If You Invested In Crypto 5 Years Ago, Are You Rich Now?

It has been a record-breaking year for Bitcoin with all-time highs, crossing USD$68,525 on November 9 followed by a recent plunge.

My first ever investment in crypto was in September 2016. That’s five years ago now, and a >100x gain. (If only I’d invested more! I was scared back then, so I started with just a bit of money.)

I’m happy, but this isn’t a victory parade. In fact, in the crypto world I’m a boomer with mediocre gains. No kidding — if you tell a hardcore crypto bro I’ve been in crypto since 2016 and still haven’t reached financial freedom, he might say I’m “ngmi.”

Maybe that’s the story of my life. Taking reasonable risks to get some nice wins, but nothing that’s gonna show up in the news. My lifestyle’s stayed the same — you’re never gonna see me flexing with a lambo. I was always a fan of getting rich slowly, but somehow crypto found its way into my life and is just speeding it up a little.

Now if you’ll let this boomer reminisce a bit, here are 10 lessons I’ve learned from crypto investing over the last half-decade.

1. Bitcoin is alive and well

Bitcoin Obituaries tracks that Bitcoin has been declared “dead” by notable people 432 times now.

The oldest death was in 2010, when Bitcoin was USD 0.23. China has also famously “banned Bitcoin” six times now. The newest obituary was by JPMorgan CEO Jamie Dimon on 12th October 2021, when Bitcoin was USD 57,485.

At what price will sceptics admit they’re wrong? USD 75K? USD 150K? People have been calling Bitcoin a tulip bubble for a decade now.

Of course, it’s not all about the price. Look beyond the hype and here’s what’s been happening over the past couple of months:

• First country in the world (El Salvador) recognizing Bitcoin as legal tender. Yes, you can use Bitcoin to pay for your Starbucks lattes there.
• Progressive governments issuing regulations to work with crypto, instead of banning it.
• Public-listed companies (e.g. Tesla, Square) continuing to hold Bitcoin as assets.
• Bitcoin ETFs launching around the world, most recently in the USA.

It’s been a real privilege to see things we predicted years ago coming true today.

2. Bitcoin is (still) king

“Why Bitcoin when I can ride SHIBA INU to the moon bro?”

True, Bitcoin has gone up 340% over the past one year. But that’s nothing compared to something like Solana, which is up >12,000% (not a typo).

I’ve written extensively on “Why Bitcoin?,” so I won’t go into detail here. But in summary, Bitcoin is still the reserve currency of the crypto world. The king. Other challengers may come and go, but the fate of crypto overall still relies heavily on the fate of Bitcoin.

This hasn’t been obvious over the past year because pretty much everything has been going up, but if/when a bear market comes — tons of altcoins are going to get wiped out.

My favourite example comes from the bull run of 2017, when a coin called NXT was the best performing new coin. In the 2018 bear market, NXT crashed 92%. Bitcoin crashed too, but today is >3x its 2017 peak. Meanwhile, NXT has never recovered.

Over the years, I’ve chatted with quite a few Bitcoin sceptics, with lists of objections. Always happy to share my thoughts, only for them to come back and say, “Bro, but what do you think about <sh*tcoin> instead?”

That’s not: “Bitcoin will fail because <legitimate challenge>” That’s: “I think I missed the boat, so I’m gonna find the next Bitcoin.”

My advice has remained the same: If you’re new, start with Bitcoin, with a small amount of money you’re willing to experiment with. That gives you the best foundation to learn and grow from.

Your reminder that today’s hottest coin might be forgotten one day.

3. Doesn’t mean other cryptocurrencies are worthless

There’s a spectrum of people who invest into crypto.

One on extreme, there are Bitcoin maximalists, who believe only Bitcoin is legit and everything else is sh*t. On the other extreme are baddies who pump and dump shady coins to get rich. Somewhere in the middle are people like me who believe in a multicoin world: Bitcoin remains king, but there will be other princes in our kingdom.

It’s foolish to ignore the innovation that’s happening in many other cryptos. Some of the applications being built on Ethereum and Solana today are astounding. I recently wrote a 2,400-word article on how Play-to-Earn gaming is transforming lives — people putting food on the table via online games.

So many opportunities to create a better world using crypto. So many cryptos. The real challenge is figuring out which have genuine potential, and which are sh*t.

