It’s times like these that I am so glad I started this blog. It will be very interesting to look back on this post years from now and see how things turned out with the latest rage: Cryptocurrency. I first heard about Cryptocurrency when Bitcoin started getting press when I was still at Company 2 in 2012 and since then it has slowly grown in media attention and been joined by a host of new coins, some too ridiculous to believe (e.g. Garlic Coin anyone?)
Up until yesterday I believed that only people that like to speculate (AKA gamble) have bought crypto. People that I don’t know or understand, but that (I hoped!) had enough money that they were ok with and willing to lose it all (the one requirement of ‘responsible’ gambling…) Yesterday those thoughts were shattered.
I was at happy hour with my colleagues and heard some people who I respect immensely casually mention that they own cryptocurrency. I have to admit I was shocked. They’re incredibly smart people that I look up to and they mention this so casually when in previous conversations they’ve mentioned how little they know about investing or at 50 are asking the advice of me, a 28 year old nerd. These are not the responsible speculators I had hoped were involved in this. Not at all.
My boss mentioned he owns 3 Bitcoins. I’m not sure when he purchased them, but in December when the craze was at its height the ‘currency’ lost half its value. It might go to 0 – there’s nothing much stopping it. His Bitcoins might get stolen or he might lose them. Basically this is the opposite of a safe investment and I’m hearing this from a man who told me his hopes of retiring in a few years (hopefully after me – don’t leave me awesome boss!) and asked what I thought about Roboadvisors. I’m worried for him, but hope this doesn’t hold him back from retiring. At today’s valuation his 3 coins are worth $25,572 (minus fees) – though as I said I don’t know if he bought them for double that. Le sigh.
As another example my company’s CEO apparently flew to Paris last weekend just to attend a conference on another crypto called Ethereum. He mentioned that he wants to somehow use blockchain in our business (don’t even get me started on cashing in on buzzwords) and he’s thinking of starting an Ethereum farm in his house. He used flimsy math to say that after buying the $1,200 machines he would be in the black after 4 months (what about the electricity costs?!) and make $200 a month…I know another way you can make $200 a month without accelerating the death of the planet through insane electricity use. It’s called have $60,000 invested in VTSAX and with 4% it will pop out $200 a month for LIFE – that would outlast your farm. And I know for a fact you paid more than that for your car so you have that money.
Overall I was shocked to discover that the people involved in this crypto craze were not at all who I thought – it includes colleagues who I consider very intelligent (though obviously not in investing…) Time will tell how this situation plays out, but I think it’s a Tulip Bulb-Type Bubble and will burst. Let’s see if I’m wrong.
UPDATE: Mr. Money Mustache posted a great article entitled Why Bitcoin Is Stupid and within the comments there was a lot of (heated) discussion and among it I found several interesting calculators that show how much you would make mining various cryptos. I plugged in the numbers of our CEO’s possible LiteCoin mining venture and discovered that he will lose $100 per month per machine – and not break even at all while consuming a lot more electricity than his family needs. Seeing exact numbers like this on a site that is designed to get people TO mine cryptos is fascinating.
Wondering your thoughts now? I think BTC was around $9,000 when you made this post, and is around $42,000 now.
Recently selling crypto has pretty much locked in my FIRE stash. I wonder if it’s going to become more common, since it gives people who saw the potential early, who don’t have good jobs or higher ed, a chance.
My mind hasn’t changed on it. I still think the fundamentals are intrinsically flawed even if some people can make money with it. However, I’m happy you were able to cash out and hit FIRE that way. That’s amazing you were able to lock in your gains.