"Premature wealth is but the forerunner of humiliation and disaster because we cannot permanently retain anything which we do not merit or which we have not earned" - CHARLES HAANEL
It is tempting to assume that early adopters got lucky and are now swimming in wealth. This assumption fails to take into account that today’s certainty was yesterday’s risk. Nobody was sure of anything despite how they acted. It was also easy to lose coins because there weren’t any sophisticated tools to secure them as we have now. Further more, bitcoins were worth very little so it didn’t make sense investing a lot of time in securing them. The early investors were people with a lot of free time: unemployed developers, smart students who were bored with school just to name a few. They didn’t have extra money to keep buying coins and they still had living expenses and overhead. Venture capitalists were not pouring money into bitcoin as they do now
In reality, only a small fraction of early adopters knew what to do with it. Whether gold, silver or bitcoin, the same rules of investing apply: delay gratification for as long as possible while living off alternative income. Most early adopters had a lot of free time and not a lot of responsibilities. This important advantage gave them the freedom to inspect the novelty that was bitcoin. But it also led to their inevitable downfall because they couldn’t hold on as long as they would have liked to. Little income meant that they spent bitcoin every time it got volatile. If you did not already have an investor’s mindset before discovering bitcoin, then being early did you little financial good and probably a good deal of psychological harm.
GUIDO THE UNFORTUNATE
“BITCOIN RUINED MY LIFE”
In 2010, an Italian named Guido learned about bitcoin. His last name has been redacted for privacy. Not much else is known about him. He was secretive but computer savvy beyond most. He installed a bitcoin client and mined some with no expectation of future returns. During that time, the mining rewards were sent to a wallet.DAT1 file on his personal computer. After a while, he switched off his miner and never gave it much thought. A few years went by, Guido bought a new PC.
In 2013, bitcoin hit the fringe edges of mainstream consciousness for the first time. It wasn’t the technology that caught media attention, but the speculative run up in price. Guido was shocked. He’d never imagined that the virtual currency he got for running software on his computer would have amounted to anything of financial value. And that’s exactly what the problem was. It was too early to imagine anything. He searched for his wallet on his computer. He did not find it. His anxiety turned into horror as the price of bitcoin erupted to $1300 in 2013.
Guido was gutted. The weight of his mistake bore heavy with every minute he thought about it. And that’s all he thought about: how a measly energy investment in 2010 could’ve changed his living conditions by mind-blowing margins. He got quite good at math as he frequently calculated his unrealized gains while thinking of all the things he could’ve done. He could’ve paid for his father’s medical expenses without breaking a sweat. It was all too painful. In time, he lost his will to live and became suicidal. Ironically, the only that kept him from taking his life was an unhealthy obsession with the numbers.
I'm addicted to those numbers in the wallet
He continued to live under a delusion that the lost bitcoins were still his. If he couldn’t get them back from his wallet, he would get the value back by investing in one of the many newly minted altcoins. They mostly came and fizzled out quickly. Guido lost everything on his new investments. That’s when he decided, he had missed the boat. It was still 2013.
REKT
Guido’s biggest crimes were being too early and not adopting an investor’s mindset. We give him a pass for not storing his bitcoins properly. Modern tools were not yet in place for that and it wasn’t worth the effort. You couldn’t buy a cup of coffee with 10,000 btc in 2010.
His life was mediocre when he discovered bitcoin. He had no knowledge of investing or financial planning. Very little about him suggested that he could handle large amounts of money with grace. So it wouldn’t have mattered if he lucked into pre-iPod apple stocks or bitcoin. It is likely that he would have sold too early and ended up with similar regret. Or that he held round circle from top to bottom of a cycle for another bout of regret. The gods gave him fire and then gave him wind.
LESSON
Would you rather be Guido in 2010 or be yourself today and just finding out about bitcoin? Would you rather be financially literate enough to grow a portfolio over time or get lucky to lose it just as quickly? Deep down most people prefer to get lucky believing they can hold on to that wealth. In reality very few do. There are no shortcuts. Any early bitcoiners who held on to their wealth did so because they were already financially literate and knew how to delay gratification like monks.