4. Being “right” doesn’t mean making money

What’s “right” in the investing world?

Unlike something like gravity — a physical law — there’s nothing fixed about the world of money and investing.

Benjamin Graham’s investing formulas might have worked in the 1970s, but probably can’t explain what’s been happening with growth stocks (congrats Tesla holders) from 2010-2021. All the respect in the world to OG investors and books, but Graham himself was constantly adapting.

As Jason Zweig writes:
“In each revised edition of The Intelligent Investor, Graham discarded the formulas he presented in the previous edition and replaced them with new ones, declaring, in effect, that ‘those do not work anymore…’”

Sometimes when I see people arguing/flexing about what’s the “best” investment, it reminds me of this. If even the father of Value Investing was constantly evolving, shouldn’t we be open to changing our minds too?

I’m not interested to declare whether growth investors are better than value investors. Or if crypto investors are better than stock investors. Or if today’s generation of millionaire NFT flippers are better than Bitcoin maximalists.

There’s wisdom in understanding diverging views without irrationally choosing sides. You don’t have to choose a camp and tie your identity to it. You can learn something from anyone.

I care less about being “right” and my ego nowadays. I’ll happily put up my hand and say I don’t understand many things about the world. I’m okay to put a little skin in the game to learn.

Viewing things as experiments allows me to get bigger wins, than if I keep my head buried in the sand and say “I only invest in things that I 1,000% believe in.”

Investing is not a religion.

5. Dealing with losses

Take the red pill, try to invest in high-risk stuff, and you’ll be wrong a lot. Here are some of my losses:

• Initial Coin Offerings (ICOs) that are down >90%.
• Speculative coins which have dumped so badly, they’re not even actively traded anymore.
• Mining Ethereum and making a 4x profit, when I could have just bought Ethereum and made 10x. (Not a real loss, but opportunity cost.)
• NFTs that have lost >90% in value, including my ex-Twitter profile pic.
• DeFi projects which have gotten rugged by clever hackers.

I used to think losing money means I did something wrong. But maybe a more realistic mindset is to expect some losses with the high-risk-high-return stuff.

I’m reminded of lessons from Renaissance Technologies and the Medallion Fund — the most successful hedge fund of all time:

At 40, Jim Simons left a famed math career to launch the most successful hedge fund ever: Renaissance Tech.

Even though it only won 51% of trades, the fund made 66%/yr for 30yrs (Simons worth = $25B). It’s a story of genius, but also of how hard it is to beat markets.

THREAD🧵 pic.twitter.com/2aiv88vrap

— Trung Phan 🇨🇦 (@TrungTPhan) August 8, 2021

Even the most successful fund ever was wrong 49 times out of 100.

I wouldn’t dare compare individual investing to quant hedge fund trading, which are vastly different. What I am saying is in investing — and more broadly in life — you can lose a lot, and still succeed.

The important thing is managing your losses well. Making sure that even when you lose, you don’t get wiped out.

That’s why you always hear crypto boomers say: “Don’t invest more money than you can afford to lose.”

6. Managing risks in a practical way

One practical way I’ve found is to separate your crypto money into two buckets. One for long-term investing, and one for active experiments. I’m pretty risk averse so I just experiment with <20% of my crypto holdings. Everything else I have in crypto is long-term hodl for retirement.

(Note: Despite all my conviction, I’ve only ever invested <10% of my total net worth into crypto. In other words, I’ve only speculated <2% into the super-high-risk stuff like DeFi and NFTs.)

This allows me to accumulate blue chips (e.g. Bitcoin and Ethereum), while still scratching the itch to dabble in new crypto projects. If I allocated everything to new projects, I’d lose too much money. Meanwhile, if I didn’t spend any “speculative fun” money at all, I’d be miserable watching from the side-lines.

It’s a mix that works for me, and I’d recommend you to find a mix (pros call this “portfolio allocation“) that works for you too.

Harder than it sounds, because we all get emotional. Especially when you’re on a losing streak, there’s a gambler inside each one of us who just wants to grab money from the other bucket and pump it into another speculative trade. Fight that inner gambler with all you’ve got. Losing control makes you lose money.

If you’re new, or all this sounds too risky, just dollar-cost-averaging every month into Bitcoin is probably the best risk-reward action for most investors.

7. Fish in a rapidly expanding pond

The crypto world is growing like crazy.

