I have been hearing so much about bitcoin and have been mildly interested since a few years back. The wild fluctuations of bitcoin the defacto and first form of cryptocurrency has seen fluctuations that would make the Danish Tulip Mania of 1637 look like a walk in the park – along with every other fad and overbought “asset” in history.
Wikipedia has a phenomenal graph showing various bubble periods for cryptocurrency since its inception. What is so surprising to me is the frequency of the bubbles.
![](https://theblindinvestor.wordpress.com/wp-content/uploads/2021/01/bitcoin-bubble-chart-history-2017.png?w=1024)
So first and foremost if you decide to go on this journey with me on learning more about cryptocurrency – full disclosure I know NOTHING! The money I anticipate to use I also EXPECT TO LOSE EVERYTHING!
Wife’s comment: And he really will lose it! I wouldn’t trust my money with him let along my children…hmm…crap that didn’t come out right…
Remember dear reader, what is another name for retail investor? Sheep!
Initial Research and Actions (January 6, 2021)
I have been reading various articles generated from various financial journals/websites and their ilk for awhile now (the past year or two). You can find plenty of articles discussing how to open your own bitcoin wallet, set up bitcoin miners, “investing” in crypto alternatives to bitcoin like Ethereum, and how to actually use bitcoin (hard to believe you can actually use this stuff to buy other stuff! Like tangible stuff!)
Now I am too lazy to get into the nuts and bolts of cryptocurrency but ultimately as I understand it – like any form of currency it is based on the faith of its users. What is the value of the dollar, euro, or even gold other than what we have placed on them?
Unlike land, manufactured goods, or services – currency is an idea based on fidelity, faith, transparency and willingness to transact between two willing parties. Currency without these characteristics is worthless (i.e. – look at Venezuelan bolivar or petro cryptocurrency).
Actions taken today:
- Researched free crypto mining software. One way to get “free” cryptocurrency is to “mine” for them. However nothing worth anything is free. There are costs involved in using a miner including: a computer (one with higher specs/hash rate/overclocking capabilities is preferable), unlimited internet connection (internet providers may put caps on data – looking at you Comcast!), electricity. Unlike the old days when bitcoin was of little “value”, the cost/benefit ratio was relatively worthwhile – whereas now you are competing against bitcoin farms and professionals. I doubt that the novice miner will profit much if at all today.
- Researched bitcoin trading apps. First all of these trading platforms will charge you a fee (typically a percent of the transactions):
- Paypal: less than $25 ($.50 fee), $25-$100 (2.3% fee), greater than $1000 (1.5% fee). Problem the bitcoin you buy here is never yours to keep but you can cash out. You have to trust Paypal to keep your bitcoin safe.
- Robinhood: Like Paypal does not offer withdrawals. Robinhood puts limit orders on purchases and sales – allowing some protection for the user when an order/sale is placed. Downside, you don’t get to take your bitcoin out of Robinhood and put into your own wallet.
- Coinbase: The vanguard of bitcoin trading apps. It’s fee structures are laid out on it’s website but a bit confusing (Coinbase pricing and fees disclosures | Coinbase Help). They charge a spread and fee (which is the greater of a flat fee or variable percent as determined by region, product, payment type). Fees can be as high as 4.6%.
- Cash App (by Square): Like Paypal, Venmo, Square is another app allowing parties to send money easily to each other. It’s fees are obscure (see Cash App may charge a fee when you buy or sell bitcoin.), but includes both a service fee and price volatility fee. It is supposed to be clear in the Cash App when you tap the Bitcoin tab in the app.
My decision on this is to likely use both Coinbase and Paypal. These two choices are based primarily on personal preference and not an endorsement of either vendor. For me, Coinbase’s website and app are very user friendly and clear regarding pricing of various cryptocurrencies. Second, it allows you to transfer the bitcoin you buy into your own wallet (the biggest benefit of those interested in a decentralized currency). Paypal, on the other hand is an app I use frequently to make payments and receive payments and obviously the fee structure is better than Coinbase.
3. Revisiting FOMO. After a furious period of research and seat of the pants actions. I sat back and committed to some self reflection. I like every other human in this day and age of social media experience FOMO or the fear of missing out. FOMO is defined as a form of social anxiety experienced by a person that stems from the belief that others are experiencing something unique and special or “once in a lifetime” experience. The self perceived “deprivation” a person feels can affect self-esteem and, mood, personal satisfaction and well-being. In this day of Facebook/Instagram, staying connected and resultant FOMO is detrimental to happiness I personally believe.
![](https://theblindinvestor.wordpress.com/wp-content/uploads/2021/01/bitcoin-price-chart.jpg?w=1024)
Taking a look at the above chart of the bitcoin price since inception helps ground me into not making a poor reflexive action like pouring my hard earned money into bitcoin or other cryptocurrencies today. On July 25, 2020 the price of bitcoin was just under $10,000 USD and as of today 1/6/21 it is $34,435 – tripling in value in 5 months!
For those of you who bought around July, 2020 – congratulations! You have made a tidy sum! I bow to your prescience! However, I can’t help but feel that bitcoin’s historic pricing trends point to a correction – but I only come from this as an experienced index, long term fund investor. I welcome additional education from any of my readers on this matter. As of today, I will not put any funds into cryptocurrency and will likely put some in once prices go down. Stay tuned.