Probably don't go there
So if you had bought Bitcoin in 2011 instead of going out for beer and ramen, you'd be a dollar multi-millionaire now. D'oh.
In December I did something stupid that I specifically said I wouldn't do, and predictably it blew up in my face. I'm sharing the story here to provide entertainment and information: you really shouldn't follow me down this particular rabbit hole.
I've known about Bitcoin for a while. I have friends that were into it years ago. Never interested me. Saw it blow up last year. 'Bubble', I wrote, 'not interested'.
I read a lot of articles about blockchain and the uses for the technology, and while it was very interesting, I didn't really think about wasting money on it.
So of course when it peaked in December last year, drunk on FOMO and greed, I decided to buy some. Ugh.
I opened accounts with bitflyer and coinbase. Both were relatively painless. Bitflyer has a great English-language interface.
It took a few days to get the account set up and confirmed, mainly due to the usual official name vs name on bank accounts vs name I want to use thing.
Once it was set up I sent 100,000 yen over and bought some Bitcoin, Ethereum, and Litecoin.
The next day my holdings went up by 20%. Eeek.
So I sent over another 600,000 yen (this was supposed to go into my NISA account in January). Typical FOMO/greed influenced reaction.
My account then bounced around for a bit (cryptocurrencies are REALLY volatile) and after a week or so I chickened out and pulled 500,000 yen out (basically broke even).
I left the other 200,000 yen in there and added another 10,000 on payday.
I'm planning to add another 10,000 yen to my holdings (split 50/25/25 between BTC/ETH/LTC) each month going forward.
One important lesson is that it's important to be comfortable with the amount and risk of (investments*) financial exposure. For me, 700,000 yen was enough to make me uncomfortable, particularly (invested*) put into something as risky as cryptocurrency.
I am fine with my current (investment*) holding of 210,000. If it all went up in smoke tomorrow it wouldn't bother me too much.
A few really important caveats:
- I haven't sold anything to buy cryptocurrencies. All our existing investments are still in place, doing what they are supposed to.
- Going forwards the monthly contribution is only about 1.5% of our new monthly investing. If it goes to the moon great, if we lose it no problem.
- I fully expect to lose everything. I think there is a small chance (10% or less) that we will make enough money on this to make it worthwhile.
This is definitely a stupid, fun project for me. It's the equivalent of going into a casino and putting it all on black (or in this case, putting a few dollars on black).
I really don't recommend others do it unless they are in a similar situation: ie have a stable financial situation with a sensible investing plan in place. Diversification is the key to safety in personal finance, and cryptocurrency should probably be a tiny part of your investments, if you have any at all.
Conversely, if you were prescient/lucky enough to do well with crypto so far, consider taking some profits. Don't prevent yourself from winning.
Here are some resources on Bitcoin and cryptocurrency:
This post by Mister Money Mustache probably represents the most sensible view.
This post is the most convincing thing I have read in favour of buying cryptocurrency.
Taylor Pearson's cryptocurrency resource page is a great place to start.
My friend Phil Smy is doing a video series on cryptocurrency.
The RetireJapan forum has a couple of great threads on cryptocurrency in Japan.
*I replaced the word invest in this post as buying cryptocurrencies doesn't seem to be investing, but rather a form of speculation/gambling.
How about you? Do you own cryptocurrencies? Any thoughts?