I work full-time in crypto and read about it for hours daily. Even then, I don’t understand half the shit I’m reading about.

Coingecko co-founder Bobby Ong, a true OG, recently tweeted something along those lines:

I keep telling everyone that even though I spend all my working hours tracking crypto, it’s still impossible to keep pace with all the developments happening. If you are still not full-time in this industry, it will be super challenging to catch up in the future https://t.co/PGzBCDn4uM

— bobbyong.eth (@bobbyong) September 4, 2021

This is good. It means there’s opportunity.

Whether for your career or investing, you can outperform in growth industries.

The classic “Red Ocean vs Blue Ocean” decision. Would you rather work for an established company in a traditional industry, or a startup in a disruptive industry? Would you rather trade in red oceans where there are already millions of sophisticated investors, or blue oceans where almost everyone is figuring things out?

Crypto is also borderless (and sometimes faceless), meaning it doesn’t really matter where you’re born, what skin color you have, or how well you did in school. You can succeed based on merit alone.

Yes, things will also be challenging because there’s no guaranteed path to success.

But if you’re looking to make a name for yourself, it’s always gonna be easier where there’s less competition.

8. Come for the money, stay for something else

Almost everyone I’ve met in crypto initially came for the money — everyone wants to build wealth for themselves and their families. Nothing wrong with that.

But the people who’ve remained happy through multiple crashes in our crazy crypto world have stayed for other things.

For some, it’s the technology. Bitcoin solved a key computer science problem known as the Byzantine Generals’ Problem, and threw the gates open to a world of possibilities. Some of the projects built around crypto today are dizzyingly ambitious. Consider Helium, a project incentivizing people to provide Internet coverage all across the world by using crypto.

For others, it’s been the community. They’ve made good friends — both on the Internet and in real life — who believe in the same principles. No matter the price of Ethereum, these relationships carry on.

For me, it’s been a combination of the above. Got involved to make money, learned about technology that blew my mind, then built cool things with good friends on exciting adventures.

Crypto turned out to become my full-time career too. I can’t imagine working on anything else today. And after spending almost four years here now, I can say with conviction: We’re only just getting started.

9. Finding balance might be your toughest challenge

I can’t guarantee you’ll make money in crypto, but I can guarantee you’ll learn amazing things by experiencing it for yourself.

In fact, if you invest enough time in the space, your biggest challenge might not be making money — it might be about crypto taking over your life.

Because crypto trades 24/7 and moves so fast, you might end up with unhealthy habits. I’ve been playing around with NFT mints recently so I’ve occasionally had to wake up at 4 a.m. I’ve read too many horror stories of people burning out. Your relationships might also suffer, especially if you’re neglecting face time with loved ones. What good is all the money in the world if you don’t have anyone to share it with?

And despite making money, there’s always gonna be some a**hole on Twitter who’s flexing 10x your gains on a dog-related project. I imagine I’m bulletproof to FOMO and peer pressure, but all this has taken a mental toll on me too.

I’m also worried for younger investors. Boomers like me spent our early twenties thankful for investments that returned 6-7% per year. It’s easier for us to understand that crypto trades like nothing else.

You might actually need to force yourself to park more money in traditional investments. Remember: bull markets don’t last forever, so you’ve gotta have a plan for bad times. If you’re already sitting on big gains in crypto, it’s worthwhile to speak to a licensed financial planner to get an opinion.

10. Look beyond the hype

The wild stories you hear are not myths. There are really people making life-changing money flipping highly speculative coins and NFTs today.

That doesn’t mean it’s right for most people. Theoretically, you could make life-changing money gambling in the casino, but most people are gonna lose it all. And as to whether someone who gets rich on meme coins can stay rich, that’s another matter altogether.

But look beyond pure greed and you’ll realize monumental shifts are happening. Crypto is changing the world.

Just like how all our lives are touched by the Internet today, one day every one of us will use crypto in some way — whether we realize it or not.

Something can simultaneously be a bubble, but also turn out to be the most important technology in decades.

Look through history, and you’ll see how “bubbles” have happened in the telegraph, railroads, and the Internet. Inevitably, the crashes happened, and doubters had their day. Yet today, you’d be crazy to say that real-time communication, trains, and video streaming are not important.

Yes, there’s a lot of hype and overexcitement in crypto today. But with all its potential, why shouldn’t there be?