The Problem With Bitcoin Is You

in #finance6 years ago (edited)

I published my first article on Medium yesterday. I am pretty proud of it, and I invite you to pay it a visit. I've put up some SUP coins (@kryptonia) and a Steem Bounty (@steem-bounty) to support my readers. To get a share of the bounty, leave a (genuine, not copy-paste) comment below. To get the SUP, complete my task on kyptonia.

Full article:
https://medium.com/the-crypto-times/https-medium-com-laurahackle-the-problem-with-bitcoin-is-you-8a73aafc6f22

Recently, a friend asked me if I still owned crypto.


Yes, I answered without hesitation, though it’s not nearly as much as I would like. My budget has been tight, and of course it is not growing like it was before.
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Photo shared with permission from Troy Emmi at Fanboy Collectibles

My friend had sold his own stack of Ethereum, at a moderate gain from when he’d initially bought in, but a disappointing drop from the all-time-high. The price dropped much further and he was glad he’d sold, but obviously still thinking about it.

I stopped short of advising he buy more soon, at those low prices. What do I know? I am not a financial adviser, so don’t even think about taking my advice on what to buy. I am, however, a specialist in human behavior. So if you want to succeed in crypto, listen up.

I’m going to tell you something that’s been bothering me since I bought my first bitcoin (technically, my first 0.03 BTC). It began as a little fear we’ve all had at least once: “this isn’t real money.” I am convinced now that it is better than money, but there is still a big problem with Bitcoin.

For simplicity, I’ll use “Bitcoin” to refer to cryptocurrencies in general. Bitcoin still rules the markets, as this month proved yet again. It may well remain the primary exchange unit as crypto catches on.

The real problem with Bitcoin is you


You, me, anyone who reads “you want to succeed in crypto” and thinks, “yep, that’s me.” We have several problems that run deeper than blockchain. Not problems of understanding, but of attitude. We’d better face them if we’re going to realize the true potential of this new technology.
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Photo by Andre Francois on Unsplash

Problem 1: You don’t know if you are gambling or investing


If you’re gambling, you are taking a chance on winning big. You decide how much you’re willing to risk, and when it runs out you go home. If you’re investing, you expect a return on the money you put in. Because you expect it to grow you don’t take the money out, at least not for a while. In fact, you usually add more over time. The money you invest is used by someone to produce something of value, and that’s how your investment grows.

My friend and I each started buying crypto last year, well before the peak, but at a time when things were growing it was easy to believe in our investments. As prices fell, we each began to treat our portfolios more like a gamble. My friend hit his limit, cashed in his chips, and went home. I held on, but stopped adding more. Missing the growth I’d seen before, I played at swing trading, trying to catch the highs and lows. I won some and lost some. I learned a bit about altcoins, but my portfolio didn’t get any bigger. I didn’t do what is required to grow an investment; I didn’t invest.

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Photo by Mark Finn on Unsplash

Problem 2: You want to get something for nothing


I was waiting for the “right time” to invest more in Bitcoin. Last year, as I watched my investment double, twice, it seemed any time was the right time. 2018 so far has been different. We don’t know what will go up in value, and when. Looking for the best opportunity to grow your money, it’s easy to miss the whole point.

Bitcoin, like all money, represents an exchange of value. Create something that people value, deliver it consistently, and you’ll have money. It might seem complicated in our current economy, but it’s really that simple. There are lots of ways to create value for people, but putting your money in an exchange and watching it daily isn’t one of them.

This was the fear that nagged at me when I started to invest in cryptocurrency. Invest in what, exactly? In other people holding onto hope? This is why the old school financial folks talk about Bitcoin as a bubble.

At some point, somebody has to do something to create value.

It was fun watching money grow with no effort at all. I know you miss those days and long for their return. It happened before, and it could happen again. I hope it does, but hope is not a plan. You can get more out of this crypto economy than you put in, just be willing to put something in. Something of real value, like your time, your creativity, your craftsmanship.

nikola-jovanovic-631527-unsplash.jpg
Photo by Nikola Jovanovic on Unsplash

Problem 3: You keep looking for reasons why the markets do what they do


I am no happier with that Mt. Gox trustee than you are. I agree that bitcoin futures trading was a sneaky way for big banks to get a big foothold in an asset they’d ignored for too long. While interesting to read about with my morning coffee, these external factors have almost zero impact on my own ability to build wealth.

