
After the Bitcoin Boom: Hard Lessons for Cryptocurrency Investors - samspenc
https://www.nytimes.com/2018/08/20/technology/cryptocurrency-investor-losses.html
======
hluska
> Now, eight months later, the $23,000 he invested in several digital tokens
> is worth about $4,000, and he is clearheaded about what happened.

> “I got too caught up in the fear of missing out and trying to make a quick
> buck,” he said last week. “The losses have pretty much left me financially
> ruined.”

I think it's distasteful to criticize the decisions that lead to someone's
downfall, but maybe someone will read this and take heed for the future. If
losing $19,000 will genuinely leave you financially ruined, cryptocurrency is
way too high risk of an asset to get involved in.

I feel bad for him and hope nobody ends up in the same spot.

~~~
cm2187
I don't think any investor saw this as anything else than a bubble, they just
wanted to enjoy the ride up. I would go all-in in a bubble if I had the
confidence someone would tap on my shoulder to let me know when it's going to
crash. Investing requires discipline.

~~~
benashford
That isn't what they were saying at the time. Even level-headed forums like
Hacker News had a lot of comments (gathering positive votes, although I
suspect not all were organic) trying to describe with a wide-array of pseudo-
science why Bitcoin was the king of a new world of inherently superior
currencies.

Of course it was nonsense, as anyone who'd read about previous bubbles could
tell you. But it was a mad time last December.

~~~
tim333
I know people who still think there is value there and it will go back up.

~~~
berberous
Yes, I am one of them. This is what, the fourth Bitcoin bubble that has burst?
The December bubble bursting is no surprise for most level-headed folks that
have been following this for a while -- just for the newbies making extremely
risk bets at the top of the latest bubble.

Also, most of us are not deluded enough to think it going up to $100k+/BTC is
a certainty; there are a number of reasons the larger BTC experiment/bubble
could deflate for good one day. But there's also rational arguments for
betting otherwise.

------
evancox100
Where do they find these people? Is this what a lot of "ordinary" people do?
Take out tens of thousands of dollars in loans to invest in cryptocurrency?
Are the people profiled in the article a representative sample? Or are we
hearing about the worst cases only because they are so notable and out of the
ordinary? Will this post ever stop asking questions??

Stories like these are full of anecdote and short on facts, it's hard for me
to know what to make of them.

~~~
21
I work in a software firm. Last autumn half of my team was "investing" in
cryptos. People who never traded before, who didn't knew what a bid or an ask
was, and who complained to me that exchange interfaces were terribly
complicated. Some of them were mulling breaking their 401k (or whatever the
term is) so that they could invest the money here.

In January they were saying to me "it's not a loss if you don't sell, right?"
Literally 0 financial education.

~~~
gammateam
> People who never traded before, who didn't knew what a bid or an ask was

and the more amazing thing to me was that they also didn't even want to know

the markets were moving too fast to learn anything, too fast to learn about
the history, too fast to put any asset under scrutiny because there is another
shiny new thing to trade with a cool name and interesting founding team

or as the ZCash employees and fans are programmed to say "the math is
interesting and the cryptographers are highly regarded so--" THAT HAS NOTHING
TO DO WITH THE CRYPTOCURRENCY TRADERS

------
apo
Every Bitcoin market decline brings out stories like this. Here's one from
2013 that's worse than anything in the NYT article:

[https://www.reddit.com/r/Bitcoin/comments/1r88vl/need_advice...](https://www.reddit.com/r/Bitcoin/comments/1r88vl/need_advice_on_inheritance_arbitrage_family_etc/)

~~~
ribosometronome
He got himeslf in over his head with arbitrage. Hindsight is always 20/20, but
if he had waited a bit, he could have turned that into what... a 10 million
profit?

------
RivieraKid
Investors? More like speculators, gamblers...

Most people buy crypto because they believe the price will rise and they will
be able to sell at profit. Investing is when you buy something that generates
profits or utility, for example a share of a company or a house.

~~~
systematical
Isn't that what my 401k is? Sure I get matching contributions from my
employer, but I am hoping it keeps rising and that I can sell later for a
profit when I retire. Maybe I'm oversimplifying that, but how is that any
different?

~~~
kimsk112
Because companies exist to create revenue and grow. Revenue means dividend and
R&D investment, hence, people spend more to buy those shares because company
values are higher. For Cryptocurrencies, you just expect someone else will pay
more than you do, but there is no obvious reason why it should be that way
forever.

------
21
Nothing new. When you see ads in the subway to buy cryptocurrencies, and you
have people buying cheaper coins because they don't realize they can buy a
fraction of a bitcoin, this happens.

There is no fast way to get rich if you are dumb.

~~~
CPLX
We still have reality television right?

~~~
21
You are not wrong:

[https://www.bloomberg.com/news/articles/2018-07-26/love-
isla...](https://www.bloomberg.com/news/articles/2018-07-26/love-island-fame-
is-more-lucrative-than-an-oxbridge-education)

------
cm2187
To be honest with bitcoin currently still over $6,000 there is a lot more pain
to come.

