mikecldi on Nostr: I recently published a piece inspired by many of the big names here preston jack ...
I recently published a piece inspired by many of the big names here preston (npub1s5y…6q7z) jack mallers (npub1cn4…3vle) BitcoinUniversity (npub1s33…252p) . I thought I would paste one of my favorite sections here. For it to live on Nostr as well.
Volatility: A Test of Conviction
If you’ve been exposed to Bitcoin in the mainstream feeds, it is likely to be when it is rocketing upwards, or when it is “dead”...again. Its volatility (its likelihood to spike or fall quickly) is often an argument against using it as a savings vehicle. People often cite its characteristic to drop drastically as the reason that they won't invest, and why they tend to stick to “safer” bets like investing into broader funds which can “promise” a decent return for less risk. I think safer financial plays are still valuable, I personally allocate money into the more “traditional” investment vehicles as well.
But, for me, it was the volatility that taught me how to think longer term about saving, forced me to think twice about spending, and made me continue to research and invest in the network that I was starting to become so passionate about.
Like many first time investors in Bitcoin when I first started buying in 2020 I thought I would take advantage of these swings in price. I watched the charts for a while, seeing the moves up and down within a close range before things started to get too crazy and for some reason, I thought I could outsmart the market and trade it. As most naive newbies, the goal is always to buy low and sell high, thinking you could cash in some quick returns. I purchased a bit, telling myself I would cash out when it hit a certain gain. I saw my initial investments gain value over the first couple of months, and as I continued to research I decided I would hold on a bit longer, I was definitely interested in the idea of a scare supply, but making a quick buck was still kind of appealing as well. Maybe it was my continuing education in the ethos or maybe it was greed, but as the momentum near the end of 2020 continued I kept holding onto my Bitcoin and the price ripped upward. I started buying more, feeling like I had it all figured out. Sending my friends screenshots of my gains and feeling like I had timed the market like a pro. But as fast as Bitcoin can rise, it can fall just as quickly. Luckily, I did not invest any more than I could afford to lose, and I did not over lever myself to attempt to gain more.
At its peak, I felt like a genius. The euphoria at the end of 2021 was palpable to say the least, when BTC reached 50K USD people were calling for 70K, and at 70K people were calling for 100K. I kept buying with any spare cash, stopping investing in my more “safer” bets and the fire of my enthusiasm was fueled by random YouTube pundits and analysts.
And then, as predicted by some of the smarter YouTubers I was watching at the time (Thanks Ben Cowan), I watched the price drop almost 60% in a matter of months. Instead of panicking and selling, I started learning deeper. A few months after making my first purchase, despite seeing a 100% increase, followed by a 60% decrease in a short amount of time, I decided that I would put a 3-5 year time horizon on my purchase as I started to understand the market cycles. I am glad I had committed to this mental model early. It was through learning about Bitcoin that continued to give me conviction about my purchases. I had put in a decent initial investment, but my plan was to accumulate slowly and buy throughout the next few years. I knew if I was able to “weather the storm”, I would come out the other side with more Bitcoin than I started with, at a lower cost.
After seeing the peak, and subsequent drop, the more I dove into Bitcoin’s fundamentals and held on to my investment, trusting my thesis; this was a superior form of money, and nothing about the network had changed—it was still decentralized, immutable, and scarce. If anything, the volatility just tested my conviction. Again, because I did not invest more than I was willing to lose, I was able to stomach seeing my portfolio go from up 100% to down 50% in a matter of months.
Living through that downward trending market also changed the way I thought about money. I started to view unnecessary purchases differently because I was focused on trying to get more Bitcoin. For example, if I wanted a new phone, TV, sweater, but didn’t truly need one, I’d ask myself: What if I put that money into Bitcoin instead? A year from now, my current phone would still work and my Bitcoin might have grown enough to afford an even better phone, or maybe find a cheaper phone and pocket the difference. Up until this point, I was pretty loose with spending, thinking that money didn’t tend to accumulate or grow anyways, I might as well spend it. It was the fact that I was looking at a massive drop in the Bitcoin price that allowed me to question what would be better to purchase, cheap Bitcoin, or some new tech. That shift in mindset—from high time preference to low time preference—was transformative. It’s one of the greatest lessons Bitcoin has taught me: patience in investing pays off.
This new way of thinking about an investment and money in general was totally against what I was conditioned to believe. Most true Bitcoiners tend to adopt a low time preference for investment, meaning, they prefer to hold their investments long term, thinking in four, eight, and even twelve year periods. This longer term way of thinking allows you to think past needlessly spending and the reward is then seeing your wealth actually accumulate rather than the temporary dopamine hit of getting some new piece of tech.
Again this lower time preference, this is not how millennials were conditioned though, so it took me some time to really relax into thinking about things longer term. Now I look at my Bitcoin as an investment I want to save to pass down to my kid, rather than something I will make a quick buck on within a year. For me, this is my way of accumulating some sort of generational wealth. It may be small at this point, but I truly believe that the energy I put into working and saving, is stored and maintained if it is held in Bitcoin.
At this time of writing, you can go back any four year period in the history of Bitcoin, and if you were to purchase, and fast forward four years later, you would have seen a good return on investment. Yes, there will be times within that four year period that you would have to stomach anywhere from a 20-80% drop in price, but if you wait long enough, it has always come back. The return of price appreciation can be seen for a few reasons; the growing network adoption, the limited supply, and now game-theory playing out as many have predicted.
