I Lost $54,932 Trading Bitcoin. Here's What I Learned.
2021-07-01 · Long video (solo, talking head or whiteboard) · Ali · recording, 11:41 · watch on YouTube
Topic: Money and investing · mode: List of tips or lessons · tags: His own numbers
Ali retells how he poured most of his savings into Bitcoin in the 2017 bubble, investing $88,000 and losing over $55,000, and draws five lessons: do not lose money, do not invest money you may need within five years, take emotion out with a plan, treat short-term trading as gambling, and sell when you feel rich and buy when you feel sick.
What is said
The parts of the video and what is said in each (★ — how much it matters to the video).
00:00:00 — The 2017 Bitcoin bubble and how Ali lost most of his savings in it
- ★★ Ali says the 2017 Bitcoin bubble took the price from $975 in March to nearly $20,000 at the start of December; on 22 December 2017 Bitcoin lost a third of its value in 24 hours, falling below $14,000. — 00:00:00
- ★ Ali says that by February 2018 the Bitcoin price had dropped another 50% in 16 days, falling back below 7,000. — 00:00:29
- ★★★ Ali says he poured most of his savings into Bitcoin during the 2017 bubble: by the end of 2017 he had invested $88,000, and within a few weeks he had lost over $55,000 of it. — 00:00:29
- ★★ At the time of his Bitcoin loss Ali was preparing for his final-year medical exams at Cambridge, making YouTube videos on the side, and watching about 90% of the savings from five years of running a business in medical school go up in flames. — 00:00:29 · University of Cambridge
- ★ Ali insists he is now completely over losing most of his savings on Bitcoin. (playful) — 00:00:58
- ★★ With crypto rallying and many people he knows getting into it, Ali shares five lessons from losing the bulk of his life savings trying to invest in Bitcoin. — 00:00:58
00:01:33 — Lesson one: don't lose money
- ★★★ Ali's first lesson: the first rule of investing, which Warren Buffett and every investor talks about, is not to lose money; by not losing money you already do better than many people trying to invest. — 00:01:37
- ★★ In late 2017 Ali had put around $50,000 into Bitcoin and his portfolio was worth around $90,000, a gain of $40,000. — 00:01:37
- ★★ Ali says 32,000 pounds is about a whole year's salary for a doctor in the UK's National Health Service. — 00:02:13 · NHS
- ★★ Ali says the prudent move with his Bitcoin would have been a stop loss: selling at once if the portfolio dipped below the amount he had put in. — 00:02:13
- ★★ With a speculative investment such as Bitcoin, which Ali calls basically gambling, he thinks it is fine to play with house money: once you have recouped your original investment, you can do what you like with the gains. — 00:02:13
00:03:22 — Lesson two: don't play with money you might need soon
- ★★ Ali put all his savings into Bitcoin knowing he wanted to buy a home within a year or two; when he bought the flat he now lives in, he had to realise the loss, taking around 30,000 to 40,000 out of Bitcoin for the deposit. — 00:03:30
- ★★★ Ali's second lesson, a standard rule for any investment: first keep a six-month emergency fund in cash, then set aside any money you might need in the next five years (some say ten), for a car, a house or a wedding, and do not invest it. — 00:04:00
- ★★ Ali still holds that in theory everything goes up over the long term, crypto, stocks and real estate alike; the danger is needing the money when the market is low and having to realise the loss. — 00:04:39
- ★★ Ali, who thought himself rational, became emotional when it came to Bitcoin in 2017. — 00:05:01 · University of Cambridge
00:05:15 — Lesson three: don't be emotional
- ★★★ Ali's third lesson: have an investing plan, with some contingencies, and stick to it, removing as much emotion from the decisions as possible. — 00:06:03
- ★★ When Ali puts money into Bitcoin he tells himself he is setting fire to it, to model losing it all; investing only what he can 100% afford to lose keeps him from buying more on news such as Elon Musk or Tesla investing. — 00:06:30 · Tesla
- ★★ Ali subscribes to the newsletter Crypto is Easy and follows its author's crypto plan, which he calls pretty good, to keep his own emotion out of investment decisions. — 00:06:58
-
★★★ Ali's fourth lesson: short-term trading is gambling and long-term holding is investing; buying crypto to hold untouched for ten years is fair to call an investment, while day trading on indicators and orders is basically gambling. — 00:06:58
“short-term trading is gambling. Long-term trading is investing.”
00:07:32 — Lesson four: short-term trading is gambling
- ★★ Ali says there is almost no way individual non-professional investors can time the market by looking at all sorts of indicators. — 00:08:14
- ★★ Ali warns that videos about Bitcoin attract scam comments from bots and fake accounts praising a trader's day-trading strategy and giving a WhatsApp number, and he has had messages from people who fell for the scam. — 00:08:51 · WhatsApp
- ★★ Ali allows that institutional investors, or a big company such as Jane Street doing high-frequency algorithmic trading, may be able to day trade, but not most people watching. (hedged) — 00:09:21
- ★★ Ali says trying to day trade, watching moving averages to decide when to buy and sell, was a big part of how he lost so much money in 2017. — 00:09:21
- ★★★ Ali's approach to crypto now: buy and hold with diamond hands, buy only with money he can 100% afford to lose, and have no intention of selling in the short term. — 00:09:50
- ★★ Ali's final lesson, which he thinks a friend told him: with crypto, sell when you think you are going to be rich, and buy when you have lost so much money that you feel sick. (hedged) — 00:09:50
00:10:05 — Timing your buys and sells, and how Ali buys crypto now
- ★★ Ali does not know whether he will actually follow the rule of selling when he feels rich and buying after heavy losses. (unsure) — 00:10:14
- ★★★ Ali now buys Bitcoin, Ethereum and Cardano every week with a standing recurring order and means to leave it untouched, hopefully for at least five years. — 00:10:14
- ★★ Ali calls crypto no get-rich-quick scheme but potentially a viable long-term investment opportunity. (hedged) — 00:10:59
Threads in this video
- retold · Ali loses money on Bitcoin (2017) — Ali says he poured most of his savings into Bitcoin during the 2017 bubble: by the end of 2017 he had invested $88,000, and within a few weeks he had lost over $55,000 of it. (00:00:29)
- refine · How should you start investing? — Ali's second lesson, a standard rule for any investment: first keep a six-month emergency fund in cash, then set aside any money you might need in the next five years (some say ten), for a car, a house or a wedding, and do not invest it. (00:04:00)
- refine · Should you invest in crypto? — Ali's fourth lesson: short-term trading is gambling and long-term holding is investing; buying crypto to hold untouched for ten years is fair to call an investment, while day trading on indicators and orders is basically gambling. (00:06:58)
- restate · Should you invest in crypto? — Ali's approach to crypto now: buy and hold with diamond hands, buy only with money he can 100% afford to lose, and have no intention of selling in the short term. (00:09:50)
Mentioned
Central: Bitcoin
Also: People: Elon Musk · Warren Buffett
Works: Crypto is Easy
Organizations: Jane Street · NHS · Tesla · University of Cambridge
Concepts: emergency fund
Products: Cardano · Coinbase · Dogecoin · Ethereum · WhatsApp
Also centred on Bitcoin: What is Bitcoin? - Bitcoin Explained for Beginners
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