People freaking out about Bitcoin’s price aren’t applying timeless principles of investing, and they will suffer catastrophic losses either in Bitcoin or some other economic venture. They are using short-term thinking and a trader’s mindset rather than an investor’s mindset.
Cryptocurrency isn’t magic. It isn’t special. It’s an investment, and like every other investment class, certain timeless principles apply.
Investing is a mindset, as is trading.
Traders think they will buy at the lowest point and sell at the highest point. They are speculators, and 99% of them will lose it all.
Investors make intelligent, calculated purchases of assets, realizing you’ll never buy a the lowest or highest point.
To paraphrase Warren Buffett, “It’s far better to buy a wonderful investment at a fair price than a fair investment at a wonderful price.”
Dollar cost average into a new investment class.
Dollar cost averaging Bitcoin
Let’s say a person bought at regular intervals, disciplined.
- May 12, ’18 – $8,441
- Sep 12 ’18 – $6,354
- Jan 12 ’19 – $3,686
- Apr 12 ’19 – $5,061
Average purchase price – $5,885
Today’s value – $7,135. BTC Up 21% vs. S&P 13.5%
Diversify your holdings.
Bitcoin and crypto was never more than 10% of my holdings. My portfolio includes stocks, bonds, crypto (including some sh*tcoins).
Set a reasonable price target.
I expected Bitcoin to hit $10,000 by 2020. Thus I stopped buying at $3,200 because then my gains would only be 3X. Bitcoin rose quicker than anticipated. I began selling off Bitcoin, as my investment hit its price target.
Listen to my Bitcoin podcast.
Take your gains.
Once long-terms capital gains rates kicked in, I began selling Bitcoin at $9,000 and continued selling up to $16,000. I sold off 50% of my investment. I’m so far up on Bitcoin that my current holdings could go to zero, and I’d be up far more than if I had invested in the DJIA, Nasdaq, or in real estate.
Bitcoin was a once-in-a-generation investment opportunity for the common man. That’s why when it hit $700, I wanted everyone who read me to buy some. Opportunities like this almost never come up in a lifetime.
Pay your taxes.
I have no idea why people think they’ll get away with tax evasion. Bitcoin gains are taxed like every other investment — either long-term or short-term capital gains.
Yes, these investment principles are covered in Gorilla Mindset, which contains a chapter on money.
If you invested in Bitcoin the way I did, you’re not following the price daily and don’t care about day-to-day fluctuations. You’re focused on its long-term store of value.
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Mike Cernovich is a journalist, author, and filmmaker.
His Bitcoin wallet is here: 1AUR4tyzDaiAG6inAMgStVX5TyBCLXeFcj
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