I’ve Been Hiding My Investment Strategy (Out of Fear) for 6 Years
Everybody has warned me not to talk about where 20% of my money goes.
I work in traditional finance. What I’m about to tell you could ruin my career. I’m at a point in life where I’m not taking anything to the grave with me. So here goes.
20% of my money goes into Bitcoin and Ethereum, and it has for a very long time. I’m going to share with you why I do this, and how I came to make this decision. Before you think I’m crazy, at least take the time to understand why I do this, even if you have no intention of ever doing the same.
In2012 I was working in a bank. One day a call came through from a young entrepreneur. They wanted to sell what they described as internet currencies. It was my job to assess their application and either approve or decline their request.
I was very rude to the entrepreneur and promptly declined their application. I did a surface-level investigation into what they were selling and was an ass about it.
Not long after, one of my colleagues (turned mentor, who was more senior than me) overturned my decision and accepted their application. The company became one of the very first cryptocurrency exchanges.
Like a good mentee I took the time to understand why. My mentor took me out to lunch one day at the cafe next to our office. They were accepting a new shiny orange currency as payment: Bitcoin.
It was 10% cheaper to pay for my sandwich with Bitcoin than it was with dollars. The problem was buying Bitcoin was a pain in the butt. You needed to have a digital wallet and it was easy to lose your coins. My mentor bought some coins and paid for my lunch. I paid him back in dollars.
I said to him “how do you know how much our sandwich costs?” He then attempted to explain to me how Bitcoin derived its value. It seemed as though, one minute the sandwich costs half a Bitcoin, and the next minute it costs a full Bitcoin. I was confused.
Shortly after the sandwich, I met the crypto business who I’d declined. They were nice about it and very forgiving. I became fascinated.
Only weeks after, the finance industry banned all cryptocurrency. You couldn’t buy, sell or be a business that accepted digital currency. My mentor and I were devastated. Still, I held onto a few coins.
Right before the 2017 bubble I started buying more Bitcoin. I also started becoming fascinated with another coin: Ethereum. I bought plenty of those coins too.
Then I became overconfident and started buying all the small coins nobody had ever heard of. Most of those coins today are worth 80–90% less than what I paid for them. I see those investments as forced learning.
At the height of the cryptocurrency bubble in 2017 I made a decent amount of money quickly. Everybody was buying it. The IT guy at work who fixed my laptop for minimum wage was going all in. He was mortgaging his house to buy coins.
There was absolute euphoria. I felt uncomfortable.
Then… it all came crashing down. The price of all cryptocurrencies collapsed. I’m not going to lie: it felt terrible. I sold a little bit of my portfolio so I only kept the profits invested. That way, I didn’t care what happened going forward.
Winter set in. People stopped talking about Bitcoin. People said it was dead. People said governments would ban it. Still, an underground community kept the flame of Bitcoin and Ethereum going. I decided to do a crazy amount of research into the field.
Investing in an asset is only stupid if you don’t understand what you’re buying.
I let financial education make the decision for me. Here was my education into Bitcoin and Ethereum:
- Real-world experience with crypto through my 9–5 job.
- Books such as “Bitcoin Billionaires” by Ben Mezrich, and “The Bitcoin Standard” by Saifedean Ammous.
- Small time trading of both digital currencies.
- Talking to early investors in both currencies. (One of them knew Vitalik Buterin, the creator of Ethereum.)
- Video content on Youtube from the likes of billionaire Mike Novogratz, ex-Wall Street Hedge Fund Manager.
This Question Changed My Financial Future:
How do you protect your purchasing power? With code.
As I went down the Bitcoin rabbit hole I discovered why bitcoin was created. It was invented by Satoshi Nakamoto. I became fascinated with him, until I eventually worked out that Satoshi was almost certainly a team of developers, not one single person.
The Bitcoin creators became fed up with the existing financial system after the 2008 Financial Crisis, where the big American Banks were bailed out by the government for their reckless gambling on subprime mortgages. This event infuriated the Bitcoin creators enough to create the first ever digital currency.
The premise was simple: an internet currency, with no founder, that was fully transparent, that was publicly verifiable, with no banks in the middle to create trust, that was secured by cryptography.
The biggest trait of Bitcoin was this:
The inflation rate of Bitcoin was set in stone by code, not humans.
The only way to change the rules set out in the code is through a democratic vote where the network has to agree to change it. The chance of consensus on changing the code was almost impossible given how many voters there were. There have been several attempts to change the code that have all failed.
It took me years to understand why an asset that had no founder and a fixed supply was valuable.
I had to understand money printing. That is, where governments create money out of thin air to give out stimulus checks, finance infrastructure projects, and save the public from a pandemic.
Money printing was a hidden tax on currency.
And I worked for that currency, so therefore, it affected me. I realized Bitcoin was one way to protect the value I had created through hard work. Bitcoin was a store of value.
Bitcoin was a savings account for money not yet spent or invested.
The Moment Everything Changed
Up until recently my inner circle who know about my investment decision have called me a whacko. Then 2020 changed everything.
- PayPal enabled Bitcoin and Ethereum for their 300M+ users, making it possible for businesses to accept payment in both the currencies, and therefore opening up an entirely new market.
- Legendary Wall Street investors Paul Tudor Jones (coached by Tony Robbins) and Stan Druckenmiller invested a portion of their money.
- US companies listed on the stock exchange like Square and Microstrategy started investing their surplus company funds into Bitcoin.
- Grayscale Investment Trust began enabling large institutional investors to buy cryptocurrencies and hold them on their behalf. (They now hold $4.7B of Bitcoin alone.)
So, I am no longer alone in my prediction that an internet currency with a fixed supply, that protects users from inflation, may in fact have a significant role to play in a digitized financial system without any sole owner.
I have been hiding my investment strategy for six years because the traditional finance world used to believe Bitcoin and Ethereum was for crazy doomsdayers.
Clearly, in 2020, this narrative is changing so I’m coming out of the financial closet I’ve been hiding in. A new financial system is being created. It took me hours and hours of research to understand what the use cases were for both currencies.
Bitcoin is a reliable store of value like a savings account.
Bitcoin is digitized gold.
Ethereum turns the internet from a read and write platform into a read, write, and own platform which has the potential to become the plumbing for every app ever built in the future.
The old days of the internet were controlled by a few small companies. The future of the internet may very well be owned by its users and controlled by nobody. In other words, we’re moving from centralized ownership to decentralized ownership. This transition is fascinating to me.
The last point I want to make is that I only invest in Bitcoin and Ethereum. They both have the network effect, track record, security, and reliability. All other digital currencies remain unproven in my eyes.
It pays to understand the future of finance.
I have funneled 20% of my money into Bitcoin and Ethereum over the last few years. This one decision has given me the opportunity to never have to work again for money. It was financial education that allowed this to happen.
Learn about money and its future so you can protect your purchasing power.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.