Investing In Bitcoin (and Other Cryptocurrencies)

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Investing In Bitcoin (and Other Cryptocurrencies)

I’m going to go through my experiences with Bitcoin and other cryptos (which have been very good) as well as my opinions and strategies. I get a lot of emails and questions about whether they make sense and whether they’re good investments.

-By Caleb Jones

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At the end, I’ll discuss how they plug into an Alpha Male 2.0 financial model; I don’t just teach “invest in anything.” There’s a very specific model you need to follow to maximize your long-term freedom and financial life as an Alpha Male 2.0.

Disclaimer: I am not a cryptocurrency expert or a Bitcoin expert. There are some of you in the audience who know a lot more about Bitcoin and crypto than I do. I’ve said this before: I’m just a guy who does a lot of research, takes action, and has done well with his investments. So keep that in mind. I’m not a professional, I’m just telling you what I’ve done.

Bitcoin and Cryptocurrencies
I don’t remember exactly when I started buying Bitcoin; it was many years ago, and I wasn’t an early adopter. I wasn’t one of these guys who bought in at 25 cents a Bitcoin. I want to say it was around 2015 or 2016 when I started buying. The numbers I’m about to give you in terms of my experience with Bitcoin – don’t nitpick them. They might not be exactly right, because we’re talking about years ago now in terms of when this happened with Bitcoin for me – but they’re close enough.

I bought into Bitcoin starting several years ago up until 2017, which I’ll talk about in a second. I bought in at a weighted average of around $1,900 per Bitcoin. Weighted average means you’re buying into an investment at different price points, and the actual average of your buy-in is called your “weighted average.”So, I didn’t buy it all at $1,900 per Bitcoin. Some I bought at $1,500 to $1,700, and some I bought for as much as $2,300. But the weighted average, once you factor in all those different buy-in points, was around $1,900 or so.I didn’t buy Bitcoin because I thought it would go to $1 million, I could just see the writing on the wall that this was going to go somewhere. I realized the Bitcoin nerds might be right and this could be something to get excited about – and I was right. I also bought a bunch of Ethereum and a few other cryptocurrencies.

Buy Low, Sell High

At the end of December 2017 Bitcoin boomed and went to almost $20,000. I follow my own advice – I buy low and I sell high, which is the opposite of what most people do. What do you think most people were doing around December 2017 when Bitcoin started making national news by skyrocketing to $12,000, then $17,000, then $20,000?They bought.

Stupid!

You don’t buy shit when it’s on the way up; you buy shit when no one wants it. That’s one of the reasons I’m out of the stock market and have been for years – it’s a bubble. Why would I buy into that?That’s also one of the reasons I’ve avoided buying any real estate over the last few years. Prior to COVID-19, real estate had been doing pretty well. I don’t want to buy things (in terms of investments) when they’re doing well. I want to buy them when they’re terrible and everybody hates them.So when everybody was buying Bitcoin, guess what I did? I said, “It’s time to sell. It’s time to get out because everyone likes it, and the value is going up.” So I sold at around $17,000.Think about this: I bought at $1,900 and sold at $17,000. I made a lot of money. I won’t tell you how much I made because I can’t tell you that stuff, but I had a decent amount invested in Bitcoin.This trade, at the end of December when I sold, didn’t happen at the peak. Remember, the peak was around 19k, and I sold at 17k. There was even one guy who said, “Ahhh, you missed out!” No, I didn’t miss out. Look how much money I made.
What happened to the value of Bitcoin the very next month in January of 2018? It crashed down to $4,000. It went from nearly $20k to $4k within a month and a half. All the Bitcoin nerds were screaming and crying. All the people who bought in as it was going to 20k said, “Bitcoin’s a bunch of bullshit! It’s a scam, it sucks!”No, Bitcoin doesn’t suck. You were just stupid. You bought when it was exciting (when everyone else bought). You bought when it was on the way up. That’s not when you buy. It’s your fault.Here’s something else I did. When I sold at $17,000, I didn’t sell it all – I sold 90% of it. I kept 10% of it because I thought, What if the crazy Bitcoin guys are right? What if Bitcoin goes to $1 million each? Or $100,000 each? That could happen.So I kept about 10% of the money I had in Bitcoin – I took my profit and it was a lot of fun – and I left the rest in there.