The situation Guido found himself in, was no different from millions of investors around the world at some point in their respective journeys. If bitcoin had not appreciated in value, his life would have continued along a mediocre path. And if news of its appreciation had somehow missed him, he would’ve been still poor but relatively happier. The problem wasn’t losing his bitcoin prematurely, he would have lost them eventually. The problem was him.
The right approach to treating something like bitcoin is to adopt the mindset of planting a tree. You know it will take time to bear fruit. You also know you need to eat in the meantime so you find other sources of nourishment. If anything happens to your tree, plant a new one. If you don’t, you will starve. It is only this way that any investments can provide you with meaningful rewards that lessen future burdens. “Wen moon?” is for amateurs. It’s 2022 and we are ridiculously early.
“MY ALL MY MONEY”
THE UNFORTUNATE RETIREE
In 2013, an anonymous Redditor, 64 years of age was nearing retirement. He had saved all the money he thought he needed to live in comfort by his standards. Then he discovered bitcoin. It was at the height of a bull cycle when exuberant media drowned out any rational thinking. He jumped in reddit threads and started doing research. He didn’t read much about adoption or how the technology worked. He was drawn to articles that fueled price fantasies.
He read about how bitcoin was going to the moon. What a curious thing to read. Everybody was getting rich overnight in a decree by first time investors, whose only useful skills were telling the colors green and red apart. The euphoria was infectious. The few savvy investors around didn’t help dampen the mass speculative psychosis that was ravaging a small but fiercely growing community. The original island boys2, Winklevoss twins, made predictions for a single bitcoin to reach a price of $40, 000. That was 40 times its current price. Their timing was only off by about 7 years but our Redditor was already convinced beyond rational doubt. He wasn’t good with computers so he had his son buy them for him through an exchange. He put in his life savings at a price of $1000 for a total of 85 bitcoins. He had spent the last 30 years earning that money but he didn’t hesitate to go all in on a shiny unproven technology.
I asked many people if i still should get in at 1000 and got the same answer from everyone: 1000 is cheap. We will be at 10k soon.
There is often wisdom in a crowd’s collective reasoning but that is not what our Redditor picked up on. The price bounced around $1000 for a while but mostly under the influence of gravity. He didn’t sell because the Reddit threads were still euphoric. Everyone kept saying:
This is just a small correction
So he held on even though he had lost a small percentage which turned out to be a sizable amount in dollars. That small percentage started to snowball until it became non significant. He was still confident the price would go up but alas it did not. $900, $700, $500, $350. Confidence evaporated as he watched the mood in the Reddit threads change from optimism to blue funk. The mass hypnosis had subsided and a calming reality took its place. He was now a bag holder.
His misfortunes didn’t stop there. House payments were due, without which he would lose his property. He couldn’t let that happen. Being homeless wasn’t an option for a retiree. And so he became a forced seller at capitulation prices. Bitcoin was supposed to change his life and it did.
REKT
Our Redditor found bitcoin early which was good on him, but he never should have invested everything with so little understanding of how it worked. He didn’t know about bitcoin’s inflationary schedule. He didn’t know about all the earlier adopters who were looking to cash out some profits. It is also possible that his security hygiene was not sufficient for the amount he invested. If the prices hadn’t done him in, something else would have.
Investing “MY ALL MY MONEY” as he worded it on Reddit meant that he became hyper-focused and sensitive to price fluctuations. Every downtick or uptick had to mean something. It didn’t help that he got his answers from unsophisticated investors on reddit. It just meant that he was in a sinking bubble with other investors who couldn’t swim. Misery loves company but we all suffer individually. His’, culminated in the loss of a lifetime’s retirement.
He spent the rest of the year calling bitcoin a Ponzi and blaming Redditors for perpetrating it. Reddit retaliated in vile.
