I'm embarrassed to say what I bought my first Bitcoin for. It was in the three digits, closer to 200 than to 800. It was 2013. The world was different. Rostam was still a member of Vampire Weekend. At my entry price, I should be jetskiing between Bond-like lairs as scantily clad Instagram women feed me grapes. Oh well. There’s time. Here are three keys I learned.
Market Size
VC’s often discuss Total Addressable Market when investing. Bitcoin addressed a large opportunity: transmitting money. When I bought, Bitcoin’s market cap was $3 billion. Visa’s was $160 billion. Mastercard’s was $90 billion. At $3 billion, bitcoin had room to run. And Bitcoin aspired to be a store of value as well as a medium of exchange, so its addressable market was comparable to that of money itself, as well as gold. Individually, the US M2 money supply and the gold market are worth over $10 trillion.
Consistency
You’re probably thinking, “wow Johnny, if only you thought this back then!” But I did. I felt Bitcoin was the future. I even wanted to be paid in the currency. I just wasn't consistent. Investments are like the gym after New Years. People rush in, then lose interest. If you buy $10,000 of bitcoin at once, you’ll likely want to sell after a dip, and you’ll definitely want to sell after a rise. But if you buy $50 a week for 200 weeks (also a $10,000 investment, for the math impaired), you may just wake up one day and realize scantily clad women (or men) are feeding you grapes as you jetski between compounds.
Conviction
A good investment is hard to hold. There's a reason many crypto successes involve people who forgot they had crypto. When the asset goes down, you want to cut your losses. When it goes up, you want to lock in gains. My best crypto return was in an exchange I forgot about for two years. (I’m still convinced I have six figures lying around on a wallet somewhere). In The Big Short, every fund manager who made a fortune had angry investors begging him to exit the subprime short the entire time the trade was on. Imagine the conviction it took to hold in the face of investors clamoring for their money back. It’s no surprise several recent high-flying assets have a cult-like following. Bitcoin, Tesla, and Gamestop, in particular. High conviction can be money-losing if placed in the wrong asset. But in the right one, conviction pays off like little else.
-Johnny