99% of the time, someone who shares a story about his investment growing 1,000% in one year is a conman; trying to get you to invest in his get-rich-quick scheme.
Well luckily you know I’m not a conman. But in case you’re not sure, how about you finish this article first — and then we make a decision. Fair?
It’s ironic, because maybe as recently as 1.5 years ago — if you told me of an investment that would rise 1,000% in a year — I would say: SCAM!
And yet, here I am — with >1,000% gains on my first money into Bitcoin.
This is the story of my one year-ish journey into the world of Bitcoin and cryptocurrencies. And here’s what I think you need to know.
Explain Bitcoin to Me (in the Simplest Possible Way)?
Okay, first a refresher.
I get this question all the time nowadays. And looking into my crystal ball, I’m gonna be talking about this a lot more very soon. So here’s my elevator pitch on what Bitcoin is:
- Bitcoin is the most famous kind of Internet money. It solves several weaknesses traditional money has, using clever science techniques like cryptography.
- Now think about how the Internet connects people all over the world. Bitcoin has several features which makes it just like the Internet:
a. It runs 24/7. You can’t switch it off.
b. It depends on a big number of connected computers all around the world.
c. These computers work together to give value to people like you and me.
Here’s an Analogy to Explain Further
Imagine a small village of 10 people, where money as we know it does not exist. Instead, the people there use their own currency known as “Stones.”
Everyone cares about security very much, so they’ve developed a very interesting way to use their Stones. Each villager has a special book called a “Ledger,” in which he/she records down any movement of Stones for the entire village.
And because they care so much about their money, every day all 10 villagers will meet for a “money discussion.” In this meeting they will review all movements of Stones (transactions) throughout the day.
Because it’s a democratic village, there is no “Chief.” Instead, all the villagers work together to track the Stones. At the end of the meeting, the villagers will agree on what happened during the day. And then everyone will update their books to show the same information.
Example: Alice Sends Money to Bob
Let’s say Alice decides to send 2 Stones to Bob on November 23rd. This is what would happen at the day-end meeting:
- “Hey everyone, I gave 2 Stones to Bob today for my new haircut,” says Alice.
- Everyone checks to see if Alice’s new hair makes her look prettier or not. Then they check their Ledgers (special books) to see how many Stones Alice had before. It turns out she had 15 Stones.
- “So Alice, now that you’ve given 2 Stones to Bob, you only have 13 Stones left,” says Carol (another villager). “Hey everyone else, can you check that this is correct?”
- “Correct. We can see from our Ledgers that Alice used to have 15, so now she has 13. Meanwhile, Bob used to have 10 Stones, so now he has 12,” comes the reply.
- “Okay everyone, let’s all update our Ledgers. Nice haircut Alice!”
- So Alice, Bob, Carol (and all the other villagers) write down this new information into their Ledgers. Then they move on with their happy lives; any further movement of Stones will be discussed during the next day’s meeting.
The cool thing about this system? It’s much more secure than if one “Village Treasurer” was appointed to write down all records of money. (What if he’s a dishonest Treasurer?!)
So in case anyone loses their special book, someone steals Stones, or maybe even a bad villager tries to create fake Stones — all the villagers need to do is to go to the meeting and check their books together. Those Ledgers hold the “ultimate truth.”
There’s strength in numbers.
As you can probably tell, Stones are an analogy for Bitcoin. And if you’ve ever read the term “blockchain,” those are the “Ledgers/special books” that every villager has.
Just like in our happy village, all Bitcoin transactions are first verified by a bunch of people together. The verified transactions are then updated into the blockchain, so we know how much Bitcoin everyone rightfully has at a certain point in time.
But the really amazing thing is that instead of limiting it to a small village (where meetings happen once a day and everyone trusts each other), we can use technology to expand this system to anyone connected on the Internet.
It’s fast, and doesn’t need any “Village Chief” or “Treasurer” to act as the boss.
What Made Me Buy Bitcoin
But enough about the geeky stuff. If you wanna read more about that, check out my article here.
Let’s go back to September 2016, and talk about my reasons for buying Bitcoin.
It might surprise you, but when I first put money into Bitcoin, I wasn’t really expecting it to go up like crazy. Instead, I put money into it because:
- Most of my investments prior to this were in Malaysian ringgit. Well guess what happens when the Ringgit loses value. (Right — my investments lose value too.) Hence, I was looking for non-Malaysian-dependent investments to “hedge.”
- I found the idea of decentralized “Internet Money” fascinating. I’m very much a geek at heart — and the technology behind Bitcoin just blew my mind.
- I had some extra money to “play” with. And by this I mean money that I could afford to lose — even if it goes to 0.