It is common that old people get scammed online
LESSON
When you encounter something new, your first impulse should be to curb all other strong impulses. Take a breath, slow down and wait for the initial excitement to go away. A clearer head would have informed our Redditor that he could’ve bought a bit, say 5% every few weeks. The subsequent drops in price would’ve stung less and perhaps fueled an impulse to buy at lower prices. This time tested investor strategy is called “dollar cost averaging”. Our Redditor went all in. Never go all in.
THE ORIGINAL ISLAND BOYS
THE WINKLEVII
Vengeful intent stabbed through the air of a cold boardroom in a law firm in 2008. One half of the Winklevoss mirror twins, Cameron, fixed his gaze on a young Mark Zuckerberg, knowing the only thing between the two of them was a literal army of lawyers. The other half, Tyler, paced outside in giant strides. Mark had requested that only one of the twins be present at the preceding. He feared that the two combined were enough to slice through the lawyers like Spartans and end him. He was not wrong. The twins were built like Spartans, 6 ft 5, athletic wingspan and perfectly chiseled bodies. That didn’t stop Mark from stealing their idea, turning it into a global business and leaving them on the sidelines. The twins did not take kindly to this. They had been fighting legal battles since 2004 and after all this while, it came to a showdown in a cold boardroom surrounded by the same legal referees.
The negotiations were tedious but finally ended in a settlement. Mark grudgingly agreed to pay $65 million for Tyler and Cameron’s competing startup, Uconnect. The twins knew they deserved more, however it was a done deal. They accepted the offer but not all in cash, they weren’t stupid. They took $20 million in the bank and the rest, $45 million, in Facebook stock options. Despite how things turned out, they were poise and logical in their decision making. They knew Facebook had potential and that it would be profitable to leave skin in the game. Plus there was some amusement at the irony that Mark now worked for them.
In 2010 the twins woke up to an invitation for a movie screening. It was about them and their arch nemesis. It did well on release. Life was great and $20 million in cash made time fly but they didn’t retire just yet. In 2012, they started something new. Since they liked the idea of meeting founders, the twins setup a family office eponymously named Winklevoss Capital. It was really just a venture fund with their name on it. Cameron and Tyler had met with lots of founders when they realized that almost every startup wanted to integrate with, or eventually sell to Facebook. Fuck that! They needed a break.
In August 2012, they flew out to the Mediterranean island of Ibiza to get drunk and party. The summer was great and they were having a fantastic time when a strange man approached them. He was from Brooklyn.
You are the guys from that Facebook movie right?
Cameron and Tyler didn’t know whether to give him a wedgie or just leave. The gentle giants smiled and indulged him. As they chatted over tequilas, the strange man asked them a question that would alter the rest of their lives to this day.
Have you heard about virtual currency or bitcoin?
No. Tell me more.
That day, Cameron and Tyler drank a lot of tequila as they listened to the weirdest pitch from a non startup. This guy could talk and he was clearly passionate about something he did not create. They exchanged twitter contacts and when they went back to the States, the strange man sent them links with lots of reading material. If there’s one thing Harvard grads can do well, it is research. The twins lost themselves in a rabbit hole of bitcoin literature. At one point, Cameron turned to Tyler and said:
This is either complete bullshit or the next big thing.
They suspected the later but research did not stop there. They wanted to understand everything about bitcoin and since they were well connected, they could get in the room with core protocol developers. They asked questions about how bitcoin worked, how it was issued, how it could be stored safely and how it could be destroyed. The responses were mind bending. These developers were a lot smarter than Mark or anyone else at Facebook. Perhaps in another life….never mind. The twins learned that bitcoin was a new kind of money outside of government issuance and control. And that it couldn’t be destroyed without bringing down the internet so governments would have no choice but to work with it. The orange pill they took from a stranger in Ibiza was taking effect.
Cameron and Tyler ate, slept and dreamed bitcoin. They felt vibes from the early social network days but this was more meaningful. Instead of sharing pictures or connecting with people which was great, now they could participate in a money network. The infatuation that came with early discovery soon wore off and it came time to buy some bitcoin. The price was still in the high single digits with little liquidity here and there. The twins had $11 million to invest but they didn’t want to move the price. So they bought in batches over 6 months period. A little bit from brokers online, some from an early exchange called Bitstamp, and the majority from Mt Gox. The experience was terrible, sometimes they would watch the sites go down for 12 hours while they waited to purchase. As they bought bitcoins, they immediately took them off the exchanges. Their developer mentors had taught them well.
