you think this crazy thing can actually work? Maybe you’re not a core developer who can review and contribute to the open-source code base, and that’s OK, because you’re willing to learn. Your curiosity sends you deep down the Bitcoin rabbit hole, where you learn about public-key cryptography and the Elliptic Curve Digital Signature Algorithm (ECDSA). You learn that you Bitcoin cannot be stolen, so long as you protect your private keys. You also learn about Proof-of-Work (PoW) and game theory. You now have the knowledge that Bitcoin is censorship-resistant. A little more research into Bitcoin’s supply and emission schedule convinces you that Bitcoin is sound money. Finally, you know to hold your own private keys, and you didn’t lose your shirt when Mt. Gox collapsed. With all of this knowledge comes conviction, a key attribute of a hodler.
STRONG HAND
Strong Hands – Bitcoin is a volatile asset that is known to fluctuate as much as 70% in a single week. If you’re able to hold your Bitcoin through wild price swings and FUD (negative articles meant to sow Fear, Uncertainty, and Doubt), fellow Bitcoiners would say that you have “strong hands”. No one’s going to pry those Bitcoin from your hands, and you’ll scoop up more and more Bitcoin as the weak hands sell out of fear when the price is low and blood is in the streets. Part of what gives hodlers strong hands is the conviction mentioned above. However, even those that are sure of Bitcoin’s usefulness may get shaken out. A lot of potential investors think they can handle a -80% swing, but the truth is that you never know how you’ll handle the paper losses until you go through a crash. It helps to have high risk-tolerance and low time preference (long-term investment horizons). It also helps of course if you have a bankroll and are able to take a loss.
Funding – Regardless of your curiosity, knowledge, and grip strength, you still need something to invest. If you’re a consumer that needs the next new shiny thing when it comes out, you might not have any cash for Bitcoin. Alternatively, maybe you have a nice little nest-egg, but it’s in a joint bank account with your Keynesian brainwashed husband. Well, then you’ll either need to be a great teacher and convince him of Bitcoin’s value, or you’ll need to dig into your secret individual investment account. But seriously, if your husband worships Keynes, just remember that there’s plenty of eligible Bitcoiners out there for you.
When Lambo Sir?
So, what kind of investment would it have taken to be a millionaire (in USD) today? We’ve created a fun little game to find out just that. You’ll see that all different combinations of funding, timing, risk tolerance and conviction could have lead to present-day riches.
(coming soon)