~~~
oleganza
Bitcoin has been through at least 3-4 major "run ups" already. Those who do
not look at the log chart think that "this time it's different" and Bitcoin
will surely die for good. Later it'll crash from $250K to $50K and then it
will certainly be the end.

2011: $1->$30->$3.

2012: $5->$15->$10.

2013: $10->$270->$80.

2013-14: $100->$1100->$250.

2016-2018: $500->$20000->$6000 (so far).

~~~
rootusrootus
That looks like skillful manipulation to me. There _is_ an important
difference with the most recent bubble -- now bitcoin is a household name.
Where is the next pool of gamblers coming from?

~~~
judah
Institutional investors via Bitcoin futures ETFs[0].

It will likely result in a lot of money flowing into the market via funds and
investment houses where investors seek to diversify their investments.

That will probably bring the cryptocurrency market back up to $20K and above.
It probably won't happen until 2019 or 2020, though. The SEC is still on the
fence about it, but I see it as an eventual inevitability.

[0]: [https://www.coindesk.com/sec-bitcoin-futures-
etf/](https://www.coindesk.com/sec-bitcoin-futures-etf/)

~~~
rootusrootus
Good grief, I hope that does not happen. I think any professional financial
services people who blatantly speculate with clients' funds should be on the
hook for criminal penalties. It's one thing for Joe Blow to play the
speculation game with his own money, it's entirely different for a
professional to do it with everyone else's.

~~~
spiralx
Don't worry, the SEC has now declined to approve two separate attempts at a
Bitcoin-based ETF, both times citing the extensive manipulation of Bitcoin
markets as one of the reasons. I don't see them changing their attitude given
that rampant market manipulation is the main thing keeping Bitcoin alive at
all right now.

------
NickM
Isn't this kind of thing the whole reason we have accredited investor laws?
This might be an unpopular opinion, but if we want to protect people from
themselves, maybe we should stop banning people from investing in private
equity and start worrying more about exotic stuff like crypto. It seems
utterly absurd to me that I'm not allowed to buy a single share of Uber or
SpaceX, while sinking my life savings into whatever obscure cryptocurrency I
choose is perfectly legal.

~~~
tptacek
I'm unclear on why we wouldn't just ban both things.

The reason you can't buy a share of Uber or SpaceX is, effectively, that those
companies _don 't want your money_. Both could easily do a public offering and
admit you as a shareholder, but choose not to.

Further clarity: I'm "accredited", and I don't think I can buy a share of
either company either.

~~~
nathan_f77
That's not the only reason you can't buy a share of Uber or SpaceX. There are
probably hundreds of employees who would jump at the chance to sell some of
their vested shares. There are some secondary markets where you have to be an
accredited investor, but most startups will block the transaction.

P.S. I think it would be a very good idea to buy some Uber shares before their
IPO. Maybe try EquityZen [1].

[1]
[https://equityzen.com/trending/uber/](https://equityzen.com/trending/uber/)

~~~
jondubois
Yes, the whole startup-to-corporate-acquisition-or-ipo funnel is an elaborate
fraud and even the government is in on it. It's why many people invested in
crypto in the first place.

------
slashink
22 years ago

[https://www.nytimes.com/1996/03/03/business/investing-it-
the...](https://www.nytimes.com/1996/03/03/business/investing-it-the-talk-of-
cyberspace-is-iomega-losing-its-zip.html)

~~~
entropie
Minidisc, anyone?

I still do not really understand why this wasnt more successful (at least by
the time CDs existed/were used)

~~~
smacktoward
Why MiniDisc wasn't more successful, or why Iomega wasn't more successful?

For Iomega, it was because of terrible quality control, leading to fiascos
like the Zip drive "click of death" (see
[https://en.wikipedia.org/wiki/Click_of_death#Iomega_Zip_driv...](https://en.wikipedia.org/wiki/Click_of_death#Iomega_Zip_drives)).
A storage vendor whose products develop a reputation for frequent,
catastrophic data loss isn't going to stick around long.

For MiniDisc, it was because MD didn't offer a clear leap up from what you
could get from compact discs, and because Sony couldn't help but be Sony and
go off and develop their own system while everyone else in the industry was
using a different one (DCC:
[https://en.wikipedia.org/wiki/Digital_Compact_Cassette](https://en.wikipedia.org/wiki/Digital_Compact_Cassette)).

~~~
_Codemonkeyism
For the majority of people this is obviously true, but my MD was so much
better than my Discman. I could record MDs and it was rock stable, while the
Discman (even the later models with buffer) would jump all the time. Would
have loved to own DAT, but was too expensive.

------
s3xham
Liquidated enough bitcoin in February of this year to payoff my mortgage. Owe
a significant amount in taxes next year. Token investment from 2013 paid off,
was time to exit based on articles like this.

