Essential advice to my friends and family asking about Bitcoin (BTC)

I’ve had quite a few conversations about Bitcoin in the last few days with friends and family, and not surprisingly.

“Is it too late to get in?”

Absolutely not. Yes it’s around USD 10,000 right now but you would have asked the same question when BTC was at USD 5,000 or USD 7,000. In my opinion, Bitcoin’s possible price moves from here could be huge. It’s not a stretch to think that Bitcoin could get to USD 25,000 at some point next year.

“Won’t it all just crash?”

Perhaps. There’s some possible headwinds ahead. If the project lost trust (say through a huge hack like Mt. Gox in 2013), then sentiment would turn from positive to negative.

So that is a possibility. But remember, that’s just one of the possible scenarios.

A good friend of mine talks about the ‘fan of probabilities scenarios’.

What is this? Think of a huge range of possible outcomes and think of these as like a hand-held fan, where there are ‘spokes’ or ‘lines’ that emerge from the centre of the fan.

Bitcoin in the next year or so has the following ranges (non-exhaustive):

  • It surges to USD 100,000
  • It surges to USD 50,000
  • It surges to USD 25,000
  • It stays at USD 10,000
  • It drops to USD 5,000
  • It drops to USD 1,000
  • It goes to zero.

Each is a possibility and each has a probability.

The tough part here is to judge what the probability of each possible scenario is, and do so objectively.

So, for example, it could go to USD 100,000 but the probability of this happening is smaller that the probability of it getting to USD 50,000 and that scenario has a smaller probability than the chances of it getting to USD 25,000. And so on.

I’m NOT saying, for example, that it WILL get to USD 100,000 in 2018.

But what I AM saying is that I can’t rule it out. It is possible and given the price moves this year and the tailwinds behind Bitcoin, who’s to say that it WON’T happen? It is though definitely LESS likely than the price staying closer to where it is now.

Go in with your eyes open

Bitcoin is NOT an investment.

Bitcoin is a speculation play.

You could make a lot of money, and you could lose a lot of money.

Know this and you may restrain yourself from making some big financial mistakes.

“Maybe it’s better to be in it?”

Okay, I get FOMO. And I’m guessing if you’re asking me about Bitcoin, then you get some FOMO too! You’re looking at the huge price moves and thinking that you want some of those gains.

FOMO is an emotional response. Be aware of this and don’t be swayed by emotions such as greed and lust.

But if you do want some exposure, this leads onto the next piece of advice:

Don’t risk more than you can afford to lose

I’ll repeat: Do not risk more than you can afford to lose.

This is SO important.

Please don’t borrow to buy or trade Bitcoin.

Please don’t sell your house to buy Bitcoin.

Please don’t risk more than if you lost all of your investment, that you’d be in tears about it. It should sting enough to be meaningful enough that your gains are worth it. But not hurt so much that it destroys your life.

Educate yourself

There’s a classic line in investing/speculation: Do Your Own Research

Speak to people who know something about it. If you’re a beginner, ask me about it!

The following articles I’ve written about previously might be helpful:

This is my understanding of how Bitcoin works (simple)

What is Bitcoin? (the beginners’ guide)

It’s just as important to know the limitations and arguments against Bitcoin. I’ve written posts before about ways that Bitcoin might not reach mass adoption, and in which case, Bitcoin might not become the dominant/winning cryptocurrency:

The biggest obstacle I can see that might block mass cryptocurrency adoption

Learn about storing your Bitcoin and keeping it safe

Storing Bitcoin is an essential part of owning Bitcoin. Without a wallet, you literally can’t hold Bitcoin.

Read the following articles re Bitcoin storage:

The 3 best Bitcoin wallets for storing your bitcoin (BTC)

This Wired article shows how difficult it can be to store your Bitcoins securely 

Enjoy the ride!

Don’t get too serious about this. It’s a fun ride! We live in an amazing time where technology like the blockchain and cryptocurrencies are available. Soak it up and savour the fact that we live in such fascinating times!

Any more questions, please let me know in the comments below!

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