December 25th, 2020 | Why You Should Never Buy Bitcoin.

Never Buy Bitcoin Before You Read This.

You might be watching Bitcoin price charts with interest or even with excitement. Perhaps, you already bought it. Or you are seriously considering it. However, there is something you should know — never buy Bitcoin before you learn about all the potential ways of losing it first.

Given the hype and the number of people in your network already bought in, you should have heard many times, “I invested in Bitcoin and just look at me – I bought myself a new house!” or “I just cashed out a bit and bought myself this cool car!” Have you ever heard anything like that though? Probably not. Me neither. But you have probably heard of those who lost their Bitcoin in all kinds of crazy ways. Me too.

Why is that? Why is the price constantly going up yet pretty much no one is getting any wealthier? Well, one reason is that there is one easy way of getting Bitcoin — namely by buying it — but there are hundreds of easy ways to lose it.

How to Lose Your Crypto Assets.

There are hundreds of more or less interesting ways of losing Bitcoin. To name just a top few:

(1) Losing access to your Bitcoin. It can happen, for example, by losing/breaking a hard drive that contains your Bitcoin wallet, or losing the password to your wallet.

(2) Getting robbed. It can happen, for example, by involuntarily sharing private keys or the password to your bitcoin wallet with the wrong person. It can also happen when placing your BTC on a malicious Bitcoin exchange that suddenly shuts down without any explanation. Then, your money just evaporates.

Actually, your crypto can also evaporate even if you don’t actively interact with any crypto scammers. New pieces of malware with the sole purpose to steal your crypto assets are revealed every day (check, this recent finding) Reportedly, some Bitcoin owners also lost money as a result of a home robbery. Telling anyone that you are a Bitcoin owner puts you in jeopardy and can result in losing money. Or even losing your life.

(3) Gambling addiction. When you see the charts soaring, you might also be tempted to think, “Hey, if I buy into it on margin, I could get so much more!” In other words, greed takes. And even though you already invested in speculative assets, you make your moves even riskier. Intelligent people often fall into this trap.

They believe that the fact that they have some competencies valued in the job market and are perceived as intelligent in daily life will help them in making decisions in their crypto-adventure. It’s a cognitive error.

The Crypto market has different dynamics than other markets. Thus, even if you made some money on the traditional stock exchange in the past, it doesn’t guarantee that you will be successful in crypto.

So, as soon as the lizard brain gets involved, we become stupid, unfortunately. I have a Master’s in Psychology and a PhD in Brain Science, yet I couldn’t prevent myself from all kinds of cognitive errors. And usually, you only learn that you are a gaming addict at the point when you feel relief when you lose instead of winning — as this means that you can finally close your computer and rest for a bit.

(4) Losing your Bitcoin by getting involved in one of the financial services/actions launched by crypto-conmen of all sorts. To name just a few of them:

1. Conmen, type #1. Those who persuade you to buy into their crypto-bots and other shady services by taking part in the pump-and-dump heists on shitcoins. You will lose your money here with a probability close to 100%. It’s because bot owners will first buy into the coin with their own money, then pump the price with your money, and sell at the top. And that leaves you at a loss. 

Plus, after you lose, they will persuade you that the bot somehow malfunctioned. They will say, “It was the last time,” “The bot will get an upgrade the next time,” and “We give you a chance to try again without any additional fee.” So you trust them, and then, they pump their coins with your money again. 

Plus, of course, they keep on deleting all the negative comments from unhappy group members all the time. Thus, you have an impression that everyone else is making money, just not you. Which probably means that you are just stupid and should keep quiet. 

But there is more to it; there are even pumps on pumps! Namely, when a group of people is planning to pump a coin in an organized way, someone else mocks the group. They maliciously buy into another coin a minute or two before the action starts just to give an impression that the news leaked and the pump-and-dump is already going on. 

Some people notice this stage of activity, get confused and start buying the other coin in high amounts. That pumps its price and makes the mocker huge profits before he/she runs with the newly acquired Bitcoin just a minute or two later. Discord and Telegram are full of such scammers.

