HODL – It’s easier said than done

Value investors like Warren Buffet likes to do a huge amount of diligence on a stock, analyse their lifetime potential, and when they’re decided, they more or less buy the stock and hold for life (or at least a decade). That’s why he’s so old now.

It’s a proven concept. Buy and hold.

Buy and Hold in Crypto

The same should apply for crypto as well. If you see it for what it is, a store of value and an emerging asset, then it makes sense that its market cap as of now, is hugely underpriced. So if you were to get your hands on some bitcoin or ethereum, and hold for a few years, preferably over 2 or more halving cycles, you should be pretty set.

However, the volatility and exponential gains in crypto can sometimes be hard to wrap our heads around.

In the stock world, we’re happy to see a stock in our portfolio become a 10-bagger. But in the crypto world, we see 10X gains as just another moderate bull year, and are looking for 100X returns. But our minds are not well equipped for that, and we often sell way before we should.

Of course, everyone’s situation is different. I’m not saying one should hold regardless of context and financial situation. We all have to do what it takes to get by.

But I often see people sell in 2 situations: When crypto dives 80%, and they sell at a huge loss, or when they manage to hold on, they sell right after it goes up past their buying price, which make their investment more or less breakeven, with maybe 10 – 20% gains when diamond hand hodlers are rewarded with 100X returns.

My HODL story

It was a lot harder to buy and hold in the earlier days of bitcoin than it is now. Simply put, the conviction wasn’t strong enough. The asset was new then (barely a few years old), so the probability of the blockchain somehow having an exploit or failing seemed higher.

FUD was stronger then, especially with the Silk Road and Mt Gox incidents, along with china bans and other negative news around bitcoin.

I first got into bitcoin in 2013. It wasn’t easy to get your hands on bitcoin then. There were dodgy exchanges that you didn’t know if you could trust. I used FYBSG, which I think was one of a handful of Singapore based exchanges.

I bought in at the absolute peak of the 2013 bull run, and saw the subsequent 80% crash.

Buy and forget. Literally

One of the most important things to remember in investing is, don’t play with your lunch money. If you need that money in the short term, you shouldn’t be investing or trading with it.

That was part of the reason I could stomach that heartbreaking crash, and subsequently even forgot about it. Literally. I went about my daily routine, and soon, FYBSG and bitcoin faded from memory into a semi remembered dream.

Crypto cold storage at the time was too complex, and anyway, at that price, was simply not worth the effort.

The awakening

And then, 2016 and 2017 happened. Bitcoin started getting on the news cycle again, and a jolted memory pulsed through me.

My emotional state cycled between jubilation and depression and panic as I tried desperately to first remember where I had stored those coins (on an exchange!!! Not your keys, not your coin bruh!), and then what the fucking password was!

Fortunately, after listing through all the exchanges, I remembered where it was, and even more fortunately, it had survived the bear market and was still safely (thank god) storing my coins. I quickly removed my coins from the exchange as the price was ripping up to $10,000, and has since stored the bulk of my crypto assets in ledger.

RIP FYBSG. (They eventually shut down in 2019, due to concerted bank efforts to close accounts associated with crypto related businesses)

So, my HODL story was essentially one of set and forget, literally. Which in hindsight was exceptionally fortunate for me, because I may have sold out early, or could have simply not been able to remember where I had bought those coins, or any other number of ‘boating accidents’.

Is the path clear for Bitcoin?

For newcoiners, I believe the path to hodling is a lot clearer now. The conviction is a lot stronger, on-ramps to crypto are widely available, with strong institutions and even public companies (Coinbase is gearing up for an IPO).

Institutions and investment funds are now looking at Bitcoin seriously as a store of value, and a contender to gold, which marks their fair value at a much higher rate than the current price suggests.

Guggenheim just released a statement saying they believe Bitcoin can eventually reach between $400,000 to $600,000 per coin. That in itself is already a 10-bagger from current prices, which has itself risen 10X from 2020’s March liquidity crash.

So yes, newcoiners. You are not too late.

Remember, the store of value narrative is just one aspect of bitcoin. If that comes to pass, the base price of BTC is around $500,000.

Add to that the medium of exchange and unit of account narratives, including derivatives market, we’re looking at a potentially $100T market, which is another 10X from $500,000.

If you think that’s not possible, look at the recent news from VISA, saying that they will essentially be following in PayPal’s footsteps to make buying, selling and using crypto a more seamless experience, working with both banks and merchants to enable this for their users globally, as well as over 70M merchants using the VISA network.