Never shilled or advised others to "invest" because the best time to sell is
when everyone else is buying and I understand how pyramid schemes work.

Got took for a ride in every major ponzi, scam, etc prior to 2014 seeking
interest... greed. Hello, hi! HN - I know you don't like the bitcoins.

------
coygui
When everyone starts talking about cryptocurrencies, one should stop
investing. A variant from a stock market quote.

~~~
rootusrootus
Yeah, last year when my 76 year old mother asked me about bitcoin, I knew the
bubble was about to pop. I've never been a bitcoin gambler myself, and I told
my mom to stay the hell away as well. That continues to be my advice.

I still think it looks like a big well-constructed scam designed to pull vast
amounts of money from starry-eyed naive people and transfer it to a very small
number of sharks.

~~~
paulpauper
that is not a reliable indicator though. I remember a lot of non-tech people
talking about bitcoin in 2013. Even at $100-250/coin it was getting a lot of
media coverage.

~~~
coygui
It raised up to $1000 at that time and followed by a great drop to 100-ish and
stay that level... but I don't know why it went up so much this year.

------
beefield
I don't like that gambling (on an obviously ponzi like scheme) is called
investing.

~~~
rootusrootus
That started a long time ago. Buying stocks that pay no income is also
referred to as investing, even though it is more accurately gambling as well.
At least with stocks there is something with a more convincing value
proposition.

~~~
bluecalm
C'mon, some stocks don't pay anything because there are better ways invest
their profit. You still own equity in something tangible and generating value
most of the time.

~~~
rootusrootus
Sure, but you are gambling that their reinvestment will raise their stock
value in the long run so that eventually you will make money. It's still a
gamble, though.

~~~
bluecalm
It's an investment. You buy equity in something that produces value. Paying
dividends or not is a non issue. Sure there is risk but it's different than
buying lottery tickets or imaginary internet money. Conflating the two in the
eyes of the public was great success of crypto currency pump and dumpers.

------
Animats
It's zero sum. All those losers are needed to power the boom.

------
rb808
I'm so glad to see naive investors learning that cryptos are a scam. Now they
can get back to real investments like social media apps and cloud computing.

------
Havoc
Made the opposite mistake. Called this a bubble way to early (Like $1 per
coin) territory and refused to put money into it.

Pretty spectacular fail right there.

Currently trying to apply the above life lesson to investing in weed
companies. It's a bit more difficult though since they have more plausible
substance so it's more murky in a way.

------
chx
> After the Bitcoin Boom: Hard Lessons for Cryptocurrency Investors

After the Bitcoin Boom: Hard Lessons for Crypto"currency" gamblers.

FTFY.

------
segmondy
Any activity that simply involves spending money and not enough sweat equity
is not an investment but rather speculation. Doesn't matter if you are buying
stocks or real estate, and most definitely so with all cryptocurrencies
especially when you are not mining.

------
cryptothrow
I appreciate being the opposite of this story. Bought into an ICO five years
ago, forgot about it, remembered early last year, diversified into more tokens
but had a feeling to pull out when BTC was $18k. Sold 95% of my entire
portfolio.

~~~
GreeniFi
Just out of curiosity, how does it make you feel knowing your gains were at
the expense of not very fortunate or rich people losing out around the world -
unprotected because of the newness of the “investment” type - by investment
laws. I made a modest return on a bitcoin investment, felt shit about it, and
donated all the return to charity.

~~~
sdf43543t345
Nobody had a gun to the buyers/sellers head. Everyone knows what they are
getting into, and markets are a zero-sum game. I have no ethical issues with
making profit from trading. I'm sorry that you were not able to take the win.
Maybe you should not play games?

~~~
GreeniFi
You’re right, no-one got their guns out. But that isn’t how confidence tricks
tend to work. I think the reality for a lot of the losers -globally - is that
they were kind of desperate, desperate enough to believe that there was some
immediate answer to their cash needs. I started off believing in the crypto
dream, but last year started to realise it was not what I thought it was.

------
s73v3r_
It would be really nice if we could get financial literacy and basic investing
taught in high school.

------
nipponese
Corrected title: After the Bitcoin Boom: Hard Lessons for n00b crypto
Investors

~~~
whoisjuan
That doesn't even make sense. Anyone that is attempting to invest in crypto is
a noob, even the ones that claim to be 'experts'. Nobody had any type of
signaling to predict a price deflation for any of the crypto assets. The hard
lesson is about timing, not about expertise.

~~~
lowdest
Not 100% true. It's a small market full of inexperienced investors. It's easy
enough to play it as such and come out a winner. For example, all the price
movements are exaggerated because novice investors lack emotional control --
they get too greedy when the price is going up (magnifying the upward trend)
then sell in a panic when the trend starts to reverse.

I often make better returns in a sideways crypto market than buy-and-hold
gives me in the stock market.