2. Conmen, type #2. Those who sell you “financial advisory services” by giving you “information” on the “hottest coins to buy into at the moment.” The advice is either based on technical analysis, fundamental analysis, or a combination of the two. 

Of course, you don’t get any guarantee of the results. The mechanism has similarities with the first option, except that it is officially legal. Mind that regardless of how competent the offered advice is, this business model is just flawed. It’s true even if it’s the most competent advice in the industry!

This is because the scenario is always the same. Namely, people with the fastest bots (and their own clients) will be the first ones to implement the advice and profit from it. While you, who diligently pays for the product and then tries to make any money by manually buying into whatever is suggested to you, will buy at a higher price and be left at a loss. Not to mention that the authors of such reports usually buy first, before the information is out in the press. 

And then, they profit the most from their own advice. You first give them cash by paying for the service and then pump their coins with your own money. Mind that these “experts” always activate during the tide, in essence, in a bull market, and somehow close their service in the bear market. So, from the very start, they are not planning to promote valuable projects. It’s rather that they ride the tide and make even more money than they would otherwise do. 

These people are typically aware of the effect that their advice will eventually have on their clients. Clients buy into these services because they are attracted by the opportunity to make profits. So, if the author of the service is conscious that they will come out of this at a loss, it makes them a con artist. It’s worth learning more about how “successful” such financial services in crypto have been in the past. For example, you might get familiar with the story of Palm Beach Confidential by Teeka Tiwari.

3. Teams releasing new coins. They can promise you the world and picture themselves as authors of groundbreaking technology. They try to persuade you to buy into their new shitcoin on online forums and conferences. If you are not an expert, it is easy to make a mistake and invest in something that only looks promising. 

While it’s a repetitive and unnecessary project in fact. Usually, you only learn that the shitcoin has no added value after its value drops to zero. Or, when the whole team disappears with the funds they collected right after the public launch of their “asset” — or even a few years later as it happened with Onecoin, to give an example. By the way, I can recommend you watch an episode at the ColdFusion channel dedicated to OneCoin.

4. Outright scammers who commit crypto-heists. Groups of crypto-scammers regularly arrange websites and YouTube channels announcing that when you send some BTC to the given address, Elon Musk will send you 10 times back. 

It is incredible that now, after a decade or more, people still go for these scams and send their Bitcoin, hoping that they will ever hear back! Of course, other protocols are attacked too. For instance, there are also so many scams that use Vitalik Buterin’s name that he had to outright put the “I don’t give away ETH” disclaimer in his public Twitter profile.

5. Influencers. Folks on social media, for instance, on YouTube who profit from their following in their own ways. To be clear: many of the owners of the crypto YouTube channels are genuine content creators. Those guys just share their thoughts and enjoy a lifestyle coming from the fact that they joined the market early enough to profit from its growth. They built a name for themselves and earned a following. 

They also made some little contributions to this space (you know, Ikigai philosophy, “purpose” and stuff) and are additionally paid from the YouTube monetization scheme. 

Of course, there is nothing wrong with such people. We all need role models. The problem starts when their real scope of operations goes way beyond what you see on the screen. Many crypto-YouTubers have become millionaires at twenty (or even earlier) which can lead to a weird morality. 

Namely, to the view that “money is just a game” and that you can play this game without thinking about the consequences. So, they start secretly buying coins before praising them in the public, so that their viewers pump their own coins. Since crypto is extremely volatile, one influential YouTuber with 100k+ followers can effectively boost the price of a middle-size project by 50% or more. So they do — and then, they quietly sell. 

Or, they take money from crypto-projects under the table and shill for coins without disclosing information that it is sponsored content — which is a plague in crypto nowadays. I will never forget how surprised I was in April of 2018 when I visited Amsterdam for a conference cast by one of the leading crypto-projects. 