It is tempting to place responsibility for your current financial situation outside of yourself; it absolves you of having to do anything about it. Tune in to your reactions when you read about market influences. Does this news affect what you are going to do, or is it a distraction?

Markets are still down. For anyone who believes in the role cryptocurrency has in shaping the new economy, this is a punch in the gut. However, if your strategy for building wealth and ushering in this new economy requires that the markets always go up, I urge you to reread problems 1 and 2.

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Excerpt from “Religion for the Nonreligious” on Wait But Why by Tim Urban

Problem 4: You cannot imagine the true potential of cryptocurrency


No one can. Even if you’re excited about its potential, your frame of reference comes from a past where blockchain didn’t exist. When the printing press was invented, new Bibles could be printed and distributed more cheaply and easily than ever. This was important, but it doesn’t even begin to describe the value that grew from that new information technology.

In 2003–2005, cameras were added to cell phones. It seemed expensive and unnecessary at the time. It wasn’t easy for the average user, and it took a while to catch on. Yet within 10 years you were streaming video, and your phone was completely transformed. If blockchain currency seems about as clunky as camera on a phone, consider this: it wasn’t that a camera wasn’t useful on a phone. It just didn’t fit with our outdated concept of what a phone is and what it does.

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Photo by Quino Al on Unsplash

When blockchain applications are more widely used, I believe we’ll find our entire concept of currency has transformed.

What do you think? I pose some solutions in the full article, I hope you will take time to read it. Or, seeing how you savvy Steem users are a big inspiration for this article (and the solutions to the "problems" listed), let's hear your ideas!

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All you need is: patience. The Age of crypto will come!

I truly believe time for easy money is gone in cryptos. This year or for few years to follow, no one will become millionaire by investing 100$. If you set a more realistic goal like doubling your money in 2018, that can still be met. Don't give up on swing trade. I have found my gut feeling to be the strongest weapon when doing swing trades.

Yeah I believe you are right. Double would be fine with me though! Thank you, swing trading was pretty fun. I need to develop my discipline though so I am not prone to panic if I guess wrong.
For example, I sold some MANA on an uptic and bought more on a dip. It dipped further, so its easy to feel regret and want out. But my gut says this one will come back as soon as the whole market does.

In swing trades i have realised its important not to buy back in too early. I made same mistake with ARK

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Thanks for the bounty. I am using dustsweeper. Its an awesome service.

Well written article!

That is what I'm praising all day long. To many people with literally no clue are involved in the market and that lead to an overvaluing at bullish times. Also like we saw in resent times bad news or rumors have a huge inflict on the market movement.

Thank you. I was finding myself frustrated and a little resentful seeing the market stay flat, and I wrote this partly to remind myself that money mostly comes from doing something valuable, not from being in the right place at the right time.

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For me the problem with Bitcoin is his price instability.

example:
Would you buy a house for 200.000 € if there is chance that your 200.000€ could be worth two houses the next week?

This is true of Bitcoin, though there is also a chance it goes in the other direction.
It's funny you should use the house example, since in 2005 I bought my first house for around $250,000 and three months later the house was worth less than half of that. It contintued down for a while and still has not risen above that initial figure. We no longer own the house.
The experience has definitely soured me on the investing advice that was given to my generation.

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You have some terrific blogging skills.

Don't stop investing, it's the dollar cost averaging that will win it for you in the long run. Start diversifying too. There are many people who think investing in cryptos is different than securities, it's not, it's still investing. There are are also many options available beyond Bitcoin. Use this downturn as an opportunity to do more research and spread your bets. I'm not giving up, I'm doubling up

Thank you. This is also what I'm trying to tell myself. (When I write in the second person, it's usually aimed at myself first.) So I really appreciate the encouragement.