Now the twins had purchased about 1% of all bitcoin supply, it was time to advertise their newest investment to the world. The residual fame from their old lives came in handy. A lot of similar minded investors took notice but these new investors were not subtle about buying. They threw money at it with no regards for market size. This was partly responsible for the 2013 mania. For a brief moment, the twins became billionaires on paper. They didn’t sell because they thought it was going t $40,000 per coin soon. It didn’t. They watched the price go down with some dissatisfaction and still didn’t sell. They weren’t paper hands3.
Then Cyprus financial crisis happened. The Cypriot government took money from every account with over $100, 000 to bail itself in. It was all over the news. Cameron and Tyler saw this as the holy grail of advertising. Bitcoin was money that governments couldn’t seize and it was going to happen again in some other country. The more it did, the more high net worth individuals would investigate alternatives. So they started a business in 2014 to accommodate anyone who wanted to buy bitcoin. That business became Gemini Trust. An exchange for onboarding fiat users.
Their business has continued to grow till this day. It even acquired the notoriously difficult BitLicense4 in order to serve New Yorkers. And in 2018, they were awarded a patent for a tech behind ETF implementation. While no ETF has been permitted yet, they would be green lit when the time comes.
LESSON
The Winklevoss twins grew up in a conducive environment which gave them an advantage over many early bitcoin adopters. Their father was an entrepreneur and as kids, they would visit the office and talk to the engineers asking questions about God knows what.
They were also investors through and through. As evidenced from their settlement with Facebook, they kept skin in the game to capitalize on future profits. Mere mortals would have cashed all out with spiteful feelings towards Mark. They kept their stocks as seed investments for the next big thing which was right around the corner.
When the twins learned about bitcoin, they didn’t dive head first, they researched like scholars. They learned what to do and what not to do from the best in the field. This saved them from the catastrophe that was Mt. Gox a year later. Even as they bought bitcoin for the first time, they did it like professionals. They only used a fraction of their money at a time so as not to move the market or draw attention to themselves. It was only after purchasing their fill that they started touring the world to talk about it.
For every problem the world saw, the Winklevoss twins saw a new business opportunity to protect their investment. They weren’t too keen on ideologies, they simply made sound investment thesis and followed through. They weren’t interested in competing, they were thinking of growing the pie. A trait that started from their early school days in Connecticut when everyone was joining the soccer, basketball and tennis teams, they started rowing. They commuted to a lake about an hour from the city during which they did homework. After a year, they went to the headmaster and formally applied to start a rowing team. Today almost all schools in the area have rowing teams. This is testament to the Winklevoss twins talent for starting and building things that last.
From the beginning, the twins treated bitcoin like an investment to be studied and then followed with action. Be like them. Read the rest of this book.
So we have seen two types of early bitcoiners but there are more. Keep reading to find out about some more early adopters who didn’t backup their bitcoin wallets and are now out of a major fortune in “CHAPTER 2”. Lord Thoth could whisper it in their ears but gods are not allowed to intervene. We can only watch and tell it as it is. Find a typo and earn Lord Thoth’s gratitude. Also subscribe and tell your friends.
A file with the .DAT file extension is a generic data file that stores specific information relating to the program that created the file. In this case, the program that created the file was the bitcoin client.
A meme reference to two South Floridan artists of Cuban origin, Kodiyakredd (Franky Venegas) and Flyysoulja (Alex Venegas). They went viral on TikTok after recording a hit song in a pool.
Paper hands are investors who sell an asset shortly after purchase because they can’t stomach volatility or are forced to sell. Some famous examples are Masayoshi Son and Elon Musk.
The BitLicense allows a company to conduct Virtual Currency Business Activity involving New York or a New York Resident, but it does not replace any other licenses required under New York law.
Winklevoss twins story is facinating. I did not know Gemini twins are Winklevoss untill I read this.