At the event, I accidentally bumped into one of the most popular YouTubers. He used to shill for that project a lot at his channel. I had trusted his words and I had bought into the coin a few months before. Well, that’s pretty much why I wanted to see the conference in the first place. But when I noticed him on stage as the announcer at the event, I realized that he had been paid for everything he ever said about the project. It was like a cold shower for me. 

Crypto is still a wild West, and if you listen to the advice from the crypto-media, you might need to say, “Goodbye!” to your money very soon. It is hard to tell the difference between genuine advice and sponsored shilling. Thus, I would advise you not to repeat my mistakes and to disconnect from crypto-authorities online as soon as you can.

6. Crypto-traders. Yet another group of YouTube crypto-conmen is traders. Again, there are some people out there who are genuine. They became well known for their real trading skills. 

Now, they show the audience their trading moves in real-time, and profit from the YouTube monetization scheme. But, many traders are not genuine at all. They build their reputation in crypto trading solely based on the fact that they have acquired a large following. 

Their “predictions” then become a self-fulfilling prophecy. After publicly sharing their prediction that a given coin will pump, it will obviously pump because of the following. And of course, traders always come back to successful predictions and discuss them, justifying why a given prediction was a good bet from the start. They also skip unsuccessful predictions and wipe them under the carpet as if they never happened. That’s why you can easily get the impression that they are always right.

7.“Friends.” You might also have some people around you who entered crypto a little bit earlier than you did. Those who are tempted to sell you some financial advice as an exchange for a part of your crypto assets. 

The problem is that greed not only prompts anonymous scammers online to take your money but can also break your relations with the people around you. All those who seem the closest to you, but when facing large sums of money, might suddenly become monsters. Remember that money often touches the lowest instincts in people. 

It happened to me in the times when I was still a naive person a few years ago. I don’t wish anyone to experience this. It makes you feel like losing everything: both your money and your friends. And it feels awful when you are ripped off by your own “friends” as opposed to anonymous people online. By the way, if you are enthusiastic about crypto, it is hard to prevent yourself from pulling other people in — including your friends. 

I made this mistake myself; in 2017 I was so enthusiastic that I started telling all my friends about the opportunity. Some of these people bought in at 1,500 Euro, while some of them bought in when Bitcoin was already at 8,000-10,000 Euro, and then experienced a lot of stress when the charts went downhill for another two years. 

I felt guilty for that, even though I knew that the prices would eventually get back on track. In summary, Bitcoin can screw your relations with people in many ways — even if you have pure intentions.

8. Other scammers. All the other types of scammers whom I might have not even heard of. One undeniable thing is that crypto scammers are even more creative than others. This space is still heavily underregulated which gives a lot of freedom to creative conmen. This creativity is an irony in itself; if all these scammers engaged their creative brains in something constructive, they might create something great. But instead, they use their talent to produce bad karma by stealing money from others.

What I notice is that now in 2020 — in times of the pandemic — we have even more of this cancer than back then in 2017. People are tired of the lockdown, feel uncertain about their jobs, and look for investments that will secure their future and help them go through the hard times. This makes them even more prone to manipulation than they used to be in the past. And, crypto-scammers can’t miss the opportunity!

Also, remember that people who try to persuade you to buy as much Bitcoin as possible, usually don’t want good for you. In principle, if someone tries to persuade you to go all in, that’s a red flag. These people usually use some of the following arguments which are all invalid:

1.“There are market cycles. Bitcoin goes roughly 10 times in every cycle so you are guaranteed to gain money anyways.” This argument is flawed for at least two reasons. Firstly, the fact that something happened before, doesn’t mean that it will happen again. 

This model (10x-ing every 2-3 years) is obviously not sustainable and must crash at some point. The whole question is “when” and not “if.” Also, the fact that Bitcoin has a market cap of Y billion dollars doesn’t mean that people bought Bitcoin as in exchange for Y billion dollars! The price is always roughly equal to the price at which the last transaction was made. That price inflates the value of all the other coins in circulation. 

