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HEALTH, WEALTH, AND HAPPINESS |
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Investing in Bitcoin and Crypto Made Easy. |
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It’s easy to make money in the block market when the price of bitcoin is soaring. But what about now?
Just three months ago (three months in crypto time = three years in human time), bitcoin was hitting new highs, topping out at about $63,500. Today, it’s about half that.
It was manic, followed by depressive.
If this is your first ride on the crypto roller-coaster, you may feel like throwing up. It’s easy to buy bitcoin when times are good, constantly refreshing the price, watching your investment go up and up. Then, in just three months, it loses half its value. Most people decide they’re out, and they sell at a huge loss. We created our Bitcoin Believer Portfolios for exactly this reason. |
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The basic principles are:
- Invest in a highly diversified portfolio of the total stock market (we recommend Vanguard VTSMX), total bond market (Vanguard VBMFX), and a small slice of bitcoin (between 2-10%).
- Invest the same amount each month, regardless of price (also known as dollar-cost averaging). This protects you against trying to “time the market,” or buying only when prices are high and everyone’s excited.
- Set up a system so you can auto-invest from your bank account on a monthly basis (Coinbase, for example, lets you automatically buy a little bit of bitcoin each month).
- If you want to invest beyond bitcoin, you can also buy ether (plus a few other tokens, if desired), putting no more than 10% of your total investment portfolio in crypto.
Here is the performance of these three portfolios since we set them up in September 2018:
- Non-Believers Portfolio (65% stocks, 35% bonds)
- Baby Believers Portfolio (65% stocks, 32.5% bonds, 2.5% bitcoin)
- Big Believers Portfolio (65% stocks, 25% bonds, 5% bitcoin, 5% ether).
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Even in a down market, we are still up. The Big Believers Portfolio has outperformed the plain-vanilla Non-Believers Portfolio by almost 250% … in less than three years!
The power of this approach is that it protects you from yourself. Instead of buying when everyone is rushing into blockchain, then selling at a loss, you can “set it and forget it,” and enjoy the steady growth of your overall portfolio.
By putting only a “slice of the pie” into the block market (i.e., bitcoin and crypto), you protect yourself against catastrophic loss – while still enjoying the upsides of one of the greatest investment opportunities of our time.
It’s a simple approach to keep everything in balance. |
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The Seven Most Powerful Words for Investors
Years ago, when I was reading the new and expanded version of The Intelligent Investor -- Ben Graham’s classic book that taught Warren Buffett how to invest -- I was kind of annoyed.
In the revised version of the book, they hired Jason Zweig, a financial columnist from the Wall Street Journal, to add his own thoughts at the end of every chapter. So Graham would dispense these pearls of investing wisdom in his professorial style, then Zweig would come in and add another 5,000 words of his own. It was like listening to a Beatles album, then having a music critic give you his thoughts after every track.
I was like, “Who is this clown?”
But Zweig said two things that stuck with me. The first was that most investors will do better over the long term by just investing in a total stock market fund, instead of trying to pick and choose individual stocks. (More on total stock funds here.)
I’ve come to believe he’s correct: most people don’t have the time or patience for diligently evaluating individual companies, as Graham teaches. That’s what led to our portfolios being based on a total stock market and total bond market fund – instead of trying to find the next AAPL or TSLA, you’re literally investing in the entire market, which has a good record over time.
(Side note: we would do the same for the entire crypto market, but a “total block fund” is not yet easily available to ordinary investors. It’s coming.)
The second thing that Zweig said is to set up an investing system – like our “steady drip” method above – that lets you patiently build wealth over time, without having to worry about the day-to-day price. That way, when someone asks you about the price of bitcoin, you can use what Zweig called the seven most powerful words for investors: “I don’t know and I don’t care.”
“That’s stupid,” I thought when I first read it. “Of course you should stay on top of your investments.” But I’ve come to see the wisdom of this phrase, especially in the block market.
Every day there is a torrent of articles, charts, and tweets about what’s happening in the crypto market. Analysis after analysis, explaining why the price is going up, or down, with all kinds of fancy-looking graphs. I’ll be honest: none of it makes any sense to me. It all feels like cavemen trying to explain the weather.
If you’re really investing on this information, more power to you. I study this stuff for a living, and I still don’t know why bitcoin has lost half its value in three months. But I do believe it will recover, and likely go on to reach new highs. (A $30,000 bitcoin is just a $60,000 bitcoin with a sign reading, “50% OFF.”)
