Second of two parts.
I could use some in the two weeks since jumping onboard the Bitcoin Bandwagon. By downloading the Coinbase app on your smartphone, you can begin trading bitcoin and other cryptocurrencies in maybe 15 minutes. And so I did.
Suddenly, without so much as an on-screen disclaimer or warning of the risk you are about to undertake, you are empowered to push a few buttons on-screen to make thousand-dollar bets on one of the most wildly volatile “assets” of our time.
Even if you never have bought or sold a single share of stock in your life, even if you aren’t a “qualified investor” with a net worth of $1 million, and even without the advice of any broker and utterly naked of any supposed “protection” from the SEC or the Consumer Financial Protection Bureau. Imagine that. Horrors.
It is intoxicating, a little heady, almost giddy, eventually crushing.
This is the New Wild West of investing in cryptocurrencies, the wannabe digital currencies of the 21st century. It is, simultaneously, both the Next Big Thing and the Next Big Bubble. Pretty much everyone already knows this, and yet millions of people keep pouring in, for now, sending prices higher in fits and starts as we race to get in and out in time. Meaning, before the Bitcoin Bubble bursts.
This unfettered freedom to lose a small fortune on bitcoin cannot last long. As soon as SEC staffers download the Coinbase app themselves, and realize the brazen betting now available even to the poorest, youngest and least sophisticated investors, they will pounce on this new turf and do their best to outlaw it or rein it in.
Yet some struggling young people tell me this may be their chance to snag a windfall, to slingshot ahead financially so long as they get in sooner-than-later and get out as late as they dare. (Just bet small and gradually, guys, and bet only money you can afford to do without.)
I decided to give it a try, getting on my iPhone around 7 o’clock one recent evening, going to the Apple app store and downloading the app for Coinbase, the largest cryptocurrency exchange. Here’s what happened next:
- When you open the Coinbase app for the first time, the sign-up process is simple, smooth and all-too-easy. Just be sure, though, you know your online password to your checking account, so you can instantly link it up with the Coinbase app. My failure on this front cost me 45 minutes of delay.
- Once the bank link-up is set, you are ready to trade. I click on a teensy icon at the bottom of my iPhone screen, labeled “Accounts,” and up pops a list of five digital “wallets,” one for each of the five currencies you can trade at Coinbase: bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), the U.S. dollar (USD) and a new bitcoin spinoff, bitcoin cash (BCH).
- I click on the BTC wallet and make a buy in a few seconds. Moments later I’m buying ETH, then LTC. Yet I am blocked from buying the fourth coin, bitcoin cash (BCH). Orders have been halted the new bitcoin spinoff, must try later.
- In three minutes’ time, my “investments” (read: wagers) are made. The time is 7:48 p.m. ET on a Wednesday night. And now, we wait.
Forty-six hours later, my “investment” is down 20%.
It is the definition of buyer’s remorse. It took a full year for the stocks in my 401(k) to rise 20%. Now bitcoin and its rivals have cost me 20% in less than two days. Bitcoin bastards.
I check my iPhone for bitcoin prices several times every hour, watching the 20% plunge ease on back as crypto prices start to recover. And then, near midnight on a Friday, two days after launching my brilliant bitcoin career, I notice that the bitcoin spinoff that had been unavailable for purchase when I opened my account—bitcoin cash (BCH)—is now available for purchase. I push a button or two and moments later, I own some.
The next morning, BCH is up. By 48%!
My brazen purchases, made within a few fleeting moments, could have totaled as much as $2,000 a week at the start (my initial, assigned maximum). A day or two later, the Coinbase app magically lifts my weekly spending max to $10,000 a week. How thoughtful.
Even if I had wanted to retreat and sell out as prices fell, I couldn’t have done so—my purchases of the first three currencies didn’t go through for eight days! And eleven days after I bought BCH, that purchase finally became official last night.
This is ridiculous on its face. Coinbase has a direct, online link into my checking account, and it instantly deducted the sums I “spent” on bitcoin, bitcoin cash, Ethereum and Litecoin. So where is the money for the next full week and more? It is making Coinbase richer, no matter what happens to bitcoin prices.
Imagine: 13.3 million accounts, at a thousand dollars per account, is $13.3 billion. At 1% annual interest that is $133 million in a full year, so for eight days that is close to $3 million, just for taking our money. That is inaddition to the 1.5% fee on each purchase. It is all part of the price of betting on the Bitcoin Bubble.
All told, I am still down almost 10% on my bitcoin bets thus far. I bought bitcoin at $16,683 (now at $15,010); bitcoin cash at $2,824 (now: $2,626); Ethereum at $880 (now at $871, the only gainer, up 8%); and Litecoin at $312 (now at $249). And although this feels like a bitcoin beating, I am mulling whether to load up on a bit more. It’s all so simple.
It is like curing a hangover by drinking the hair of the dog that bit me. “Wow,” a friend tells me on the morning my bitcoin cash was up 48%, “imagine if you had invested ten thousand dollars.” And therein lies the risk in betting on any bubble. There’s always one more play, always one more chance you might make a killing… until the bubble kills you.