I know that “play” money sounds arrogant. But if you’re not financially secure, you shouldn’t play with high-risk investments.
Thankfully I’m doing okay financially. So I started small — with an intention to learn.
My First Bitcoin Experience
When I first bought in, Bitcoin was selling for USD 567 per bitcoin (BTC). I thought it was freaking expensive. Especially considering how it used to be in the USD 200-300 range for most of 2015.
But I also really wanted to experience cryptocurrency “investing.” So I opened my friend Suraya’s article and followed the step-by-step instructions on how to buy Bitcoin.
It was uncomfortable. I might be the kind of person who tries risky things with my career, but I’m usually very conservative with my money. Would I lose all my money and regret it in one year? I reminded myself this was money I could afford to lose — but the learning might be priceless.
I made sure the bitcoin transaction went through, the BTC was safely in my wallet — then I shut down the computer. Over the next few days, I would occasionally look at the price of Bitcoin, and play around with my bitcoin wallet.
Then after a couple of weeks, I just let it be.
On the Way to the Moon
Before 2016, the highest Bitcoin had ever gone was USD 1,242 / BTC. This was back in November 2013, when the infamous Mt. Gox exchange hadn’t declared bankruptcy yet.
After I got in, Bitcoin rose steadily (though “steadily” in crypto terms means “OMG CRAZY” in traditional investing) till the end of December 2016. But Quarter 1 2017 was when it really started to get mass attention. Why?
In March 2017, Bitcoin set a new all-time high at USD 1,290 / BTC.
I was getting hooked. At the same time, a young cryptocurrency called Ether was taking the world by storm. I felt I needed to get in too.
In April 2017, ~8 months after my first investment into cryptocurrencies — I bought my next portion of Bitcoin and converted some into Ether. The price of Ether at this point was about USD 92 / ETH.
Meanwhile, Bitcoin’s price had already almost tripled to USD 1,444.
Sell, Buy or HODL?
At this point, I had a decision to make. I had it for less than a year, but Bitcoin was already the best investment I had ever made with my money. Should I sell?
(For comparison’s sake, if I had a more conventional investment like stocks giving 8% a year — it would take me ~15 years to triple my money.)
Like most fans, I started reading everything I could about Bitcoin on the Internet. I read how “gurus” like Vinny Lingham predicted Bitcoin would hit USD 3,000 by end 2017. I read how legend John McAfee predicted Bitcoin would hit USD 500,000 in three years, or he would eat his d*ck on TV. And I also read how skeptics said Bitcoin was worthless and this was all a huge bubble.
There are a lot of extremely smart people predicting the future of Bitcoin, but ultimately I realized that no one really knows. Stock markets have existed for more than 200 years, but can anyone really predict stocks accurately? And Bitcoin is just 9 years old.
I made a promise to myself: I would only put in money that I was willing to lose. And because I believed in the long-term prospects of Bitcoin and cryptocurrencies, I wouldn’t lose myself in the emotions of wild price fluctuations by becoming a trader. I would hold.
So I became a HODLer.
How to Triple Your Money in One Year
Last month was the one-year anniversary of my first Bitcoin investment.
I’ve continued to put in money periodically, similar to how stock market investors use dollar-cost averaging. Yes, I sometimes try to “time” the market — but usually end up feeling stupid, because it’s too unpredictable to get in at the “right time.” Looking at prices drop after I’ve bought makes me feel like shit too.
How do I deal with fear, uncertainty and doubt? By reminding myself I’m investing for the long term; and it’s money that I’m prepared to lose.
I’ve also invested in other cryptocurrencies apart from Bitcoin and Ether. I really like several interesting projects like decentralized computing (Golem), decentralized storage (SiaCoin) and Blockchain-as-a-Service (Stratis).
And who can forget NEO, the so-called “China killer app” that can do everything Ethereum does and more! Naturally, I bought into NEO at its all-time high, and then it crashed. I’m still waiting for it to recover. 🙁
So win some, lose some. Based on yesterday’s prices, my cumulative investments have quadrupled (4x) in value so far.
But Wait… You Said 1,000%
Yeah, and here’s an important lesson. I’ve been writing online for a couple of years now. In that time I’ve analysed lots of headlines and written hundreds of headlines myself.
You can write something that is very true, and still adjust it to become as sensationalized or as boring as you want.
The truth is, my first money into Bitcoin (from Sept 2016) is up >1,300%. But the latest amount I bought (early Nov 2017) is obviously not.
I could have made my headline click-baity like below, and it’d still be true:
- My Bitcoin investment just went up 1,300%. Find out how!
- Stock market investors HATE him for making so much in Bitcoin!