Moreover, Bitcoin has no comparative in any physical assets. It is fully speculative and its real value is very hard to estimate. When the sentiment in the market will change and people will start taking money off the Bitcoin market, the price can also rapidly go down and verify how much Bitcoin is really worth. So you can’t really guarantee that there the ultimate market crash won’t happen. The only certain thing is that when you buy Bitcoin, you inflate the price for all those who already have it. Including the person who persuaded you.

2.“Bitcoin makes people equal. Bitcoin is an alternative to a dollar that is a flawed currency ever since it doesn’t have a comparative in gold anymore.” Well, yes, indeed, you can print digital dollars, which lowers the value of the dollars in circulation. This inflationary system has been working for over 100 years now. 

Somehow, the world economy is still improving over time instead of going to the dust. The inequality is on the rise, that’s true — but what about the Bitcoin market? It is deflationary which produces inequality too. 

Let’s look at the situation from another angle. Those who had cash to invest, the best access to the internet, and information about new technologies, bought in first and became millionaires. While those who live in third-world countries are still mostly unaware of Bitcoin’s existence. They will probably find out about the whole blockchain revolution only after Bitcoin becomes ultra-expensive. 

So, geeky kids from developed countries bought for 1 dollar, and geeky kids from developing countries will buy for 1 million dollars. That doesn’t sound like equality to me at all.

3.“Don’t trust banks! They can steal your money!” Oh really? I was never robbed by a bank and neither of my family and friends. Yet, most of the crypto investors I ever encountered, were robbed in one way or another. Many of them multiple times and in hundreds of different ways. 

Of course that there is some risk of getting robbed by a bank (mostly in developing countries). Yet still, it is incomparably lower than getting robbed of your crypto assets. As a matter of fact, many of the crypto conmen feed on the lack of public trust towards banks and their overall bad press. It is so easy to make money on other people’s hate!

To sum up, just don’t trust people who try to persuade you to go all in. If these people were Bitcoin evangelists who have a deep belief in the project, they would try to persuade you to use Bitcoin — namely, pay with it and/or accept payments — rather than buy it for all your money.

Why Investing in Crypto Doesn’t Work in the Ways You Expect.

Now, to the point. Judging from the title of this essay and the text above, you might be thinking now, “The author is clearly against crypto assets.” I’m not. I just think that as soon as you invest your savings in Bitcoin, then most likely, you won’t profit from it. It’s rather that, you will likely become wreckage in one way or another. Let’s analyze three possible scenarios.

Scenario 1: You lose your crypto assets in the process.

As mentioned above, there are hundreds of ways in which you can easily lose your Bitcoin. And it happens to many, if not the majority of the crypto investors. Funny enough, those who shill for crypto, will first tell you, “Banks steal from you, don’t keep your money there! Buy crypto!“.

But once you follow, take off your money from the bank, and move it towards crypto, and then you lose your crypto savings, the same people will tell you, “Yeah, this is normal. Everyone loses in crypto at the start. Just buy more crypto, and I promise you that you won’t lose it the second time!“

Say what? You told me I should buy crypto as otherwise I will get robbed by the bad, bad banking system. And so I buy, I DO get robbed, and NOW you are telling me that it is all fine? And why didn’t you share this insight BEFORE I moved my money out of my bank account? This is insanity.

Furthermore, once you lose, many people in crypto will tell you, “Oh, you are not the only one.“ Imagine that you tell someone that you have cancer or that your house was just burnt and they react by saying, “Oh, you are not the only one.“ That’s pretty much the level of empathy that crypto people will have for you.

Not mentioning people outside of crypto, who will just laugh at you or even clap at your loss. They will think to themselves that your greed has just beaten you and that you’ve got what you deserved. So, you will be suffering in silence without having anyone to share your pain with and be understood or helped.

Scenario 2: You don’t lose your crypto.

And what happens if you don’t lose your assets? Well, let’s assume that you invested your savings in crypto. You took the risk, you have put your now private assets on the table, and now you want to achieve a maximum profit.

So, you will hold and hold, and hold, and be afraid to sell. You know that all these people who sold during the bull market in 2017 or any of the bull run before regret it now. There can always be yet another bull run 10 years from now, right?

