My mind has been distracted by a thought experiment for the last few weeks. In April 2015, I invested a substantial amount of money in a crypto coin that no longer exists. If instead I had just purchased a diversified basket of the major cryptocurrencies at that time (i.e. BTC, LTC, ETH, XRP, etc) and then did nothing, what sort of situation would I be in now? I believe there are 3 minds of wealth:
- Generational - so much money that your grandchildren will never have to work a day in their lives
- Transformational - so much money that an individual will never have to work a day in their lives
- Functional - enough to pay off debt and invest for retirement
The seed I would have invested then would probably be enough for "Functional" wealth now. And I imagine there are hundreds of people who did make better investment decisions at that time period and find themselves sitting on a theoretical pile of transformational or even generational wealth. It has me thinking though. . . what are these people doing now?
Let's put aside the "hodling on for dear life" and "to the moon" memes for a moment. I've always looked at these decisions through the lens of "regret management". Specifically, if one year from now I look back on the decision I am making now, will I be able to convince myself that I made the right call? With that in mind, if an individual saw the promise of cryptocurrencies and resisted the temptation to cash out or overtrade in the last 2 years, what exactly are they doing now?
- Are they celebrating? Or are they losing sleep over when, where, and how to convert this transformational wealth into something more tangible?
- Are they slowly selling on exchanges and withdrawing cash as quickly as their daily/weekly/monthly limits allow?
- If they're pulling the money out of cryptocurrencies, where are they putting it? Are recent gains in the stock and housing markets the result of wealth transfers?
There are no generalized answers to these questions. . . everyone's definition of wealth is very different, and everyone handles regret differently. These would theoretically be great problems to have, but I wonder how many lives are being ruined by worry and regret at this very moment.
I'll end with a quick story. My wife doesn't really know much about cryptocurrencies, and I told her the other day that I received some Bitcoin Cash "out of nowhere" in my Coinbase account since I was holding BTC there when it forked. She thought about it for a minute and then asked. . .
"Is it real?"
I didn't really know how to answer. What do you think?
Stupid answer, but I think it's all of the above. Just depends what stage they are at. I can't tell you much other than anecdotal stories but living in a tech area, I've heard stories either directly of themselves or of their friends and colleagues.
Most people who are knowledgeable of the tech and potential of cryptos are going long, they may cash out a little for profit but the majority of their coins are still intact. They don't store their coins on exchange but usually hardware wallets, this way it prevents them from looking at daily prices. A young hardware engineer I talked to told me that he and his friend mined BTC back when they were bunking in college dorm, which helped cut their cost and they managed to mine a few hundreds. They cashed out early to pay for the mining equipment cost and took some profits. They probably only keep a little bit as saving on hardware wallets. However, they invested heavily into ETH during its new born stage (<$10 a coin). They are holding and not worried about it.
There's another instance of another engineer's coworker who holds about 10 millions in BTC. That coworker no longer works there. He hired lawyers and accountants in order to cash out without running into legal issues. He hasn't cashed out yet but he's looking into ways to avoid tax agency going after him. He probably celebrated in the beginning but is likely to lose sleeps over regulation and tax laws.
To your wife's question, you could sell those BCH for a nice profit on the rise, then show your wife the money with a smirk on your face. "Does it matter if it's not?"
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