I came across this question on the internet and decided to share it with you guys.
How long are you in the game of cryptocurrency? Can you hold to a loss of 80–90% if the price continues to go down? If your answers are “lots of years in the game” and you have the mental courage of a Buddhist monk, then your answer is a yes.
Take your time and read through the story.
The Billionaire VC investor Tim Draper has been investing in technology companies for a couple of decades now including that of SpaceX and Tesla.
Some years ago he started his due diligence on a major cryptocurrency (bitcoin) as a potential investment. He was moved by some of the same reasons a lot of us are moved by.
Below is what he wrote
“The Key uses for bitcoin are
i) Is having a currency that is accepted generally without any government interference or friction.
ii) also, is a stored value solution that doesn’t require a holder to keep a room full of arts and metals, and
iii)Finally, a FRICTION-LESS currency that can migrate automatically based on a contract without the likly drag that emanates from regulations that need to be reviewed by an accountant or lawyer.”
When the government take in possession thousands of bitcoin from thebust (a place where drugs are sold in turn for BTC), 37,000 bitcoins were put up for bid.
Tim Draper bid the highest, paying $763 for 37,000 bitcoins. This implies he dropped $27.7 million dollars to buy all that. Some estimates put it below that (around 18m dollars) but you get the point, it was a big game.
Bitcoin price was around $500 during that time, so while the bid was a bit high, it made sense. But then between June 2014 and 2016, the price dropped drastically. It went from $500 to $180, This implies Tim lost more than half of his money something like $14m USD.
look at his situation.
You just drop $18m on a go on digital coins and then you lose more than half that money in some months.
That’s a lot to hold.
From what I know, Tim didn’t sell any of his bitcoin during this bear market.
The price didn’t rise towards his initial position until the end of 2016, where it rose up past $800, and then back down. He had to wait for a year and a half year to get back to the price he bid at.
Fast forward to 2017, The price of bitcoin rose past 1,000, 3,000, 11,000…and it breaks all expectations and gets up to $20k at the maximum. Tim’s $20 million worth of Bitcoin turns into more than $800 HUNDRED million Bitcoin. That’s quite a huge return.
If he would have listened to his friends or rushed back in 2015 and sold at a loss…well, that would have been a real shame, huge loss and he would have missed out on making hundreds of millions of dollars from it.
While not all of us are seasoned technology investors, at the minimum we should consider the emotional/mental courage that is necessary to push through such losses. And whether BTC is cheap or not is a different question, that’s something you need to decide based on your personal analysis, and based on your ability to bear the loss and take the risk.