Taking Bitcoin Profits, Going Down in Flames, or Holding On

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Today’s article is another in my Money Diary series. This one is entitled “Taking Bitcoin Profits, Going Down in Flames, or Holding On.” If you haven’t checked out my Money Diary series yet please do so. Some interesting stories. As usual, today’s story is for entertainment purposes only.

Anyway, this article is another of my “what should I do” stories to a certain extent. To see one of my Money Diary stories that exemplifies this concept please see “I had a Dream that the Stock Market Crashed.” Anyway, today’s Bitcoin profits story is a look at my brush with that currently hot crypto known as bitcoin.

If you have been following the cryptocurrency bitcoin you know it has been on a tear recently. As I write this it is the day after Tesla’s Elon Musk was reported to have just bought $1.5 billion worth of the crypto for his company. Right now the price of bitcoin is a little over $46,000 for one coin.

What is Bitcoin?

Bitcoin was started in 2008 and put into use in 2009 by the mysterious Satoshi Nakomoto. As Wikipedia notes, “Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.”

My First Article on Bitcoin

On November 3, 2013, I wrote an article on Bitcoin profits for an old site of mine, Buks.us. In that article I mentioned that a gentleman named Kristoffer Koch from Norway had invested $27 in bitcoin in 2009. He was writing a master thesis about encryption technology which lead him to look at bitcoin. At that time he was able to purchase over 5,000 bitcoins. He then forgot about it.

Four years later when bitcoin started getting some buzz he remembered his initial investment and decided to check the value of bitcoin. It actually took him a day to figure out his forgotten password but once he did he checked the value and realized that his investment was, at that time, worth north of $890,000!

Lost Password Yields No Bitcoin Profits

Fortunately, for Koch he was able to figure out the password. Others have not been so fortunate. For instance, take the story of Stefan Thomas who was given over 7,000 bitcoins by an early bitcoin pioneer. He put it in an encrypted wallet and wrote down the password. However, in 2012 Thomas lost the password. To this day, he has not figured it out. To make matters even more ridiculous, he only gets 10 tries to figure out the password. As of right now, Thomas has already used 8 of them with still no clue what the password is.

Now, when I first heard the story my initial reaction was to have him hire a hacker to decrypt this device. However, I then read up on some of these encryption technologies and it just might not be possible to decrypt that wallet. Then I thought he should use a hypnotist to regress him back to the time he wrote the password down. Evidently people have suggested that among a variety of other methods as well. As of now, that money is still not recovered unfortunately. However, he still has a chance – 2 of them to be precise!

My Bitcoin Story

In October of 2013 the price of one bitcoin soared from $196 to over $1,150 in November. That rocket rise in price prompted me to write that article. It also prompted me to start looking at it as a possible investment.

I liked the notion of blockchain but wasn’t fully convinced that bitcoin could really function as anything more than a store of value. It seemed kind of clunky compared to other cryptos. On the positive side there was a limited quantity – only 21 million could ever be produced.

By December bitcoin was starting to slide back in price to the $700 range. In March of 2014 it was in the 400s. And, in December of 2014 it had dropped back down to about $300. At that point I seriously thought about investing some money in it. In my mind I had two different scenarios. I could buy 10 for about $3,000 or 100 bitcoin for about $30,000 if I was really ready to gamble. Now, I don’t mind gambling (read my Gone to the Dogs money diary story). However, I was really on the fence. At that point I knew I didn’t want to risk losing 3K let alone 30K. On the other hand, I also wondered how much I would be kicking myself if I didn’t do it.

More Hassle Than It’s Worth?

At that point I looked at investing in bitcoin via Coinbase but read a number of less than glowing reviews from those who had used it. Plus there were a lot of hoops you had to go through just to sign up. Send them your driver’s license photo and some other things that I didn’t really want to bother with.

At that time I remember thinking here I am a person really interested in putting some money into it and yet it seemed like a real hassle just to do so. If I felt that way I could only imagine there had to be others in the same boat who might get turned off by that. But, I was still interested. Of course I should have taken that as a lesson that as time moved on it would be easier to invest. Also, that the extra barrier in the beginning might have allowed me to get in at a better price. Live and learn!

Bitcoin Profits or Lost Opportunity?

So, during 2014 and 2015 I kept my eye on bitcoin. In 2015 it dipped into the 200s before shooting up into the 400 range at the end of the year. During this same stretch I got enamored by some MJ stocks and plowed about $7-8 thousand into a variety of them. As it turned out, these glitzy penny stocks lacked any real substance. I was up big in the MJ space 3 weeks after starting investing in these ticking time-bombs. Soon thereafter the SEC halted two of the stocks and the whole lot of them basically went up in smoke (pun intended).