Now that I was fully committed to continuing to work towards “stacking sats”, it also changed the way I looked at work in general. Being a scientist myself, the relationship between the first law of thermodynamics (energy cannot be created nor destroyed) and money really started to become clear. What if we applied that understanding to our own lives, our own energy, rather than just the laws of the universe.
Volatility: A Test of Conviction
If you’ve been exposed to Bitcoin in the mainstream feeds, it is likely to be when it is rocketing upwards, or when it is “dead”...again. Its volatility (its likelihood to spike or fall quickly) is often an argument against using it as a savings vehicle. People often cite its characteristic to drop drastically as the reason that they won't invest, and why they tend to stick to “safer” bets like investing into broader funds which can “promise” a decent return for less risk. I think safer financial plays are still valuable, I personally allocate money into the more “traditional” investment vehicles as well.
But, for me, it was the volatility that taught me how to think longer term about saving, forced me to think twice about spending, and made me continue to research and invest in the network that I was starting to become so passionate about.
Like many first time investors in Bitcoin when I first started buying in 2020 I thought I would take advantage of these swings in price. I watched the charts for a while, seeing the moves up and down within a close range before things started to get too crazy and for some reason, I thought I could outsmart the market and trade it. As most naive newbies, the goal is always to buy low and sell high, thinking you could cash in some quick returns. I purchased a bit, telling myself I would cash out when it hit a certain gain. I saw my initial investments gain value over the first couple of months, and as I continued to research I decided I would hold on a bit longer, I was definitely interested in the idea of a scare supply, but making a quick buck was still kind of appealing as well. Maybe it was my continuing education in the ethos or maybe it was greed, but as the momentum near the end of 2020 continued I kept holding onto my Bitcoin and the price ripped upward. I started buying more, feeling like I had it all figured out. Sending my friends screenshots of my gains and feeling like I had timed the market like a pro. But as fast as Bitcoin can rise, it can fall just as quickly. Luckily, I did not invest any more than I could afford to lose, and I did not over lever myself to attempt to gain more.
At its peak, I felt like a genius. The euphoria at the end of 2021 was palpable to say the least, when BTC reached 50K USD people were calling for 70K, and at 70K people were calling for 100K. I kept buying with any spare cash, stopping investing in my more “safer” bets and the fire of my enthusiasm was fueled by random YouTube pundits and analysts.
And then, as predicted by some of the smarter YouTubers I was watching at the time (Thanks Ben Cowan), I watched the price drop almost 60% in a matter of months. Instead of panicking and selling, I started learning deeper. A few months after making my first purchase, despite seeing a 100% increase, followed by a 60% decrease in a short amount of time, I decided that I would put a 3-5 year time horizon on my purchase as I started to understand the market cycles. I am glad I had committed to this mental model early. It was through learning about Bitcoin that continued to give me conviction about my purchases. I had put in a decent initial investment, but my plan was to accumulate slowly and buy throughout the next few years. I knew if I was able to “weather the storm”, I would come out the other side with more Bitcoin than I started with, at a lower cost.
After seeing the peak, and subsequent drop, the more I dove into Bitcoin’s fundamentals and held on to my investment, trusting my thesis; this was a superior form of money, and nothing about the network had changed—it was still decentralized, immutable, and scarce. If anything, the volatility just tested my conviction. Again, because I did not invest more than I was willing to lose, I was able to stomach seeing my portfolio go from up 100% to down 50% in a matter of months.
Living through that downward trending market also changed the way I thought about money. I started to view unnecessary purchases differently because I was focused on trying to get more Bitcoin. For example, if I wanted a new phone, TV, sweater, but didn’t truly need one, I’d ask myself: What if I put that money into Bitcoin instead? A year from now, my current phone would still work and my Bitcoin might have grown enough to afford an even better phone, or maybe find a cheaper phone and pocket the difference. Up until this point, I was pretty loose with spending, thinking that money didn’t tend to accumulate or grow anyways, I might as well spend it. It was the fact that I was looking at a massive drop in the Bitcoin price that allowed me to question what would be better to purchase, cheap Bitcoin, or some new tech. That shift in mindset—from high time preference to low time preference—was transformative. It’s one of the greatest lessons Bitcoin has taught me: patience in investing pays off.
This new way of thinking about an investment and money in general was totally against what I was conditioned to believe. Most true Bitcoiners tend to adopt a low time preference for investment, meaning, they prefer to hold their investments long term, thinking in four, eight, and even twelve year periods. This longer term way of thinking allows you to think past needlessly spending and the reward is then seeing your wealth actually accumulate rather than the temporary dopamine hit of getting some new piece of tech.
Again this lower time preference, this is not how millennials were conditioned though, so it took me some time to really relax into thinking about things longer term. Now I look at my Bitcoin as an investment I want to save to pass down to my kid, rather than something I will make a quick buck on within a year. For me, this is my way of accumulating some sort of generational wealth. It may be small at this point, but I truly believe that the energy I put into working and saving, is stored and maintained if it is held in Bitcoin.
At this time of writing, you can go back any four year period in the history of Bitcoin, and if you were to purchase, and fast forward four years later, you would have seen a good return on investment. Yes, there will be times within that four year period that you would have to stomach anywhere from a 20-80% drop in price, but if you wait long enough, it has always come back. The return of price appreciation can be seen for a few reasons; the growing network adoption, the limited supply, and now game-theory playing out as many have predicted.
Now that I was fully committed to continuing to work towards “stacking sats”, it also changed the way I looked at work in general. Being a scientist myself, the relationship between the first law of thermodynamics (energy cannot be created nor destroyed) and money really started to become clear. What if we applied that understanding to our own lives, our own energy, rather than just the laws of the universe.