Something else happened in 2017. I didn’t just make the money on this trade alone. Around August 2017 we had the Bitcoin Cash Fork, and Bitcoin Cash was created. If you had $10,000 in Bitcoin, all of a sudden, you had another $10,000 in Bitcoin cash. It duplicated whatever you had. Suddenly, you had all this money appear in one of your crypto wallets. It was awesome.What was happening to the price of Bitcoin at that time? It was skyrocketing. What happened to the price of Bitcoin Cash? It also skyrocketed. As Bitcoin rose toward its $20k peak, Bitcoin Cash also rose in value, and my Ethereum also rose. I’m no expert, but in my experience, most cryptocurrencies tend to follow Bitcoin. When Bitcoin goes up, other cryptos go up, and when Bitcoin goes down, other cryptos usually go down (though not always).

When I sold the Bitcoin that December, I also sold pretty much all my Bitcoin Cash and Ethereum. So I didn’t just make money once, I made money on all three. I was very, very happy. In fact, in 2017, because of this and a few of my other investments that year, I more than doubled the size of my entire investment portfolio. My overall portfolio return for 2017 was 122% for the year. Not bad, especially for a guy like me who has literally never lost money in any given calendar year in his investment portfolio. (I don't like losing money, so I just don't do it.)[/vc_column_text][/vc_column_inner][/vc_row_inner]
So in early 2018, Bitcoin went to $4k, and everyone suddenly hated Bitcoin. Did I buy more? No. I probably should have, but I didn’t. But I kept my 10% leftovers in there because I had a feeling that in a few years, Bitcoin was going to come back up again.

Where is Bitcoin right now? As of the date of this article, Bitcoin is over $9,000. So the Bitcoin I saved that was at $4,000 is now at $9,000. Also, my Ethereum is up, and my Bitcoin Cash is up from where it was in early 2018.But remember, even if it had stayed at $4,000, I bought in at $1,900, so I was perfectly happy at $4,000.These are the things you can do as long as you follow the second rule of investing. The first rule is “Don’t lose money.” The second rule is “Buy low, sell high.” If everyone is excited about it and you’re hearing about it from all your friends and in the news, that’s not when you buy it. That’s when you fucking sell it! And that’s what no one does. You buy it when it crashes! So if you were smart, when would you have bought Bitcoin if you hadn’t jumped on it really early? You would’ve bought in early 2018 at $4,000 when everyone was getting out and screaming about how much Bitcoin sucks. That’s when you should’ve bought it, you would have more than doubled your money in two years. See how this works?
Bitcoin Exchange CEX.IO
I get a lot of emails asking if it’s too late to get into Bitcoin – no, I don’t think it’s too late. I think the current valuation of $9,000 is going to go up, at least eventually.Do I think Bitcoin is going up to $1 million each, or $100,000 each, or $75,000 each? My short answer is “no, but it’s very possible.”Again, I’m not an expert, so take this with a grain of salt – but my rough guess is that there is a 40% chance of Bitcoin taking off and doing something amazing, like going to $50,000 or more. I don’t think it will, and because I put that at less than 50%, it’s not likely to, in my opinion. But it could. Forty percent is still decent.So you could buy Bitcoin right now. You don’t have to buy $9,000 worth – you can buy whatever you want. You can buy fractions of Bitcoin; that’s the great thing about it and other cryptocurrencies.

What About Other Cryptocurrencies?

I would say that Bitcoin is probably not going to be a de facto currency standard, especially if it does well. If Bitcoin is $100,000 each, are you going to use it to buy something on Amazon? No, and no one else would either. So I’m leaning more in the direction of things like Ethereum or maybe Litecoin, Dashcoin, or Dogecoin. I have bits and pieces of all these cryptos. I have Bitcoin too, and again, Bitcoin sets the stage for what happens with other cryptocurrencies.

Cryptocurrency is a very big topic and I’m not an expert. I would recommend you go to YouTube and look around at some guys who are Bitcoin nerds who know all about this stuff and do your own research.

Your Financial Model

Now, let’s talk about how this fits within an Alpha Male 2.0 financial management model.You don’t just invest in Bitcoin because it’s exciting. Bitcoin is not an investment; it’s actually a speculation.You don’t invest in it if you have debt. I’ve talked about this in my courses, blogs, books and videos. YOU DO NOT INVEST IN ANYTHING IF YOU HAVE DEBT. If you have credit card bills, student loans, you owe your parents money, or a car payment, you should not be investing in anything. Instead, pay down your debts and get debt-free. There’s no point in investing when you have debt. Here’s the question: If you have debt and you invest in something, would you go to a bank and borrow money just to put it into an investment? If the answer is “no,” there’s no point investing if you have debt.I have no debt. I sleep very well at night. One of the big reasons this coronavirus stuff has not affected me at all is because I don’t have any debt. It’s awesome. It’s like a superpower these days.