When the dust cleared I was $7,000 lighter in the pocket. That foray into penny-stock hell dampened my enthusiasm for investing in another speculative play, namely bitcoin. Yet, I still thought about it. I still was looking at other options besides Coinbase. I found GBTC.

Greyscale Bitcoin Trust – GBTC

Finally, sometime in 2017, I decided to bite the bullet and put some money in bitcoin. GBTC was a trust that owned bitcoin and tracked the price of the coin to a certain degree. A certain degree being key. When I bought in, GBTC traded at a premium to the actual number of bitcoin that they held. The nice thing with GBTC, however, was that the trust traded like a stock. Therefore, I could purchase it in my brokerage account at the time.

I decided to put in around 3k sometime in mid to late 2017. It was good and bad timing. When I got in bitcoin was somewhere in the $3k range. But I was paying a hefty premium to get into GBTC. When all was said and done I think I was looking at owning the equivalent of a half of a bitcoin. Not even one bitcoin, and certainly not the 10 bitcoins or 100 bitcoins that I had considered buying in 2013.

Taking Bitcoin Profits?

The nice thing was that in December of 2017 the price of Bitcoin shot through the roof. At it’s peak it would hit 20,000. Because it was going up so far so fast in December I started thinking it might be a good time to take some profits and then reinvest if it consequently fell. Or even better, sell a certain amount to make my initial investment back and then the rest would be house money.

In early December, on the day when it hit it’s peak I was on my computer with my finger on the sell button. There was 10 minutes to go in the trading day and I was up about $14,000 from the time I initially purchased the stock. In other words I was looking at almost a 5x in about 4 months time. Not a bad hit if I could just pull the trigger and sell my position.

But, I wavered between taking the profit and getting caught up in the irrational exuberance of the moment. I remember thinking “but what if it just keeps going up!” The irrational exuberance ended up winning. And the next trading day the price of bitcoin began to slip along with the price of my gbtc shares. Ok, I told myself I’m in it for the long haul.

From the Stratosphere to the Abyss

Over the next year the price of my gbtc shares kept slipping and dipping. Everytime I looked at the price I just cringed seeing my finger over the sell button yet not pushing it. By December of 2018 my gbtc shares were worth about half of my original investment. From $3,000 to $17,000 and then down in flames to being worth about $1,600. At that point it was all gloom and doom. The stock market was getting whacked and bitcoin was going nowhere. Alot of folks were saying bitcoin was going back to 0.

There was a stretch where I thought about selling out what little I had left. I remember at one point, though, telling myself that instead of doing that I should actually double up. You know the old adage, “when there is blood in the streets you should be buying.” In the end I did neither. I held onto the shares I had and decided to ride it out.

The Bitcoin Rollercoaster Continues

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Fast forward to today. In 2020 bitcoin started to slowly creep up from 7,000 to 8k to 9k and more. By November it really started to ramp up. It shot past 20,000 and then 30,000. And, as of right now in early February of 2021 it stands at about 46,000.

There is definitely more institutional money coming into bitcoin. And, there are more and easier ways to buy the coin itself. So, I could definitely see it going higher at some time in the future. However, I could also see it taking a big breather as it has gone up quite far quite fast.

My Bitcoin Investment is Ok, Could be Better

My shares in GBTC are looking ok. Not great but ok. That premium I paid when I first bought has pretty much evaporated meaning that I haven’t made as much in that time as those who have owned the straight bitcoin. But, I’m doing ok. My investment is currently worth a bit over $21,000. Having been in it for several years now I know that that could disappear overnight.

Some of my shares are in a taxable account so I don’t want to sell them and create a taxable event. I have been considering taking some bitcoin profits by selling some of the shares I have in the retirement account. However, as usual I’m wavering between taking some profits and holding long term. Right now holding long term is winning out which means the price of bitcoin will probably go into the tank for awhile lol. That’s ok I’ll still be watching.

Bitcoin Profits that Never Were

So, when all is said and done I’m in the game to a small extent with bitcoin. And, I did get in at a decent price. Not a bitcoin millionaire price or anything close to it. But, at least I’m in the game and glad that I am.

But, if you are like me the things that get you more than anything else are the things that you didn’t do, the chances that you didn’t take. My life is unfortunately littered with too many of those. In this case, I was looking at investing in bitcoin in 2013, 14, and 15. Yet, I still never pulled the trigger. If I had taken that same $3,000 that I eventually invested in 2017 and put it into bitcoin in 2014 or 15 it would now be worth over $450,000. And, if I had somehow mustered the courage to risk $30k? It would be worth $4.5 million. Of course, that’s also assuming I would have held on without liquidating the position at some point along the way as the price shot up. Woulda, shoulda, coulda…

Hope you enjoyed today’s Money Diary story Taking Bitcoin Profits, Going Down in Flames, or Holding On. If you have any bitcoin stories of your own I would love to hear them in the comments section below.

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