Written By: Rodrigo Lopez
No matter what one thinks of Bitcoin or Blockchain technology, all investors (rookies and grizzled veterans alike) should thank the Cryptocurrency phenomenon for one thing: A crash course in investor psychology. As everyone has different experiences investing in cryptocurrencies, I’ve decided it would be valuable to others to share my experience.
Week 1: I read about Bitcoin for over a year and my curiosity was starting to get the best of me. I decided to spend the entire week researching the pros and cons of cryptocurrencies and the best way to buy and store.
Week 2: After conducting extensive research and teaching a Blockchain 101 seminar in the office, I convinced several other colleagues to take the plunge with me. We opened Coinbase accounts and set a 60/30/10 plan to invest in what we thought was a “balanced” portfolio. The plan consisted of allocating 60% in Bitcoin, 30% in Ethereum and 10% in Litecoin.
Week 3: Timing could not have been worse, we bought Bitcoin at the top – and it was downhill from there. Furthermore, I lost conviction in Litecoin and sold with a 40% loss to allocate the remainder into Bitcoin. I thought, “Hey, Bitcoin has been here for a while, I’ll balance my cost basis and wait for it to rally again.”
Week 4: Bitcoin continued to plummet and every time this happened people said it was a “buying opportunity.” I succumbed twice and didn’t want to continue losing money, so I decided to stay put/hold my positions. I was no longer willing to get caught in the trap once again, even though the thought of 1,000x gains was very tempting.
Week 5: After the famous “crypto bloodbath” of 2018 I learned that discipline, especially in investing, is key. Cryptocurrencies are a completely different story, they do not behave like financial markets and any attempt to analyze them in the same manner is futile.
In less than two months, I’ve lived through a full “market” cycle and learned humility, discipline and restraint. On a more positive note, my Ethereum has rallied almost 50% (Thank you, diversification).
I look forward to sharing my future experiences with novel currencies and hopefully have some upside to share as well!