So, you don’t want to be this loser who had a golden goose in their hands yet walked away way too soon. All those people who bought at 1$ and sold at 100$ must be feeling like fools now!

So you will hold, and hold, and hold, and always be afraid to sell. What if Bitcoin traded at a million one day? I can’t sell now. But what if the central banks pull the plug and delegalize crypto the other day, and its value will go to zero? Perhaps keeping it is a gamble too? It’s a never-ending spiral of fears and anxiety.

And what happens if you buy in because you really believe in this project? — in the new financial system called Bitcoin? So, you support it by buying Bitcoin, and then hold for dear life (HODL) through the thick and thin, and keep your Bitcoin safe.

So, what happens when you and/or Bitcoin successfully get through the bear markets together? And if you grow a deep belief that this is IT? Well, most likely, you will become a miserable slave to your Bitcoin, like Gollum has become a slave to the ring in “The Lord of the Rings.”

Many Bitcoin millionaires will die in their empty one-room apartments with tons of Bitcoin hidden somewhere. They will never go on a decent vacation, buy a decent car, or enjoy life for their Bitcoin. Every time they spend Bitcoin, they feel like they were cutting their own fingers.

By the way, for the same reason, my prediction is that Bitcoin is much more likely to become a store of value — a digital gold of sorts — than a viable payment system.

Scenario 3: You are one of the few lucky ones who manage to cash out with great profits and make a lot of money from crypto.

Well, in that case, you are happy, right? Waaaait! Isn’t this pretty much the same situation as winning a lottery? Buying a ticket for a few bucks that just happens to win millions? Lottery winners are known to medicine as one of the most unhappy groups of individuals. In 1978, lottery winners were investigated by Brickman et al. at Northwestern University.

The study reported that despite cash on their account, the lottery winners were not happier than the controls. Actually, they enjoyed their daily life less than before. After all, money won’t replace bonds with people and a sense of purpose in life.

The same can be seen in crypto. Instead of travelling the world and enjoying their fortunes, many of the people who became crypto-millionaires became miserable. That’s why they try to become influential figures in the crypto community—in all the wrong ways. They keep on arguing in public which Bitcoin fork is the “real Bitcoin” and provoking all kinds of dramas and scandals.

Apparently, money doesn’t make them much happier; what they really dream of, is being respected. And it is something that winning a lottery just can’t buy.

Conclusion.

So, is there any way in which you can, in fact, gain anything from Bitcoin? Yes, there is. Namely, you can get paid in Bitcoin — by actually producing some value with your work.

For instance, by contributing to the crypto world. For instance, by building new protocols and infrastructure, becoming a Bitcoin miner, producing new educational materials, becoming a legit tax advisor, and saving companies and individuals from legal trouble with their financials. I even know people who earn their Bitcoin by helping other people redeem their lost Bitcoin — for instance, by fixing crushed hard discs or getting involved in crypto-forensics.

And even if you have nothing to do with the blockchain industry in your professional life, you can still profit from it if you peg crypto payments to your payment system. The point is: since you didn’t formally invest your own private assets in crypto because you believed in the concept. It’s rather that you generated sales and received payments in crypto. So, you don’t feel any emotions about your crypto assets.

In this setting, crypto is just yet another way to pay you, nothing more, nothing less. It’s just one more banking account, just with a different currency name. If you acquire crypto this way, you most likely won’t get involved in any speculative actions that might make you lose your assets. You won’t hesitate to exchange your crypto assets with cash whenever you need to spend some money. Well, preferably at a higher price than the price at which you originally earned it.

You might be thinking now, “Investing in crypto or earning it — what’s the difference? I don’t see any.” Indeed, this difference is hard to notice with a bare eye, as it is nonmaterial. Namely, it is a psychological difference that allows you to benefit from crypto in real life. Believe me or not, the one people I know in real life who really benefitted from crypto assets, were those who got paid in crypto.

And, that’s why you should never buy Bitcoin. You should earn it.