My (Successful) Bitcoin Investment Journey - Part Four
After losing half of my Bitcoin investment, patience has (finally) paid off
In late 2014, I wanted to merge my research regarding retirement planning with my interest in a growing, somewhat obscure (at the time) concept known as Bitcoin. As a person who was actively writing about both topics, I wanted to go beyond just a literary view of the topics and take a more journalistic “hands on approach” to addressing these two topics.
I decided to pursue an investment with my own funds into Bitcoin.
Because it had to be related to the topic of retirement, I decided to use my current retirement plan contribution to make this investment. At the time in 2014, this was not an easy thing to do.
I invite you to read my past articles in this series to follow my journey to this point. In my first article in this series, I laid out my belief that investing for retirement, or any type of portfolio, demands proper asset allocation. This allocation should provide for a mixture of investment vehicles such as stocks, bonds and cash to provide a proper mix of risk to address market fluctuations. Over the last decade, we’ve seen more and more portfolios including a small allocation of alternative investments.
Alternative investments are typically regarded as “non-correlated” investments, meaning that they’re not typically directly correlated to the equity or bond markets, this helping to further spread out that risk.
These often include gold, real estate or sophisticated investment strategies such as long/short or alpha strategies. It’s my belief that an investment in Bitcoins, or other cryptocurrencies, fit the bill as an alternative investment as well.
Therefore, making an investment of my yearly SEP contribution of $25,000 into Bitcoin was not viewed as “taking a flyer” on a hair brained investment idea, but rather a prudent investment decision based upon sound asset allocation.
So I decided to take the plunge and found the only investment at that time that was available for a retirement based account, which was the Bitcoin Investment Trust (BIT). You can read about that process in Part Two of this journey.
The most recent article I wrote on the topic (Part Three) discussed the reality that my $25,000 investment in Bitcoin had declined by 50%.
Yes, I had lost half of my investment in four months! No one likes to lose that much money, but the reality was that my original investment was around 5% of my overall retirement account and therefore, I was fortunate enough to weather that type of a loss (it also helped that the overall stock market had not taken a similar drop – after all, I remind you that an alternative investment is supposed to be a non-correlated investment).
So, here I am today, writing about the last part of this journey.
When I wrote about the one year anniversary of my investment in May of 2015, I was still down by 50%, but I expressed my optimism because of many of the exciting events going on around Bitcoin and Blockchain technology. So I was going into my second year with my investment with a smile on my face and fingers crossed.
At the end of 2015, I wrote the article that I hoped to write.
My initial investment in Bitcoin Investment Trust had become GBTC and was now being traded on the OTC market and was available to any investor. It was also up about 133% from the same period a year ago. Yes, my investment in Bitcoin was back to its original investment of $25,000, and growing.
Since that time, GBTC (which has transitioned from BIT to a publicly traded ETF that consists of investments in Bitcoin) has continued to grow in value, as has the value of Bitcoin.
The interesting aspect of this is not just that Bitcoin has proven itself as an investment, but that it’s also raised the reality that there are other cryptocurrencies such as Ethers (Ethereum) and Factoids (Factom) that have grown in value as well. Although the access to these other cryptocurrencies is not as easy for regular investors as GBTC is, that is changing and many investors are now recognizing the benefits of looking beyond Bitcoin for investing in digital currencies.
After all, they may be alternative investments, but they’re regularly traded on public exchanges and with prudent asset allocation strategies (no more that 5-10% of your overall portfolio), you may make money. After all, I may be an example of that.
However, you’ll need a supply of Rolaids to deal with the ups and downs. I have some extras if you need them.