The Price of Procrastination, Payoff of Patience

I have a confession to make, and I’ve felt guilty about it for over 2 years. Only recent developments have alleviated this guilt. Allow me to explain.

In early 2018, a friend started asking me about Bitcoin. I told him everything I knew and he was very receptive to the concept of decentralized finance. He asked if I would help him set up an account to buy Bitcoin and of course I agreed. We met a few days later and I guided him through the process of setting up a Kraken account. The next step was for him to allocate funds to his account. This involves a trip to the bank to wire funds, then a holding period to ensure the funds transferred successfully. He decided he wanted to start with $2,000 which was a lot for him at the time.

A few days later he told me his funds transferred successfully and he’s ready to make the purchase but his schedule is a little crazy so he’s not sure when I could come over.

Anyone who recalls the history of crypto prices in early 2018 knows it was very volatile – crashing down from the highs of Christmas 2017 at $20,000, prices fluctuated thousands of dollars a day.

A week lapsed since my friend’s commitment to purchase, and in that week, Bitcoin’s price plummeted to $5,000. I called him and told him this is the time to buy – his money would go far. He was excited and said he’d call me back with a good time for me to come over and help him make the purchase. Days passed and he didn’t call. I called him again and told him the prices can jump quickly and he may miss a good opportunity to get the best price for his purchase. He thanked me for keeping him in the loop but still wasn’t ready for me to come over.

Over 10 days later, he finally invited me over to help him buy his Bitcoin. Unfortunately the price doubled to $10,000. I struggled with the ethics of letting him buy at (what I considered at the time) a high price versus waiting for the price to fall again and then attempting to coordinate a time with him that coincided with a price fall. I’m embarrassed to admit I took the easy way out and let him spend his $2,000 on Bitcoin at $10,000. He owned 1/5 of a Bitcoin and was elated, but it haunted me knowing that he could have owned almost 1/2 of a Bitcoin if he would have not waited, or if I had the fortitude to tell him to wait for another price correction.

Months later the price crashed to $3,000 and held at that price for a long time. He could have had 2/3 of a Bitcoin if I talked him out of buying when he was ready but the price was $10,000.

Of course I didn’t have a crystal ball. I had no way of knowing the price would crash to $3,000 – it could have bounced back to $20,000 or higher. I felt responsible for not guiding him the way I would have guided myself, but he being oblivious to the price differential was a weak comfort I clung to while prices remained well under $10,000 for over two years.

During the fall of 2020, Bitcoin prices suddenly started climbing back to $10,000, then over $10,000, then toward $20,000 and I finally felt relief that my friend’s investment finally paid off. His $2,000 investment more than doubled. Presently the price is close to $40,000 yielding him a quadruple payoff on his investment.

The moral of the story is this: When someone you trust tells you to make your purchase NOW, it’s a good idea to stop what you’re doing and follow their advice. But the fact that this friend was otherwise disengaged from trading crypto, protected him from the urge to sell at a loss and miss the opportunity to benefit from a long term HODL.

Bitcoin and The Black List

During the COVID-19 Shelter In Place directive, I took the advice of a friend and started (binge) watching a show called The Black List. In Episode 5 of Season 3, Bitcoin was used as payment on the Dark Web. This would have been edgy in 2014 when the episode was shot, and even in 2015 when it was broadcast. What caught my attention was the USD equivalent for the Bitcoin. The offer was “2,800BTC or $700,000 USD”!

I double-checked and indeed the scriptwriters had their facts correct. In 2014 and 2015, a Bitcoin was a few hundred dollars. This was when Mt.Gox was hacked and shut down, diminishing confidence in Bitcoin.

Today the price of a Bitcoin bounces between USD $6000 – $10,000. Although this price is less than half of its peak in December 2017 where it hit $20,000 USD. Anyone who bought Bitcoin between December 2017 and January 2018 but didn’t sell immediately would have lost money – some lost a lot of money. But thinking back to that The Black List episode, if that Dark Web payment of $700,000 USD in 2015 was accepted in the form of Bitcoin, its value would be $18,000,000 USD today.

Indeed the episode is fictitious, but the math is real. It provides comforting context that Bitcoin does hold its value given a sufficient timeline. Transacting with terrorists is not in my plans, but I do intend to hang onto my digital currency to see where it is in 5 years, maybe while binge watching another show, hopefully not during another pandemic lock down.