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The Essence of Staying Stoic

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When times in the crypto market are rough and I’m getting twitter updates saying “EXIT ALL CRYPTO MARKETS” I like to think of the poem “If” by Rudyard Kipling. It’s about being a grown-up in the face of adversity:

If you can keep your head when all about you   

    Are losing theirs and blaming it on you,   

If you can trust yourself when all men doubt you,

    But make allowance for their doubting too;   

If you can wait and not be tired by waiting,

    Or being lied about, don’t deal in lies,

Or being hated, don’t give way to hating,

    And yet don’t look too good, nor talk too wise:

If you can dream—and not make dreams your master;   

    If you can think—and not make thoughts your aim;   

If you can meet with Triumph and Disaster

    And treat those two impostors just the same;   

If you can bear to hear the truth you’ve spoken

    Twisted by knaves to make a trap for fools,

Or watch the things you gave your life to, broken,

    And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings

    And risk it on one turn of pitch-and-toss,

And lose, and start again at your beginnings

    And never breathe a word about your loss;

If you can force your heart and nerve and sinew

    To serve your turn long after they are gone,   

And so hold on when there is nothing in you

    Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,   

    Or walk with Kings—nor lose the common touch,

If neither foes nor loving friends can hurt you,

    If all men count with you, but none too much;

If you can fill the unforgiving minute

    With sixty seconds’ worth of distance run,   

Yours is the Earth and everything that’s in it,   

    And—which is more—you’ll be a Man, my son!

My favorite line from the poem is “if you can meet with triumph and disaster and treat those two imposters just the same”- in crypto investing triumph would be the outstanding gains and greed and disaster the big corrections and fear. 

 When the storm has passed and times are good again and others are FOMOing into the coins you’ve been holding through thick and thin, you’ll have a level of great satisfaction and feel like a crypto OG. It’s widely accepted across the veteran crypto investing community that if you can hold onto your coins through a 50% correction, you’re a true crypto investor. In the first part of this year we have seen that correction.

I haven’t been a crypto investor as long as many others have, but I have been investing in the US stock market since 2005 when I purchased shares of the NASDAQ 100 index. The 2008 recession came and 40% of what I had was destroyed. But I held on. Today, those shares are up 5x from when I entered in 2005. In 2012 I graduated undergrad and started putting everything I could into my 401k. Ups and downs in the market came after that too, and I was able to hold, and thanks to that I’m well on track to retire comfortably. I strongly believe that cryptocurrency will gain more than the level of adoption it has now. Fully 70% of the world’s governments are looking into digital currencies- and they say imitation is the purest form of flattery. Why would so many major entities be so interested in blockchain technology? It isn’t because they’re stupid- it’s because they see the potential in the technology. Adoption of Central Bank Digital Currencies (CBDCs) will be a boon for private cryptocurrencies.

Zoom Out

 This is a favorite mantra of crypto investors when things are shitty and all of the bears are coming out and denouncing cryptocurrency as a store of value. It’s a reference to the fact that crypto has outperformed every big investing class in the last 10 years- granted, it’s a small 0 to 1 technology. If you’re a believer and/or investor in crypto, get used to the hate, the doubt, and the fear. Get used to reading headlines of fund managers warning about the coming crashes. Get used to friends and family thinking it’s bunk. This is the price you will pay for being early to a technology- but you will also reap the rewards. Unfortunately the field of finance is extremely tribal and often opinionated. Recently a WSJ article came out slamming Bitcoin’s returns since May with the following chart:

It’s pretty convenient that this article only showed April-July 2021. Let’s zoom out- not even a lot, just a little, to the beginning of the year. We’re currently in mid-2021. Let’s compare Bitcoin to Gold:

 Bitcoin

1/1/2021: $29,388 per coin

7/23/2021: $32,191 per coin (+9.54%)

Gold

1/1/2021: $1,893 per ounce

7/23/2021: $1,801 per ounce (-4.86%)

We have an outperformance of roughly fifteen percent- and that’s only zooming out a little bit. I think we all more or less know the story of when we zoom out a lot:

We see the 10x, 100x, 1,000x and 10,000x returns that Bitcoin has delivered. A fair amount of charts of the price of Bitcoin aren’t even linear charts- they’re exponential charts so they can capture all of the nuances of the price movements. Still, as an investor you should know that past performance and chart-reading is no true indicator of the future returns. The single biggest factor in future returns in your crypto holdings will be how many real-world problems blockchain technology can successfully solve and thus  global adoption of the technology. It won’t be about ‘wedges’ and ‘support and resistance levels’ and Wyckoff Distributions- it will be the fundamentals and the adoption of the technology, and the supply and demand dynamics that come with that. I’m definitely guilty of watching technical analysis videos on YouTube for crypto price movements, and a small group of people really do make a lot of money day trading crypto, but much of that doesn’t hold a candle to the bigger picture. 

When times are bad, remind yourself it’s ok to be scared and have doubts about your investments. You should also remind yourself that cryptocurrencies are much more than just stocks- there are actual technologies that aim to provide economic value to the world. Forget crypto, a history of hundreds of years in stock markets has shown us that when there are dips, prices will recover and things will move on. Question yourself about the reasons you’ve invested in crypto to begin with- if you’re a believer in what it can do, remind yourself of that!

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The Fear & Greed Index

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