Once you pay off your debt, then you need to get an emergency savings account – six to 12 months of emergency savings for expenses, something liquid you can access very quickly so you’re covered in an emergency. That’s another reason I didn’t have to worry – I have a lot of emergency savings.Then for Step 3, you invest. You can start looking at real estate, Bitcoin, silver, ETFs, or whatever you want.Also, there’s no point in putting anything in Bitcoin if you don’t make a lot of money. I talk to guys who make $35,000 a year saying, “Hey Caleb, should I invest in Bitcoin?” No, you make $35,000 a year – you know where your money should go? Once you’ve paid off your debt and built up savings, it should go into your business. Build your Alpha 2.0 business, start making money there, and then put money into Bitcoin.

Investments vs. Speculations

An investment means you put money into something relatively boring and safe to make an average return – four, five or six percent. It’s not very exciting, but it’s very safe.

Bitcoin is not that. Bitcoin is highly volatile. You could lose your ass in Bitcoin just like people did in January 2018 when it went from $20,000 to $4,000.Bitcoin is dangerous, so it’s a speculation, not an investment. A speculation means you might make a lot of money, or you could lose it all. I know that with 100% of the money I have invested in cryptos right now, I could lose it all. I don’t think I will, but it’s entirely possible. In five years, it could all be worth zero. In fact, there are some very intelligent people who think that’s exactly what will happen, and instead what will change the world is blockchain, which is the technology under cryptocurrencies rather than the cryptos themselves. So you have to be very careful.
This article was originally published on July 13, 2020

Comments


  • Michael 2020-07-13 05:35:07

    The reason I don't fool with it is that I don't understand it. Clearly it has no intrinsic value. And if government didn't want us to have it, we wouldn't have it. I don't buy the anonymity, and who takes it in payment? At this point, it is almost solely a traded item, much like fish tins full of sand ("ah, but *those* are the ones for trading"--I think it was an anecdote from the Intelligent Investor). I have no problem with people making money via Greater Fool, but it just isn't for me. Now, if you'd like to talk about silver, I can contribute to that discussion.

  • Michael 2020-07-13 06:09:50

    PS: BlackDragon, you get up early. It is no wonder that you are successful!

  • Redbaron 2020-07-13 07:18:36

    You don’t buy shit when it’s on the way up; you buy shit when no one wants it. That’s one of the reasons I’m out of the stock market and have been for years – it’s a bubble. Why would I buy into that?
    Yes, this is my MO. Instead of buying Bitcoin, I've been quietly hoarding the other Cryptocurrencies that are so worthless that NO ONE gives a damn about them. I don't have much money invested in any single one of them (most of my investment portfolio is in precious metals) because I know its a volatile and speculative market. My intention is to sell most of my holdings if there is a massive spike in any of these cryptocurrencies (they are worth 10,000x, 100,000x, or even 1,000,000x per unit compared to what I originally put into them). Cryptos like Orchid, Stellar Lumens, BAT, and XRP are worth LESS THAN ONE DOLLAR PER UNIT. They're also prevelant on high profile exchanges like Coinbase. You can literally buy tens or hundreds of the little fuckers for only $100. The way I see this, Bitcoin is like the United States which everyone foolishly thinks is the greatest crypto on the market while these other cryptocurrencies I mentioned are viewed as random backwater nations in Africa. There's no telling what the cryptocurrency market will look like in 5, 10, or even 20 years from now. Another one of these currencies could easily supersede Bitcoin in value per unit within those timeframes. As for the stock market, Western stocks are fucked in the long term. I would not invest a penny into any of them except for odd occurrences like this COVID-19 situation, and when things get back to normal, sell everything instantly. Asian stocks could do very well in the long term though once this whole crisis is over. I would look into multiple African stocks. Africa will be on a slow rise in the future. Their stocks are essentially worthless because no one gives a damn about Africa. That will change 20 years from now though.

