Trivia: What is the median amount of time that someone holds onto Bitcoin?
150 days, or five months. For comparison, the median holding period for US stock is 1.06 years, and the median holding period for private equity firms that hold stock in portfolio companies is 4.9 years. This goes to show you that the vast majority of crypto investors (if we’re looking at it as an asset and not a currency) hold for very short periods. Many investors have become very wealthy with Bitcoin- but so many more would be way wealthier if they could have controlled their emotions and held. In a letter to shareholders, Warren Buffett once stated “our favorite holding period for a stock is forever.” Don’t take advice from angry youthful pontificators on Reddit- take it from someone like Buffett who is worth $105 billion.
Be part of the 10% of holders that holds on when things aren’t so great and reap huge rewards when things get better. Note the ‘New Buyer FOMO’ crowd is very likely the same as the ‘Panic Selling’ crowd. They lose money. It isn’t their fault- it’s how we’re wired.
I continue to believe that investing in digital assets is one of the most important, risky, and intelligent moves one can make in their life. The big coins of today might not be at all important 30 years from now, but I think as long as we pay attention to trends and understand the impact of things like Stellar Lumens (XLM) or Chainlink (LINK) we’ll have some fantastic opportunities to get in early on technologies that could see adoption by billions. In a portfolio of 10-20 coins, you may only need one or two winners to hitch a ride to the moon. But in the meantime, things can be nerve-wracking. Another price correction happens because a nation-state bans Bitcoin; the US government announces a go-ahead with a digital dollar initiative, or some over-idolized billionaire like Elon Musk tweets and prices tumble. It seems there is a never-ending stream of events that can cause the digital asset class to bleed- but this will change as the asset class grows, and it will be able to weather the storms far better. Even the May 2021 correction (45%) wasn’t the worst of Bitcoin’s history- from December 2017 to February 2018 the price corrected 59%, and from November 2013 to January 2015 the price corrected 89%.
In order to grow your wealth, you’ve got to be focused, you’ve got to be disciplined, and you have to be stoic. When I graduated from undergrad I had $50,000 in student loans and was on a $50,000 salary- I remember waking up in the night and thinking about how fucked I would be if I lost my job and wouldn’t be able to keep up with payments. My fear caused me to act- I signed up for a Dave Ramsey (a personal finance expert in the US) Money Management course, and took a job waiting tables at the local strip mall restaurant as a way to supplement my desk job income and pay down the student loans faster. The days of meetings in the mornings, spreadsheets in the afternoons, and taking food orders at night were long, but when you’re in your early 20s you can go nonstop until you tell yourself otherwise. It was a bold move, but it didn’t last- I burned myself out within two months after getting tired of getting yelled at by line cooks and getting tipped poorly by some of the customers. I quit the job waiting tables and decided to focus on my main job and pursuing a master’s from UCLA in aerospace engineering. The strip mall restaurant experience made me 100% more grateful for my desk job.
During the same time I made the decision that whatever I should do, it should be sustainable. After the Dave Ramsey course I was doing everything I could to max out my 401(k). Over the next five and a half years (2013-2018) the US stock market continued its incredible bull run and between the money that I had put in, the money my company had contributed, and the appreciation of my portfolio’s value, I had tripled the original amount of money I put in. The financial position generated by this effort made me comfortable enough that I was ready to use some of this to pay for going to Dartmouth’s Tuck School of Business for an MBA- because I also learned that top employers ($$$) in this country often swipe left or right on resumes based on the logos on your LinkedIn profile (top universities, certifications, previous companies).
Investing and making money was one of the best feelings I’d ever experienced. Crypto had the potential to provide this feeling and also existed at the intersection of finance and technology so it naturally interested me. Compared to much of the lot, I’m extremely new to crypto- but I’m not new to finance, technology and engineering since they’ve both been the focus of my career and graduate degrees.
Early in 2021, the cryptocurrency market had a huge boom. The price of BTC went from $29k on January 1st to $62k 100 days later, and many alt coins received 10x gains in the same period. The retail investing movement that took place on platforms like Reddit and Robinhood caught national headlines. Crypto and stocks that had intrinsic value soared; crypto and stocks that had no value at all also soared.
Be Disciplined, Patient and Stoic
It doesn’t take very long at all to be considered a long-term holder of cryptocurrency.
With investing, long-term is our greatest ally, and short-term our greatest nemesis. Unfortunately, 1 million years of human evolution has wired our brain to do just the opposite and think only in the short term. If you’re still under 40, small investments now after decades pass will form your basic level of economic security. Those tweets by Elon about Dogecoin and China FUD headlines? They don’t fucking matter. Albert Einstein, who knew about time and its relation to everything, said that compound interest is the eighth wonder of the world. The best things in life take time – whether it’s your investments growing, your writing skills improving, or your relationships becoming more rich. If you change the timescale of your crypto investing horizon, you change your life. You might think of 5, 10, or 20 years from now is the distant future. But those milestones are closer than you think.
Being stoic means that the winds will constantly change but you will stay the course. This means investing, which is different from “trading”. “Trading” is constantly making moves to get those dopamine hits (believe me, I know it’s fun!) and while it feels like you’re making progress and doing work toward building wealth, you’re not. Something like less than 5% of active traders make money. Of the 95% that lose, most can recover what they’ve lost, and for others it’s far worse. Warren Buffett would like others to pretend that they had a punch card with 10 spots to punch holes in it- with each hole being an investment decision you can make in your life. For me, it’s been my education, index funds in my 401(k), treasuries, and crypto. Buy it and forget it.
If you’re anything like me, you check crypto prices 100x each day. I’ve got CoinStats on my phone which ties all of my accounts into one place, and I also check CoinBase, statistics for this blog, and Google Finance to see how some of my stocks are doing. Looking at these things takes time away from me- something I’ll never get back. Bob Dylan once said that if a man can get up in the morning and do what he wants to do all day until he goes to bed at night, that’s what success is. I want my investments to grow- I don’t want to spend all day looking at my phone. The roller coaster of crypto can be hard on the nerves. Life is so rich, and there are so many other things that can captivate your interests. For me, I hated that after checking prices several times a day, it would make no difference. So I started writing about crypto and investing and technology as a way to actually practice a skill and grow an online presence to help with the excitement and anxiety that comes with crypto investing. I wish you all a balanced and healthy day. And remember- take profits on the way up, but never sell all your crypto completely. You’ll be sad if you do!