Securities feel like a bigger barrier-to-entry to me, maybe that's just an error of perception. I do have an IRA and a mutual fund, but I don't put much into them.

Crypto for me seems to be replacing the savings accounts I learned about as a kid, the ones with the compounding interest. Want to know the results of compounding 0.1% interest on an investment of $200? I'll tell you what - enough to make a whole generation want to say screw it, we'll take our tuppence and use it to feed the birds instead.

Crypto may be the investment choice for the next generation but since you are American, look into purchasing a cryptocurrency Exchange Traded Fund(ETF) in your Roth IRA or 401k. Such an investment vehicle would include any company that is utilizing this technology. Everyone is trying to find the next Google or Amazon but it may likely be Google or Amazon which benefits the most from this technology and other already NASDAQ listed securities. A lot of these tokens don't represent a claim to profits and are open-sourced so anyone can steal their business and monetize it.

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I think of Steemit as a true proof of concept for crypto. It shows that a cryptocurrency can be tied to "real" work and real world value, and that it can power a project in ways that wouldn't have been possible without it. My Bitcoin is staying right where it is in its wallet. If it appreciates in value one day or becomes liquid in its own right, great. If not, then no big deal. I believe that crypto is here to stay. It might not ever have that enormous bull run, but maybe it will. I don't measure Bitcoin's value in terms of dollars, and I don't stress about what it's doing relative to the dollar. If I can say that I'm motivated at all by that, it's mostly in the sense that it represents a dream for me. I don't expect that I'll make money off of what crypto I have, but I know that as long as it's there, it's a possibility. It's not really a gamble and not really an investment; it's something inbetween.

I'm totally with you on the utility of Steemit! It's a major inspiration for this article.
I also can see plenty of shades of grey between gambling and investing. I almost got into it in the piece, but it was already long enough.

I would like to see my crypto (including STEEM) as an investment, and I do if I consider returns in the form of experience, learning, confidence. Financial return would help a lot, though.

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I think crypto is just like any other business... You get better, by passing through experiences. Sometimes, you just trust your instincts. And just like every other business offline, you win some and loose some. It's all calculated risk.

This makes sense. I have learned a lot about both crypto and business this year. The best and worst thing about both is that my productivity is almost entirely up to me. There are things I cannot control, but my strategy and consistent effort seems to matter more than anything else.

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Problem 1: You don’t know if you are gambling or investing

We are doing both. Every investment is a gamble.

Problem 2: You want to get something for nothing

Hell yeah I do and I can .... I got allot of my cryptocurrencies from doing bounties. I started with investing at the wrong time and my investments have since lost about 50 % of there value. So not wanting to take a loss and sell my coins I decided to find another option. Hold and gain more for FREE. I made over $1200 from a single token doing bounties for the project and recouped all my losses.

Problem 3: You keep looking for reasons why the markets do what they do

The crypto market is crazy. I won't even attempt to try to understand it. I do believe in crypto but I also believe once a handful is widely accepted the rest will be left in the dust being worth next to nothing.

Problem 4: You cannot imagine the true potential of cryptocurrency

The potential is endless. A currency that can used world wide without interference of banks and next to no wait time to do those transfers.Sounds awesome don't it. I think the bigger problem is getting people to accept this massive change from a physical fiat to a digital crypto. People in general fear change and moving towards cyrpto is a big one.

Love this response!

Me: You want to get something for nothing
You: Hell yeah I do and I can ...

Now that you mention it, I see nothing wrong with wanting to get something for nothing. My problem comes with expecting to get something for nothing.

I actually don't think you are doing that. Bounties exist because someone values the action you take to get the bounty. I was willing to put down a bit of SBD because I want my article to be seen and have a better chance of upvotes and future readers.

Your strategy will work because you invest your time productively and hold on for a market upturn.

I think the bigger problem is getting people to accept this massive change from a physical fiat to a digital crypto.

Totally. I think the change is hard cause it's more than just a change from physical numbers to digital ones. I've done mostly digital banking since the 90s, but with fiat. But now we have tokens that carry other information, like reputation, game data, ...??? I have a feeling we are headed for a future with multiple currencies that we use for different purposes (though I suppose there will be a few main ones that emerge as the most stable exchange for the others).

