The scene was a grungy locals dive bar in a posh mountain ski town known for its relaxed views on marijuana. It was rumored to be haunted by a handful of deceased prostitutes and johns, and it made an off-brand frat house (envision the movie Old School) look pristine and inviting. Next to the foosball table, the four of us found something we believe was for sure a gift from the ghosts - a fully loaded pipe. After some ad hoc sterilization and a quick trip to the parking lot, we settled onto the grimy sofa just off the bar and looked at the big screen TV. It was showing a rerun of The Good Wife and they were jabbering about computer money. Our techy friend Dave explained that they were talking about Bitcoin, and he complained that his own wife made fun of him every time he said he wanted to buy some. I told him if he hosted my website on his server in perpetuity I'd buy him $100 of Bitcoin.
So, in January 2013, I ventured through the layers of Mt Gox-y weirdness, bought 6.5 BTC, and sent the entire stash to my buddy. He sold them about 3 months later for $750 feeling like quite a financial genius. Yeah. Well, now I'm back and trying to do a little better this time.
A wonderful recent post by @johnwege on his BitCoin Regret connected with me as you might imagine! As someone with one of "those stories" about Bitcoin, I want to be careful with how the past missed opportunity might affect my current investing approach. For example, I first got interested in putting money toward individual stocks back in 1998, just minutes before the dot-com disaster of the late 90s. I passed up buying Amazon shares in favor of overvalued pipedreams like JDS Uniphase and Sycamore Networks (I am sorry if those names are triggering for anyone who got sucked in like I did!). Amazon was destroying my beloved local bookstores and, besides, how much money was in books (it only sold books back then). In contrast, the internet needed miles of fiber and millions of switches. The use cases made sense to me. At the time, I was making about 2x minimum wage so it was a blow when the bottom fell out and *poof* there went all my money!
How might my 6.5 BTC, missing out on AMZN stock in 1998, and losing 96% of my meager investments play out in the current cryptocurrency market?
There is a tendency for us to anchor our perceptions in our first calculations of value. AMZN was a phenomenal deal in 1998, and any purchase I would ever make of that stock is undeniably a worse investment than it would have been in 1998. That comparison can be a killer to how the investment possibilities feel on a gut level today. Likewise, how can picking up $100 of BTC now ever stand up to the chance I already passed to have $250,000 in hand right now?
On the opposite end of the spectrum, having lost so much in the last bubble burst I can't help but look at the rapid growth of assets that have no tangible value (I'm also looking at you Wall Street stock price estimates!) and see every last cent invested disappearing once more. If a company that was laying actual fiber optic cable in real cities like Boston could lose 99.3% of its market cap, how could any one of thousands of cryptocurrencies stand strong?
Two ghosts haunt my entry into cryptocurrency investment - the Ghost of Better Deals Past and the Ghost of Worthless Assets Future!
There is a solution, of course, rooted in doing the proper research, having an investment plan, and holding myself accountable for sticking to it. But if I never address the psychological ghosts they will get in the way. They might push me to think that BTC and ETH are done growing, and instead captivate me with the infinite upside of $HotDogBun or FerrariBulgariCoin! Or they might lead me to doubt my analyses, and keep me on the sidelines as I wait for absolute certainty.
We need to confront and understand our psychological ghosts in order to make good decisions. Not every ghost is as considerate as the ghosts in that rundown dive bar!
How about you? Do you have any psychological ghosts from past investments that you need to work around?