On Oct 14, 2021, at 4:20 AM, [email protected] wrote:
... I would like to learn about the crypto world, especially Bitcoin. Are the altcoins even worth investing in? Should I just stick to Bitcoin? Is Bitcoin here to stay? ...
Hi Redacted,
I can happily give you an unequivocal answer.
I believe Bitcoin is here to stay, and that it's just about the only thing that really matters in the whole so-called "crypto" space.
There are many reasons for this—too many to try to cover in an email—but most essentially they come down to the following:
- Bitcoin's fixed supply of 21 million coins
- Bitcoin's superior decentralization characteristics
- Bitcoin's superior network effects
Bitcoin is on a mission to become global base money, similar to how gold was global base money until the beginning of the 20th century.
There is no other "cryptocurrency" that has a remote chance of achieving this extraordinary goal. Most of the thousands of other coins are pretenders run by fools or scammers. Bitcoin stands alone.
Some blockchains and coins and tokens are sincerely attempting to do innovative things, but those things have nothing to do with establishing a new global base money. Global base money is the prize to keep one's eyes on. The other things may be interesting, but they are not similar in importance, impact or potential upside.
I've spent a lot of time thinking about Bitcoin and developing software for the Bitcoin ecosystem and relatively little time on anything else in the space. I've come to ignore almost all of "crypto" and simply focus on having a growing bitcoin-denominated net worth.
There are a couple exceptions that are worth mentioning, i.e. non-Bitcoin coins and tokens that I believe do matter or are worth understanding.
The first category is stablecoins. Tether, USDC, et al. These can be useful for managing one's overall finances, especially when it comes to Bitcoin-backed USD loans. They are not "investments", per se, but rather tools to have in one's toolkit.
The second category is privacy coins, and there's really only one entrant that matters, which is Monero. It currently has stronger privacy characteristics than Bitcoin, and this makes it useful for some people. I don't own any, and I don't consider it something to invest in per se, but it is a legitimate project, not a scam, and probably has some useful future ahead of it.
In a nutshell, I would suggest ignoring everything but bitcoin. As we like to say, just "stay humble and stack sats". Simply continuing to grow the amount of bitcoin you own will put you in the best position possible as bitcoin continues to absorb a greater and greater share of the world's wealth. It may seem like bitcoin is worth a lot today at 50K+ USD per unit, but only around 1% of the world has any exposure to it. As bitcoin continues to be adopted by millions and eventually billions around the world, and as its supply remains fixed at 21 million units, the value that the network stores will grow many times over from where it is today and the price of each unit will grow alongside it. We are still very early in bitcoin's adoption curve. If you're prepared to buy and hodl for the long run, you'll be in great shape to ride that curve to its stable top many years from now.
I would recommend against day trading or any other kind of trading for profit on the simple rationale that it is extremely hard to do well. Unless you are willing to dedicate your whole life to getting really good at it, you will probably lose both a lot of time and money. I helped build a bitcoin exchange called Bisq, but even I do not do any such trading for profit. I only trade when I need to for practical purposes, i.e. to add to my bitcoin savings or (god forbid) to sell some bitcoin to buy something I need in my life.
Rather than actively trading, what I recommend is taking a dollar cost averaging (DCA) approach to growing your bitcoin savings. Maybe you already know the term. If not, it just means that you allocate a certain amount of your monthly / weekly income to buying bitcoin, and you always buy the same dollar amount, regardless of what the USD/BTC price is. This is an excellent way to take advantage of bitcoin's volatility instead of getting wrecked by it.
If you take the advice above, you may find that there's not much left to do! If you ignore 99% of the "crypto" world, give up on active trading and just focus on growing your bitcoin stack, you'll suddenly have plenty of time on your hands. With that extra time, I recommend going deep on your Bitcoin education. There is so much to learn and master. Focus on understanding and using the Lightning Network for fast, cheap and private transactions, CoinJoin for keeping your on-chain history private; multisig, hardware wallets and steel plate backups for keeping your stack secure. Make sure you have an inheritance plan in place. Understand the philosophical and economic underpinnings of Bitcoin by reading the great works of Austrian Economics, e.g. Mises, Rothbard and Hoppe. Read Saifedean Ammous's The Bitcoin Standard and his forthcoming The Fiat Standard books. All of these things are valuable uses of time, and will keep you busy for perhaps years to come. As you spend time with each of them, you will become a stronger Bitcoin user and you'll be increasingly ready for the wild ride I believe is ahead of us in the years to come.
With regard to where you do business buying your bitcoin, I would recommend working with reputable, bitcoin-only exchanges and financial service providers. Among the best are Swan Bitcoin, River Financial and Unchained Capital. Check them out, see what they do, and consider using them instead of whatever "shitcoin casino" exchanges you might be working with today.
This whole space can be bewildering in its complexity, big sums of money and fast pace of change. But there is signal to be found in the noise, and that signal is Bitcoin. Focus on it, and let yourself fall down the Bitcoin rabbit hole. It'll guide you in the right direction.
As a final note, I would recommend getting to know some of the Bitcoin podcasts in the space. They're an excellent way to keep up with what's going on, and to hone your intuition about what matters over time. Here are a few good ones:
- What Bitcoin Did
- The Stefan Livera Podcast
- Tales From the Crypt, especially the weekly "Rabbit Hole Recap" episodes
- The Bitcoin Standard podcast
- Bitcoin Audible
With regard to the first podcast (What Bitcoin Did), I especially recommend The Ultimate Bitcoin 101 episode with Vijay Boayapati. If you listen to just one podcast, make it this the one.
If you like what you hear there, then follow up by listening to WBD's 17-part Beginners Guide to Bitcoin series. It's a great way to catch yourself up on all things Bitcoin with some of the very best minds in the space.
All the best to you on your journey! Let me know if you have any follow-up questions, and I hope you enjoy watching my own Why Bitcoin is Better Money video.
Cheers,
Chris