  • I don't like the mentality of expecting something for nothing either.

  • Agreed but while its true most have been doing digital banking for some time now we can still go to a bank machine or teller and have the physical fiat in our hands. The majority of things we have that hold value are physical objects. .. Gold .. Silver .. Fiat . Crypto is much different and scary to invest large amounts of money in for most people due to the fact there is no actual object that you gain when you give the seller your fiat money for it.

You will receive a share of the bounty in 2 days. I have upvoted each comment on this post proportionately to how much you engaged me, made me think, or made me smile.

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I guess I didn't quite understand how to allocate the bounty vote, so you all got an equal share. For what it's worth, I attempted to make your comment the "winner" by waiting till I had full 100% voting power before voting you.

I am saving my remaining SBD for a @steemmonsters starter pack, or I would send you a gift. Would you like a monsters booster pack? I won some in a contest!

Thanks for the bounty. The @steembounty is a new project and is still a learning process for many of us. Thanks for naming me the winner :) I think if you have low SP ( like me ) your vote pretty much gives the same amount of the bounty away regardless of where our VP is at.

I have one monster card in which I won on here from @monsterworld giveaway. Its seems like its going to be a big game. I was never one for playing these type of card games but I might look into this one. No need in sending me one of you packs for winning your contest here. I got a share of the bounty as you advertised.

You have gained a follower.

Thanks, as have you.
I think the game is going to be huge. They are generating lots of excitement, and drawing in a lot of talent to work on the storyline and art work. Their leadership is solid too, from what I can tell being inside some of the writers collaboration channels.
Good for steem!

Whenever there is innovation there is always an acceptance gap. Is the new tech going to be the next big thing or a flop? Which tech should get my money? In an environment built partially on confidence, the timidity of the mob mentality can be both defining of the situation and inhibitting to acceptance. Its not until a tipping point is reached where the early adopters are percieved as the proof of value to the general populace that will lead to mass adoption and acceptance. We are the vanguard and I dont know what the tipping point will be, but I have a feeling its not distant in the future. I am old enough to remember when text messaging was a novelty that no one was going to use! But as services become readily available and reliable and early adopters proved its worth, now it is a prolific form of communication that we lived without 20 years ago! We are experiencing fintech Darwinism at the moment square within the acceptance gap, waiting for the tipping point. Thanks for the article @wholeself-in, it really got me thinking!

I agree, we are right at the edge of what will eventually be mainstream.
I remember thinking cameras on phones were silly, but I had 2 generations of "handheld computers" in 2003-5 before technology caught up and combined all those functions into a phone.
I think whatever emerges will not quite look or act like what we are using today, though the roots of that thing already exist.

You will receive a share of the bounty in 2 days. I have upvoted each comment on this post proportionately to how much you engaged me, made me think, or made me smile.

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If your vote is valued at less than $0.03, I recommend the @dustsweeper service. Dustsweeper votes will not affect the bounty, but will ensure the 1 and 2 cent votes you receive are actually paid to both you and your upvoter.

enjoy reading your post, this is great because you did a very broad analysis on this whole world of cryptocurrencies! good ideas about possible alternatives, and the realistic scenario of low and high and totally agree about investing, is something necessary if we expect more of this. I agree that this is part of the future and it's just beginning, I loved that dimension between betting and investing. It made me realize some things! no more to add, good post greetings, I liked it! Reest for you!

Thank you for reading and commenting. Keeping to a regular schedule of saving/investing has been hard for me. I think crypto has helped, since it is more motivating when you can see a real return! I guess that made it hard for me to keep going through the downturn. Still working to change my own behavior.

You will receive a share of the bounty in 2 days. I have upvoted each comment on this post proportionately to how much you engaged me, made me think, or made me smile.

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If your vote is valued at less than $0.03, I recommend the @dustsweeper service. Dustsweeper votes will not affect the bounty, but will ensure the 1 and 2 cent votes you receive are actually paid to both you and your upvoter.

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