People freaking out about Bitcoin’s price collapse 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.
I began acquiring Bitcoin at $500 per coin, and continued buying up to $3,200. I bought at regular intervals.
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.
— — —
Mike Cernovich is a journalist, author, and filmmaker.
His Bitcoin wallet is here: 1AUR4tyzDaiAG6inAMgStVX5TyBCLXeFcj