  • Blackdragon 2020-07-13 10:20:57

    The reason I don’t fool with it is that I don’t understand it.
    Good. Never invest in anything you don't fully understand.
    Clearly it has no intrinsic value.
    Irrelevant. Bonds have no intrinsic value either but I've made real moeny from them over the years.
    if government didn’t want us to have it, we wouldn’t have it.
    Incorrect. Government didn't want anyone smoking weed yet everyone did. Government almost never works as intended.
    I don’t buy the anonymity
    Correct. It's not 100% anonymous. But other cryptos are, like Monero.
    and who takes it in payment?
    Millions of companies and people all over the world, including Overstock.com. And me. I took several bitcoin orders for my last course.
    Now, if you’d like to talk about silver, I can contribute to that discussion.
    Absolutely. Silver is a fantastic investment and everyone reading this who doesn't have any debt should be buying some right now. I've made a shitload of money from silver and I intend on making more.
    PS: BlackDragon, you get up early. It is no wonder that you are successful!
    Eh, yeah, 6:45am-7am 7 days a week. Early, but not crazy early like those 4am guys.
    Instead of buying Bitcoin, I’ve been quietly hoarding the other Cryptocurrencies that are so worthless that NO ONE gives a damn about them.
    That's very speculative but if you're careful (and lucky) you could make that work.
    You can literally buy tens or hundreds of the little fuckers for only $100.
    Haha that's very true!
    As for the stock market, Western stocks are fucked in the long term.
    Correct.
    Asian stocks could do very well in the long term though once this whole crisis is over. I would look into multiple African stocks. Africa will be on a slow rise in the future. Their stocks are essentially worthless because no one gives a damn about Africa. That will change 20 years from now though.
    I generally agree.

  • Sparks 2020-07-13 14:31:20

    Redbaron thanks for the tip, I've been watching Ripple (XRP) for a while, it was over $2 at one point but is now 20 cents. Think this is the time to buy.

  • rgz 2020-07-13 17:10:52

    If I did my math right, you put an 11.5% weight into bitcoin.  (17,000/1,900)*11.5 = 103%

  • Blackdragon 2020-07-13 21:58:49

    If I did my math right, you put an 11.5% weight into bitcoin. (17,000/1,900)*11.5 = 103%
    No. I didn't have 100% of my investment portfolio in bitcoin in 2017. Only a percentage of it.

  • Bob 2020-07-14 00:07:09

    Bd, is starting bussiness good thing when I have debt or should I pay my debt first? I think I have good business idea and I don't want to wait with it but I have also debt.

  • AlphaOmega 2020-07-14 02:58:20

    Good. Never invest in anything you don’t fully understand
    but what is full understanding in this case? You dont need to understand blochain technology to understand crypto price trends in fact i would say those two are almost detatched.
    Irrelevant. Bonds have no intrinsic value either but I’ve made real moeny from them over the years.
    even true about everyones fav baby: stocks... to some extent. Yes its ownership of real business but those numbers have long been so detatched from the business performance that its almost like it has no connection  
    Correct. It’s not 100% anonymous. But other cryptos are, like Monero
    irrelevant for speculative investments. More relevant for payments
    Absolutely. Silver is a fantastic investment and everyone reading this who doesn’t have any debt should be buying some right now. I’ve made a shitload of money from silver and I intend on making more
    what is the best way to get into silver without owning it physically?  
    PS: BlackDragon, you get up early. It is no wonder that you are successful
    completely irrelevant, it depends what time a person goes to sleep and what he does during the day. You could wake up at 2 or at 11 makes zero difference
    Africa will be on a slow rise in the future. Their stocks are essentially worthless because no one gives a damn about Africa. That will change 20 years from now though.
    not sure why you think that. Its full of lazy people with low intelligence and backwards way of thinking and currently they are being recollonized by china who will be much more strict and nasty to them than the previous collonizers.

  • Blackdragon 2020-07-14 10:20:06

    even true about everyones fav baby: stocks… to some extent. Yes its ownership of real business but those numbers have long been so detatched from the business performance that its almost like it has no connection
    With the possible exception of land/real estate, no investment has actual intrinsic value. I love gold, own a lot, will own more, and recommend it. But pro-gold guys are always talking about how gold is great because it as intrinsic value.... but it doesn't. Society has just decided it has value. There's nothing intrinsic about it.
    Correct. It’s not 100% anonymous. But other cryptos are, like Monero irrelevant for speculative investments. More relevant for payments
    Correct.
    Africa will be on a slow rise in the future. Their stocks are essentially worthless because no one gives a damn about Africa. That will change 20 years from now though. not sure why you think that. Its full of lazy people with low intelligence and backwards way of thinking and currently they are being recollonized by china who will be much more strict and nasty to them than the previous collonizers.
    That's one of the reasons it will boom later: China. But the biggest reason is that there will be a population explosion in Africa over the next few decades the likes of which humanity has never seen. It doesn't matter how backwards you think a people are; if there are 60+ million of them in one city they still need to eat, drink, dress, shit, talk on phones, etc. Imagine the economic activity that will create, particularly if China is guiding it all.
    Bd, is starting bussiness good thing when I have debt or should I pay my debt first? I think I have good business idea and I don’t want to wait with it but I have also debt.
    Start it right now regardless of your debt. You can start an Alpha 2.0 business for zero dollars. I have.

