I’m a conservative investor and extremely risk adverse. One thing I’ve come to learn in my years of investing is that risk is all a matter of perception at the end of the day. What seems risky to me, may not be risky to you. When I tell people that I invested in Bitcoin in 2015 (When Bitcoin was $500) the next question I get, is “Are you a millionaire”? This is traditionally an extremely personal question. It’s like asking someone what their salary is. For some reason, it’s a question that always comes up whenever Bitcoin comes into the conversation. In this letter, I’m going to tell you about my journey investing in Bitcoin, and how I’m still not a millionaire (YET)!
It’s useful to know where I came from, so you can understand how I got into Bitcoin, and how my upbringing guided my investments. I came from a lower-middle class family in Nova Scotia, Canada. Growing up, I remember money always being a problem, or a topic of conversation at the dinner table. I paid for my own education, graduating with $60k worth of student debt at the end of my four years. I had always been a saver, so I graduated with $10k in cash that I had saved up over the years.
Split Up the 10k into Three Parts
I decided to invest the 10k into three different things.
A Tax-Free Savings Account (Low-Risk Mutual Fund)
A Local Business (The Floatation Center)
Bitcoin
I also left some of my savings in cash in an interest bearing savings account with my bank. My plan was to see what did the best, and then lean into that line of investments in order to grow it more. I invested in the order of what I perceived to be the least risky, to the most risky. Needless to say, Bitcoin got the least amount of my allocation. Ironically enough, my mental model of risk was completely wrong, and my returns were completely unexpected.
Cash is Trash
Cash is Trash — Ray Dalio
It took me far too long to understand this. Cash is for spending. It is the best thing to hold in the short term, and by far, the worst thing to hold in the long term.
Earlier on in life, I had thought that if I held cash, then my wealth would be safe. If it is in cash, then the stock market couldn’t implode and erode my savings. If it was in cash, then no one could steal my wealth.
I didn’t care about the tiny amount of interest I was getting on my cash, because it was “safe”. It was only after pondering, and studying inflation on a timespan on 10, 20, 50, and 100 years that I started to understand where I had gone wrong with my investment allocations. Cash is Trash. Inflation can erode the wealth out from underneath your mattress. I see this as the #1 lesson missing from financial literacy education. If only we were taught this in school.
I Didn’t Buy Enough
When I bought my first Bitcoin, I was thinking that it was an experiment. I was fully prepared to lose every penny. I wanted to buy some Bitcoin to experiment with, and to expose myself to a possibility of the future. I really had no expectation of Bitcoin doing as well as it has. I now wake up with the feeling of FOMO every single day, because I didn’t buy enough at the time. Let’s dive into the decisions I made along the way.
I had been out of school for two years at this point. The Bitcoin I had bought up to this point had risen by a factor of 40, and I had more money available to me than ever before in my life. At this point in time, I could pay off my debt several times over. So thats what I did. I liquidated some of my Bitcoin, and took my debt to 0. Normally, I would advise against this, as debt is leverage, and leverage is the ultimate tool for multiplying gains. However, student loan debt is a different kind of debt. I cannot borrow, and pay back my loan at will. I can only pay back what I owe. In that sense, student loan debt is among the worst type of debt to have, because of its inherent inflexibility.
The Cost of Debt
How much was the debt costing me? I had three loans, one with my bank, and two with the government (1 provincial and 1 government). In total, I owed between $400 - $500 per month. Because I had this financial obligation, I was locked into a job. I was unable to not work, because if I didn’t have a paycheque, my loans would start compounding, and costing me more money. This is the debt spiral that so many people fall into, especially in times of unemployment. In hindsight, even though I sold Bitcoin to pay off my debt (which is now against my investment philosophy), it was good to get rid of this bad debt once and for all, so I could FREE MY TIME.
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Distracted by Altcoins
My Bitcoin journey included me getting significantly distracted by Altcoins.
Altcoin - Anything that isn’t Bitcoin
I would even go so far as to include stocks, bonds, and FIAT currencies in the definition of Altcoin. A little more derogatory term for Altcoins is one you may have heard of “sh*tcoin”.
In essence, this above graph indicates why I’ve adopted my current portfolio allocation. During 2017, 2018, and 2019, I owned more than 30 different Altcoins. All of which I had to purchase Bitcoin in order to obtain.
If I had just kept the Bitcoin, instead of buying Alts with it, I would be a millionaire.
Even though I am “up” in terms of Canadian dollars right now, I am extremely “down” in terms of Bitcoin. It’s abundantly obvious to me that I need to be optimizing my portfolio for gains in CAD or USD because “Cash is Trash”. I need to be thinking, and optimizing so that I end up with more Bitcoin. In other words, I need to be adopting the Bitcoin Standard (Book | Podcast) on a personal level.
My #1 Mistake is Altcoins
I would classify being distracted by Altcoins as my #1 mistake.
Insanity Is Doing the Same Thing Over and Over Again and Expecting Different Results — Albert Einstein
There was a big part of me that wanted to continue “playing the market”. It is still possible to time the market and end up with more Bitcoin than what you started with. However, I was in the midst of spawning my philosophy of optimizing my life around Time, Bitcoin, and Health. By getting involved in Altcoins, and day trading, I was losing tons of time, diminishing my portfolio in Bitcoin terms, and that in turn was stressing me out. In mid-2019, I consolidated my portfolio, and never looked back.
Learn from my Mistakes
The following is a list of questions I’ve been asked since the bull run started in mid-2020. I’ve estimated the % of people that have asked me these questions.
What do you think of Dogecoin? (15%)
What do you think of XRP (Ripple) (40%)
What do you think of ALT (20%)
How do I buy Bitcoin? (25%)
The thing that I noticed, is that when people ask me about Bitcoin, they’re typically already sold on it. They’re not asking what I think, although I do get questions about how it works, and where it is going. The point is, that people are already prepared to buy it. Whereas the Altcoins are largely speculative, less well known and understood, and almost always depreciated in value in Bitcoin terms.
This last factor is not a mistake, rather just context into why I am not a millionaire as many people have perceived me to be. These factors have largely shaped the last couple years of our finances, and influenced our savings.
In August 2018, I moved into the city (higher monthly rent).
In November 2018 I started my business with my (now) wife. (expense for a while, we’re profitable now)
In 2019 I got engaged (large life purchase).
In 2020 COVID happened, and well…. you know.
Needless to say, life is constantly happening all around us. My wife and I have our own car. We have hobbies and interests. We like to go out to dinner. If I sat in my bedroom all day for the last four years, I would no doubt be a millionaire right now. But at what cost? Quality of life and meaning is of the utmost importance. At the end of the day, being a millionaire is lower on my list of priorities than enjoying the ride to get there.
All The Best,
Keegan Francis