- 10 Secrets of Bitcoin investing for beginners!
I could also have written it as boring as:
- How to make money slowly with Bitcoin
Why am I telling you this? Because you’re gonna see a lot of crypto news/articles/videos in the coming weeks and months. And a lot of these publications will try to steal your attention in sometimes irresponsible ways. So please stay away from articles that shout “Now everyone can be a Bitcoin millionaire!”
But what’s even worse than irresponsible headlines is this: people are gonna try to cheat you of your money — in the name of Bitcoin.
How to Tell If It’s a Scam
I can already see it happening. People are gonna come up with all kinds of exotic Ponzi/MLM schemes and say it’s backed by Bitcoin (or the latest “hot” coin). No my friends, stay away from the dark side.
- They promise you guaranteed returns. Especially if it’s big guaranteed returns. Anything above 4-5% per year (that the boring banks promise you via FD) is considered big. There are no guarantees in life bro.
- The only thing “good” about the investment is the price is expected to go up. It brings no benefit to people except a means to gamble.
- The people behind it are shady. (You know who I’m talking about.)
- You need to recruit people to join…
If you wanna buy a cryptocurrency, you don’t need additional “upline” or “downline” to take care of your money. You can buy it directly from someone via a peer-to-peer platform like LocalBitcoins and then hold the cryptocurrency yourself.
Or if you’re like me and prefer using an Exchange, you can buy your Bitcoin directly there. You can even change from one cryptocurrency to another (e.g. Bitcoin to Ether) using Exchanges.
If you’d like a recommendation for an exchange, I’m a true-blue Luno supporter. Use my referral code here. (Buy more than RM 250 and we’ll both get RM 5 as a reward.)
Should You Buy Bitcoin?
I’m not a financial adviser, so please take my advice with a pinch of salt. Actually, please take anyone’s advice with a huge pinch of salt — even so called “experts.”
Here’s what I would do if I were you…
Make sure your basic finances are in order first, like:
- No credit card debt.
- Have 3-6 months’ worth of expenses in emergency savings.
- Own some other safer investments like Amanah Saham (Government Trusts) and ETFs.
If you’ve satisfied the above, then only would I recommend you consider high-risk investments like Bitcoin. But even if you’re ready to buy, please don’t go all in yet.
When I first bought Bitcoin, I bought a sum that I was comfortable to “test” with. (No, you don’t need to buy a whole bitcoin. You can buy small quantities of it down to 0.00000001 BTC.) Use this money as a learning opportunity. Plenty of things to learn such as:
- How to buy/sell Bitcoin.
- How to transfer it to other wallets anywhere around the world.
- Keeping your Bitcoin safe.
- What to do if you forget your password.
- How to convert Bitcoin into (and buy) other cryptocurrencies like Ether and Monero.
Yes, you could read up on all the above even before you get into Bitcoin. But without skin in the game, you’re probably not gonna be as motivated to learn right?
If Yes, How Much Should I Buy?
You’re gonna have to do your own research and make your own decisions on this one.
Some very smart people say put 1% of your net worth into it, and see what happens in a couple of years. If you’re young and have lots of spare cash (lucky you!), I think you could probably afford a little more risk. But again, this depends on what kind of investor you are, and how much potential pain you’re willing to live with.
Personally, I can’t tell you exactly how much I’ve put into Bitcoin/cryptos. What I will say is — the money I’ve put in is a very small percentage of my net worth. Below 3% of it.
Meaning, even if it all crashes down to 0, I wouldn’t be badly hurt. Yes, I’d be f*cking pissed and very surprised — but financially I’d still be okay.
p.s. Please don’t ever borrow money to invest.
The Future of Money?
Yesterday, the price of Bitcoin touched $8,000 for the first time ever. Ether was hovering around $350. People are already predicting a $10,000 Bitcoin, and many analysts say big institutions are gonna start pouring money into Bitcoin soon.
(Yes, most big market movers like banks, pension funds and mutual funds haven’t even joined this roller coaster yet.)
Will we ever see the $1 Million Bitcoin predicted by Silicon Valley’s first believer, Wences Casares? Will John Mcafee eat his d*ck on TV because Bitcoin drops to 0? And will big banks start to embrace cryptos, or end up like what Amazon did to bookstores?
I don’t know. But I know the world is changing; a lot faster than most of us ever expected. We’re in for a wild ride, so hang on tight.
What an exciting time to be alive!
– – –
- My Love Affair with Bitcoin and Cryptocurrencies
- 30 of Your Bitcoin Questions — Answered (with Webinar)
Buying Bitcoin in Malaysia? Use my Luno referral code here.
(Buy more than RM 250 and we’ll both get RM 5 as a reward.)