So Zweig’s “seven most powerful words” really are powerful. You can still monitor the price, of course, but with an investing system like our Blockchain Believer Portfolios, you can detach yourself from the manic-depressive mood swings of the market. That’s what he means by “I don’t care.”
I’ll take it one step further: when you have these systems set up, everything can be good news. When bitcoin hits record highs, you can celebrate that you’ve made so much money. When it loses half its value, you can celebrate that now you can buy it on sale. This is a huge mental shift that makes all the difference.
While beginning blockchain investors are obsessively refreshing the price, unable to get anything done because they’re watching and worrying, everything is good news to us. We’re in this for the long term. |
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Bitcoin is Still Up 15X vs. Stock Market
At the top of this newsletter is the chart that should give every financial planner a heart attack.
While the stock market has had a great run in the three years since we launched the Blockchain Believers Portfolio, bitcoin has outperformed the stock market by 15 times.
15 times the return, in three years.
It’s easy to hear this and say, “Then let’s put it all into bitcoin! Honey, cash out the 401K and sell it to Satoshi!” Again, this is the kind of manic-depressive behavior we want to avoid, because bitcoin could halve its price again in just a few weeks. (That's the Halvening that matters.)
By diversifying (or balancing) our portfolio, we “smooth out” the crazy price swings of bitcoin — while still participating in its phenomenal growth. Even if bitcoin goes to zero, we’ve only lost (at most) 10% of our overall investments.
It’s tempting, especially if you’re a blockchain believer, to constantly chase the latest and greatest, jumping into DeFi, then NFTs, then the next flavor of the month. Instead, keep it simple. Establish a system, then set it and forget it.
Someday we’ll make this system even easier to set up – just one auto-withdrawal from your account will automatically invest in our Blockchain Believer Portfolios. For now, there’s a little bit of work in setting it up. But you can already see the results, in just three short years.
Imagine what it’s going to look like in thirty. |
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Health, wealth, and happiness, |
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John Hargrave Publisher Bitcoin Market Journal |
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Hey Everyone,
Last night our power went out rather suddenly. When I went to check the house's electricity box, I found an actual waterfall coming from upstairs.
My two daughters were taking a bath at the time, so naturally, my wife and I blamed them for doing way too much splashing. Upon further inspection, it seems there was a crack in the tub.
My oldest, bless her soul, took it pretty hard that we blamed her for something she had nothing to do with, causing me to question a lot of assumptions that I may have previously made.
Assumptions about the markets, the economy, or specific coins, suddenly everything is coming under extreme scrutiny. After all, what do we really know in this world?
When I noticed EOS pumping this morning despite the rest of the market firmly in red, my first assumption was that some whale was taking advantage of the thin order books to try and manipulate the price a bit.
My assumptions were quickly put in check by a follower who sent me this video, which is now gaining traction on YouTube. A few clicks later and I found an official press release.
There's something truly exciting about being among the first to get to a piece of breaking news, and this development seems pretty big.
However, I don't envy crypto writers and editors who are right now frantically trying to figure out how to squeeze this announcement into a neat headline. So, here's what's happening. ...
Technology firm Bullish plans to go public by merging with a special purpose acquisition company (SPAC) and offering its securities on the New York Stock Exchange. The company also intends to establish a regulated, innovative cryptocurrency exchange.
There is no word yet from the NYSE on whether they will succeed in listing their new company there, nor does the announcement specify if and how the EOS token might be utilized in their new platform.
In this case though, the association and involvement of the creators seems to have been enough to pump not only EOS, but the entire crypto market with it.
Those of you who were around during the 2017-18 initial coin offering (ICO) craze will no doubt recall that Block.one, the company behind the release of EOS, held by far the most successful of ICOs, raising an eye watering $4.1 billion.
In the above-linked video, Brendan Blumer, who is the founder and CEO of Block.one, as well as the incoming chairman of Bullish, emphasized that the new exchange will take advantage of a $6.5 billion balance sheet treasury.
He also goes into a lot of other nitpicky things about the current DeFi landscape that they're looking to fix, but the main advantage for investors seems to be the extremely deep liquidity pools that other newer projects find difficult to amass.
Will they succeed in their goals? Perhaps they will, and perhaps they will not. I'll believe it when I see it.
These guys have put out far too many products that are apparent busts for me to simply take their word for it.
Despite all of the above less-than-positive assumptions, I managed to reposition a bit of my eToro portfolio into EOS. The charts are screaming oversold, and I'm not one to let a good pump go to waste.
Just glad to have the lights back on.
Have an awesome weekend!!
Best regards, |
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