My Greatest Investment Loss Ever & The Lessons I Learned

Tags: Mr Stingy

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On the 8th of January 2018, I invested RM9,000 into a mix of 9 promising cryptocurrencies. You’ve probably never heard of their names, though I admit some sound pretty cool, like “Stellar Lumens” and “ICX.” (Yes, apparently we still live in an era where putting “X” into anything is supposed to make it cool.)

Today, almost three years on — that RM9,000 is worth ~RM1,046, an 88.38% loss. It gets worse if you break it down by individual cryptocurrencies, as we’ll see later.

What happened? How did we get here? Why did someone who publicly calls himself stingy burn money on some crazy trades?

This is the story of my greatest investment loss ever.

Throwback to Q4 2017

In Q4 2017, crypto markets were at an all-time high. If you think the hype surrounding crypto today is crazy, you probably don’t realize how insane it was when Bitcoin was touching 20,000 USD. But while Bitcoin was (and has rightfully remained) king of the cryptocurrency world, there was something even hotter in the space.

People called them ICOs: Initial Coin Offerings. An innovative way to raise money for startups by giving investors cryptocurrencies (tokens/coins) in exchange for cash. Unlike traditional finance, everything was 100% done online. You didn’t have to walk into a bank or heaven forbid — even sign a single form.

Get into the right coin, and you could 10x your investment within months. Put enough into the right ICO and get out correctly, and you could retire.

Never mind the lack of government regulation and other red flags. “F*** the old ways of investing in startups. Too slow, too many rules, and too many greedy consultants sucking up fees. F*** that and f*** the boomers.” This was the start of a revolution. And I wanted in.

Additionally, I had just made about RM9,000 of clean profit through a business venture. I was thinking, “This is profit money. I can afford to take risks with this.”

It was my chance to get rich quick. Only one question remained: What was I going to invest in?

Gambling is fun, especially if you think you can win

This isn’t an article on how to value cryptocurrencies. But if I had to give you my hot-take assessment of the thousands of cryptocurrencies that exist today, I would say:

A few might change the world. Some would argue Bitcoin already has.
2% might become viable projects.
Probably >97% will fail.
Some are outright scams (Or as Margot Robbie in The Big Short called subprime mortgage bonds: “Shit.”)

Of course I know this today, but back in the euphoria of December 2017, this was the furthest thing from my mind. All I could think of was prices going UP.

I already owned the two most important cryptocurrencies — Bitcoin and Ethereum — which had already given me profits of >500%.

But I wasn’t satisfied. No, I was going after even bigger gains. For that, I needed to buy newer cryptos that had potential to go up 1,000%.

So I dived into the research to figure out which coins to invest in. And by “research,” I don’t mean reading investment analyst reports by JP Morgan. It wasn’t even 800-word articles on CNBC. F***, I was watching “Top 10 Underrated ICOs” YouTube videos and reading “Hottest ICOs This Summer” articles on dodgy websites.

So many coins, how to choose? I decided I was going to play amateur venture capitalist. RM9,000. Invest RM1,000 each into nine coins. Even if most die, surely one will go up 10x and make me money right?

You can probably guess what happened next.

Life changes and crypto losses

I made the investments and promised myself I’d be patient. I’d give it a couple of years to rake in my profits.

And then life got busy. I started a new job and focused all my energy there. Every once in a while I’d check if my coins were making money. But apart from a few small spikes of hope, the downward trend was clear. With Bitcoin (“XBT” in the chart below) going down from its peak, every other coin was following — and almost all were performing much worse.

Almost three years on, as of 6th September 2020, here’s how our nine coins performed (in USD terms):

ZRX: -69.95% (Yes that’s a minus sign)
VET: -73.43%
OMG: -85.05% (Seriously, even if you don’t like crypto you’ve gotta admit owning some OMG is pretty cool)
XLM: -88.11%
ZEC: -91.38%
MOD: -96.45% (Potentially 100%, since it’s not trading actively anymore)
ICX: -96.52%
NANO: -97.13%
REQ: -98.29%

Total value: $252.06, or RM1,046.

As the saying goes: The quickest way to have a thousand bucks is to start with nine thousand and buy a bunch of shitcoins.

What were you thinking?

It seems silly now, but in retrospect I was actually pretty confident I would make money. Wrong.

Logically, I knew most of the coins were probably going to crash. But knowing something in your mind and actually believing it’ll happen is something else.

Besides, all the hours I spent “researching” the coins convinced me I knew what I was doing. That my picks would outperform.

Why haven’t I sold? It’s gotten to the point where selling the >-95% losing ones isn’t gonna be worth the effort. A small part of me also believes some coins can recover one day. (To be fair, there are interesting things happening with ZRX, so I’m giving it time.) I’m also waiting for another spike in the Bitcoin price — to see if that rising tide will lift my sinking shits.

I don’t regret anything, but did I learn some lessons? Hell yeah.

Lessons from burning money

Trying to get rich quick usually makes you lose money.
Prices cannot go up forever. But in the heat of the moment, you can be blinded by greed. You convince yourself into doing crazy shit.
Don’t underestimate the time cost of monitoring investments. It’s easy to monitor one asset. But monitoring 20 can be a full-time job, which most of us don’t have time for.
I am not a venture capitalist.
Understand you might lose everything when investing in speculative assets. Only use extra money you don’t need.
If you’re serious about not losing money, set exit prices and be disciplined about getting out.
Be cautious when people are overly excited about any money-making thing. As the old saying goes: When even your cab driver is talking about it, it’s time to sell.

The silver lining

Last week, as I started writing this, I was angry. It was painful revisiting my greatest loss.

But today, looking back I can’t help feeling a sense of nostalgia. That feeling of exuberance in the air in late 2017; of feeling invincible; that our time had come. That we, the agents of decentralization were going to take over the world. Those are vibes I haven’t felt for a long time. It was naive of me back then — it was way too early. But it felt like something special.

The world of cryptocurrency has since moved on from ICOs. Today, the hot trend is DeFi, where we’re starting to hear of incredible gains in short times again. I’m heeding my own advice — I haven’t had time to study deeply, so I’ve stayed away.

Meanwhile, Bitcoin and Ethereum continue to march on. Despite not recovering to their all-time highs yet, I’m more bullish than ever. Especially as more and more governments and traditional institutions continue to get into cryptocurrencies.

If you’re interested in crypto, I think starting with a bit of “experiment money” in Bitcoin is a good idea. I wrote a detailed article about why here.

And if you’ve lost money investing before, I hope you can also get over the pain, and use that as a lesson too. What’s the story of your greatest investment loss ever? Feel free to share in the comments.

Some lessons are expensive, but hey, what’s valuable that isn’t?

Aaron Tang is the founder of mr-stingy.com. He writes about optimising time, money, and relationships – to make the most out of life.