  • Incognito 2020-07-16 08:29:22

    As for the stock market, Western stocks are fucked in the long term
    Well, western economies are fucked in the long term. It doesn't mean every company listed on an American stock exchange has grim prospects. To take an obvious example, look at gold miners. If fiat currencies collapse and the stock exchange goes through the floor, they are probably going to go up. Some American listed companies are dependant on the Chinese or other non American economies for their fortunes. Better to consider how a company generates its revenues rather than putting them all in the same basket because they happen to  be listed on a particular exchange or have their head office registered in a particular city.

  • gamblinsam 2020-07-16 11:46:40

    This is a bit of an embarrassing read and generally pretty awful advice. Buy low and sell high. As though this were simply a choice that's on the table and people are so dumb that they choose to buy high and sell low. Also you point out that cryptos are speculations and not investments yet the title of the article is 'investing in cryptos' which is a bit silly. Just because by complete luck you managed to sell bitcoin near the peak doesn't make you a smart investor by any means. You chose that selling point completely at random, based on an emotional assessment of the market, not based on any kind of information or data whatsoever. Making investing decisions in this manner is guaranteed to cost you a lot of money in the long run. Example: I bought bitcoin for the first time at around $100 per coin. There have been MANY periods of time when 'everyone' was buying, and the price flew up astronomically. I remember when it hit $1000 thinking jesus I'm glad I got in earlier because there's no way I'm buying at $1000 that's EXPENSIVE.  My buddy sold his at $1000 and felt very intelligent for doing so. He bought a new car and bragged to everyone about how he got this $40,000 car for $4,000. Well guess what? Now he spent $400,000 on a $40,000 car because that's what his bitcoin would be worth today if he had held. Not so much bragging anymore. The point is, if you are investing intelligently then there are good reasons why you invest, and there have to be good reasons to sell. 'Everyone is buying it' or 'it's up SOO much' are idiotic reasons to sell. Heavy regulations, a major security flaw discovery, etc. would be good reasons to consider selling bitcoin. Without a reason like that, if nothing fundamental about the investment has changed since you first bought, if all the reasons that it was a good investment originally are still in place, then selling is dumb, always. Whether you profited or not is irrelevant. Volatility is completely unpredictable so attempting to jump in and out at the right moments is idiotic and it will absolutely end up costing you a lot of money.    

  • gamblinsam 2020-07-16 11:51:19

    Comment deleted for violation of Rule Number One.

  • Blackdragon 2020-07-16 14:40:27

    Whether you profited or not is irrelevant.
    Oooookay. Are you actually reading what you write?

  • Incognito 2020-07-17 05:02:44

    Any opinions on the direction of gold for the rest of the year? It broke 1800 a couple of weeks ago and could easily go over the historical record. If it does, I'd expect there to be a minor media frenzy, with lots of articles and analysis from gold bugs who will suddenly be taken seriously, after being snickered at for the last decade. That in itself could exert upward pressure, particularly given that the gold bugs' arguments all of a sudden look quite convincing.

  • AlphaOmega 2020-07-17 12:04:38

    I am curious what you and others here think about cryptos backed by gold for example. The idea is that the price is locked to price of gold. It is somehow like am etf to me but with the technicalities of a crypto instead.

  • Johnny Ringo 2020-07-29 17:02:45

    Not an expert, but I'm getting pretty decent at trading. As for myself, I have no interest in the outcome of a particular market.    I'm only looking to buy low and sell high. Instead of just looking at Bitcoin, people could look at cheap Cryptos like BAT.   You could check the swings, attempt to buy low, and then dump it 2 or 3 cents upwards. I don't have the discipline of people like Caleb, but I also never have any big losses either as I can sell off generally well before a market crashes being the penny flipper I am.