I traded Bitcoin (COIN) (OTCQX:GBTC) several times between August - November 2017. Fun fact: I lost money on most of those trades. I lost money partly because I sold. I know right, HODL.

How do you lose money going long an asset that is up ~1000% YTD? Want to know how? Buy some Bitcoin.

I’ve read a lot of commentaries by Bitcoin bears about how it’s nothing more than an inflated asset with no real intrinsic value. They all point out the same fact that this is nothing but a bubble with a lot of people bound to be hurt in the end.

Well, I beg to differ. I honestly do not believe anyone who has never invested in/or traded Bitcoin should have an opinion on this cryptocurrency. Understanding financial valuation is not enough. Like Nassim Taleb said, “you need to have some Skin In The Game.”

I thought I knew how to value Bitcoin until I made my first purchase. Talking about acquiring some real #SkinInTheGame In accordance with some of my investment philosophies:

I made sure my total investment in Bitcoin was no more than 1% of my personal investment portfolio. Always diversify.

I performed my due diligence on the exchange I chose (Coinbase) as well as the trading fee to determine my net returns ex-transaction charges.

I actually came up with an investment thesis which I was supposed to hold onto.

The Thesis

After reading the initial whitepaper produced by Satoshi Nakamoto, the inventor of Bitcoin, as well as over 100 blog posts, articles and research papers by bulls, bears and indifferent analysts, I formed the following convictions:

Any trading price is an arbitrary price. I believe it doesn’t matter if you bought at $100, $1000, $5000, $10,000 or $50,000, no one knows the intrinsic value. This can only be determined by the market. And the market is driven by the number of people who are willing to invest in Bitcoin versus the amount each stakeholder is willing to lose.

Based on my conviction, I decided I was going to be invested for the long term. As a long-term investor, I won’t be checking the daily price swing, volatility won’t move me, and like BlackBerry (BB), investors are known to say, “I’ll be long and strong.”

Well, that didn’t last 24 hours. Within an hour of purchasing some Bitcoin, I had already read hundreds of bearish articles on how I could lose money in the trade. Good thing was that they were all unconvincing. I tried to pacify myself with the fact that I was only investing money I could afford to lose. But I wasn’t satisfied.

Having broken one of my own investment principles of never touching assets trading above their intrinsic value, more so that I couldn’t even establish an intrinsic value for Bitcoin, I needed an answer.

Jamie Dimon gave me an answer a week after he announced to the world that anyone invested in the world was stupid.

If you're stupid enough to buy it, you'll pay the price for it one day
The market reacted accordingly and Bitcoin fell 10%. As if that wasn’t enough, days later, news broke out that China was going to be banning cryptocurrencies. Guess what, the plummet continued. I sold my position only to watch it double two months after. HOLD, they say. From August to date - I learned the following lessons:

Bitcoin's price action from the beginning of 2017 can be akin to the story of the Thanksgiving turkey in The Black Swan by Nassim Taleb:

Consider a turkey that is fed every day," Taleb writes. "Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race 'looking out for its best interests,' as a politician would say.

On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

Any argument against the HODL strategy is dead on arrival. Data doesn’t lie and Bitcoin’s historical price action shows that holding the cryptocurrency is the best strategy to generate the highest % of paper returns.
Contrary to the popular opinion that other cryptocurrencies are here to kill Bitcoin, the opposite has proven to be true. No cryptocurrency has been able to stop the momentum of Bitcoin. Comparing the market cap of all cryptocurrencies, Bitcoin and its variants (Bitcoin cash & Bitcoin gold) have the largest market cap.

Conclusion

Boastful tweets like the one above continue to piss off real financial experts across the world who by now are either grappling with loss aversion or can’t seem to understand why Bitcoin enthusiasts (mostly college kids) have outperformed them this year.

For those who want to understand how this game really works, it’s simple, just acquire some #SkinInTheGame. I can assure you the experience will leave you with a lesson or two.