Bitcoin and the “smart people investing in it”
Author: Javier Marti. Founder, BitcoinGlobalInvestments.com
When we talk about Bitcoin investments by individual investors, or investments in Bitcoin companies, one of the main arguments that some individuals rely on to enter this space or to convince others -as seen on Reddit- is that “smart people”, including…
- Sir Richard Branson : http://en.wikipedia.org/wiki/
- Marc Andreeson : http://en.wikipedia.org/wiki/
- Peter Thiel : http://en.wikipedia.org/wiki/
- Andreessen Horowitz : http://en.wikipedia.org/wiki/
- Barry Silbert : http://en.wikipedia.org/wiki/
….are investing in Bitcoin.
This is apparently a powerful argument in favour of Bitcoin, but also one of the weakest ones, and certainly one that should not have an excessive weight in our financial decisions.
At Bitcoin Global Investments we take pride in offering our clients objective and impartial advice on Bitcoin, so we are extremely careful not to fall prey to some of the most common misconceptions and biases that may put our clients in a delicate position regarding their investments in Bitcoin. Some of the most common ones, at the core of the argument mentioned above, are:
- Confirmation Bias: because others are doing it, it’s a good idea. Our mind concentrates on any piece of news that is positive, making us lose the big picture perspective that allow us to objectively assess our investment decisions
- Follow the leader: because “smart people” are doing it, it’s a good idea, simply because smart people do smart things.
These two are just some of the dozens of biases that exist and our minds regularly fall for, on a regular basis, and together with the concept of “social proof”, it is why advertising -particularly celebrity endorsements- work so well in the general population.
As an antidote to this simplistic way of thinking, it is worth remembering that:
- Bitcoin is a great idea for many different reasons, with or without the investment in this new digital venture by this “smart people”, many of them relative latecomers into the space.
- Branson, Thiel and others, and the companies they represent, invest in many different ventures, big and small, in the course of a year, expecting widely different results for different reasons.
- The investments in Bitcoin made by some of these individuals are relatively small compared to their investments in other ventures.
- The fact that they invest in Bitcoin, does not mean that they support the idea behind it, or that they would not invest in the main Bitcoin competitor tomorrow if advised to do so by their investment managers.
- Investments made in the Bitcoin space so far -including Bitpays’ recent 30M round of new funding are still low in dollar terms, compared with other sectors and investments opportunities that these and other individuals could and do invest in regularly.
Last but not least, “celebrity investors” positions are much more liquid, and thus, they can ride the market much longer than the average individual investor in Bitcoin can, still remaining solvent. We should not assume that their calculated risks -that include a potential and total write off of their investment- mean that Bitcoin is guaranteed to succeed as an idea, network or currency. Many of those who are successful investors today have failed many times in the past, and lost a lot of money doing it.
All of the above warnings are important to be taken into consideration when planning our investments in Bitcoin. We should all be extremely conservative in our choice of investments, including those opportunities in Bitcoin that may or may not give the returns we are looking for. Let’s remind ourselves once again that “The best way to make money, is not to lose it in the first place.”
As seen in my presentations about Bitcoin (skip to 17:00) there are at least 14 things that make Bitcoin, and the idea behind it, extremely valuable, without having to resort to arguments based on celebrity investors backing up this exciting and revolutionary digital currency project.
Javier Marti is the founder and CEO of
For more information visit JavierMarti.co.uk
This article is free for reprint on any platform as long as text and links are kept intact and a link to BitcoinGlobalInvestments.com is included in the reprint