There are some things in life that you never want to admit doing:
- Being really good at Dance Dance Revolution
- Asking for a 2nd helping of dinner while flying on Economy Class
- Buying bitcoin
I am very proud to say that I’ve done all three.
Wait. Lionel Yeo – Champion of Index Investing, Advocate of Boring Routines, Merciless Critic of BS Marketing – has finally caved in and bought crypto? What the heck is going on? Is the world coming to and end?
Ruuuh-lax. I bought some Bitcoin, but not for the reasons that you might think.
I’ve Never Really Liked Bitcoin
I first heard about Bitcoin way back in 2014. Back then, it seemed like a fad – an interesting idea put forth by technologists and geeks. Even when it started getting popular, I’ve always had my doubts. Crypto, to me, was just another bubble like the tulip mania of the 1600s.
Even as my friends started jumping into it, I stayed out. It seemed too bubbly and hyped-up for my liking. Reinforcing my skepticism, I laughed at the crypto enthusiasts who were doing everything they could to capitalise on the craze:
- Every other person started listing “blockchain” on their LinkedIn profiles (these were the same folks who listed “AI” last year, “fintech” 2 years ago, and “Big Data” before that)
- An acquaintance started spamming our WhatsApp group that his friend was raising a “friends and family round” for his new crypto hedge fund
- A cryptocurrency class I attended turned out to be a 2-hour sales pitch for his $1,988 crypto trading course, complete with testimonials like “I made 3500% in 4 days trading alt-coins!!!”
Ugh. Crypto bros and Bitcoin. I rolled my eyes and continued with life.
Getting Some Skin In The Game
And then, in late 2017, the bubble popped. The price tumbled from a high of over $19K to $13K overnight, and continued to trend downwards to just under $7K over the next 4 months.
A lot of the crypto hype died down after the crash. I thought the fad was over; yet I kept seeing new startups, new use cases, and even institutions jumping into the blockchain game. Despite all the challenges that crypto has faced – the criticisms, the government regulation, the hacks, the crash – It. Just. Refuses. To. Die.
That’s when I started to take notice. I researched a lot more into the space, and formed some initial, tentative opinions of my own:
- Not every related concept has substance:You have to separate the wheat from the chaff. Getting interested in blockchain is not the same as agreeing that “Bitcoin will reach $50,000!” or “Cryptocurrencies will usher in an era without governments!”
- It’s a work in progress: The technology is far from perfect, and several miracles need to happen for it to succeed. But looking beyond today’s flaws, we can at least agree in principle that the end-goal is interesting
- You don’t need to answer every question: At this point, I don’t know what I don’t know. There are plenty of reasons to be skeptical, but everything I’ve seen so far leads me to suspect that there might be something there.
According to professional poker player Annie Duke (whose book I’m reading right now), the best way to learn is to place a bet. Therefore, despite my skepticism, I decided to buy some Bitcoin.
I realise that betting on Bitcoin is not the same as betting on the potential of blockchain, but it’s the easiest experiment I can find for now. I’ll be keeping my total cryptocurrency investment to less than 1% of my overall portfolio: Large enough to keep me interested in learning, but small enough that I wouldn’t lose sleep over it.
The Ideology Bias
The journey so far helped me become more aware of my own ideology bias.
Conventional investors like me label crypto enthusiasts as greedy, overconfident, and delusional at believing the hype. Conversely, crypto enthusiasts view traditional investors as antiquated, stuck in the old ways, and who are too stubborn to see the new paradigm that’s right in front of them.
Want proof? Take a look at the comments section of any cryptocurrency blogpost. It’s now as entertaining as the Pan Lingling-Hong Huifen saga, with both sides digging their heels in the mud and talking over each other.
The ideology bias is our natural tendency to put a label on someone, and then attribute all the usual stereotypes of that label to that person. We do this all the time:
- “Foreigners have no manners and are just here to steal our jobs”
- “Christians follow arbitrary rules and have beliefs that aren’t backed up by science”
- “If you’re a PAP supporter, it means you care more about money than about freedom”
We need to be aware of this bias, because it can cloud our ability to make the right decisions. Learning from my crypto experience, there are a few questions we can ask ourselves to test this:
- How do we separate the “crazies” from the core concepts that actually make sense?
- There will be some elements with flaws. But which flaws can be corrected, and what are the end-goals?
- You may not understand 100% of it. But does it make you stop and go, “Hmmm, maybe there’s something there”?
Now, I’d love to hear from you: What’s one idea that you might be unconsciously be biased towards? Is there a small bet you can make to test that assumption?
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