SALtoshi Whitepaper #108
Hopefully everybody’s year is going well so far. If not, one might consider making some adjustments, and then hope for the best. Results don’t always come right away, so trusting the process is key. Even small changes lead to meaningful impact. Since August, I’ve been sitting on either my bed or yoga ball, because I didn’t have a chair or couch in my apartment. Even at my desk, the yoga ball is my chair. I know — kind of weird, but I like it. People generally feel the need for the full setup in their home, but because of the Army and my goal to buy more bitcoin, I’ve become accustomed and even enjoy living with less.
On Tuesday of last week, my couch was delivered, and I ended up rearranging my apartment in order to put the couch somewhere suitable. Now, the vibe of my apartment is different — much better. I still don’t have a chair for my desk, but one step at a time, plus the yoga ball is comfortable. It’s interesting, because I didn’t realize what I was missing until experiencing my new setup. After 4 months, my apartment finally feels like a home, rather than a pit stop — which is what I’m used to as a former Soldier and nomad. For those who are not aware (as I was not), the energy flow of a room is just better when properly designed. I suppose the same can be said about life — the energy flow of life is just better when properly lived.
The bitcoin market has been very volatile (bearish) for the past 2 months. People are certainly feeling the pain of buying near the top, and/or high expectations for bitcoin to reach the moon by now. On 10 November, we reached an all-time high of $68k, and now we’re struggling to hold $41k. Nobody is certain about the future. We could drop lower, maintain and run sideways for a while, or bounce back to $50k within one day, $60k within one week, and reach another all-time high of $70k within one month. Bitcoin’s market is a wild animal which refuses to be tamed. However, I’m not trying to provide insight on the market. Rather, on the market participants.
Anybody can buy bitcoin, which means the market is extremely diverse and unpredictable.
We have buyers like my buddy, Skeptical Dave. He first bought bitcoin closer to the top, and his investment has been at a loss for a while, which is completely normal. At this point, he wants to break even, and cash out. This type of investor can be categorized as profit-seeking with a high time-preference. In other words, his primary objective is to multiple his dollars quickly, and then find a quick exit back to fiat.
On the opposite end, we have buyers like myself and many other legends. Joking, but not really. I’ve been buying bitcoin since the price was $3.3k, and I’ll gladly buy more when we reach $1 million per coin. For the most part, I don’t mind what the market says it’s worth — I’m trading my dirty dollars for bitcoin. This type of investor can be categorized as long-term with a low time-preference, AKA HODLer. In other words, my primary objective is to transition from a fiat-based monetary system to a bitcoin-based system. Bitcoin is already my reserve currency, just waiting for the rest of the world to wake up, and then bitcoin will become the next global reserve currency.
Finally, we have all types of investors in between Skeptical Dave and myself. Again, the bitcoin market is extremely diverse, because there are barely any barriers for entry. Millions of other buyers are all over the world with millions of unique strategies — including those willing to buy the top, and then sell at a loss. However, no need to go any further down the rabbit hole, as you can imagine there are countless examples. If you can imagine a certain type of bitcoin investor, she’s out there.
Let’s focus on HODLer behavior, and more importantly — HODLer conviction. For those who don’t know — HODL was not originally an acronym, but a misspelling of the word “hold,” and has since become an acronym and meme to mean “Hold On for Dear Life.” My friend Mike told me that people have actually asked him how much bitcoin I have, and I find this amusing. Then, they’ve asked him why I don’t sell, and I find this even more amusing. People really don’t understand Bitcoin, which is part of the reason for writing SALtoshi Whitepaper. Stick with me, kid.
My reasoning is simple — Bitcoin is designed to be held forever. Bitcoin is not a gamble or a stock. Bitcoin is not another hot crypto. Bitcoin is The Crypto. No crypto has succeeded before bitcoin, and so far — 16,000+ crypto assets created after bitcoin (shitcoins) have failed, and/or are failing in some major way. Sure, a better money might come along someday, replacing Bitcoin as the next-next global reserve currency, but extremely unlikely to happen within the next 118 years. Bitcoin hasn’t even reached the medium of exchange phase yet, and that’s how we know we’re early.
You can already sense the HODLer conviction, right?
HODLers are 100 percent convinced that bitcoin is the greatest investment of a lifetime. I know of people who have sold their investment properties to buy more bitcoin. I know people who have cashed out their entire 401K to buy more bitcoin (me). I know of people who have sacrificed a lot of comfort and time to buy more bitcoin, even when they already had a significant amount. Price is not really a make-or-break point for HODLers. We’ll be buying and holding forever. The current market conditions are like a blip on the radar for HODLers. One year from now, we’ll be like, “Oh, that happened? Yeah, I forgot about that.”
HODLers are long-term thinkers, and are barely affected by short-term price movements. Bitcoin can create generational wealth, and there is only one rule — do not sell. Of course, there are exceptions — mostly emergencies. Anybody can buy and hold bitcoin for long periods of time. However, only HODLers have the knowledge and conviction to understand why selling is a no-go. This is why research is supreme. Reasonably, most HODLers probably question why the market is taking such a beating, but we have no fear. We’re convinced our investment will never go to zero.
Why? 21 million. Proof-of-Work. Full-nodes.
With a current valuation of $41k, bitcoin is down 40 percent from the all-time high of $68k, which means it lost nearly half of its market value in 2 months. No fun for Skeptical Dave, but a great buying opportunity for the legends. The following data was published one week ago, so the past week of further downside is not captured, but you’ll see my point. According to Glassnode, only 1.11 percent of long-term coins were sold since October. Let me elaborate, because this behavior is crucial.
Bitcoin’s market had a great month in October — opening at $43k, and closing at $60k. I cannot speak for other HODLers, but my expectations in October were very high. I was expecting $100k bitcoin in 2021, and we didn’t even come close. One might assume that because bitcoin did not perform as expected, people lose hope, and then sell. Yes, people are clearly selling. However, nearly 99 percent of sellers are not HODLers. You see, price floors are set by HODLers. Without the legends holding the line, bitcoin goes to zero. We’re willing to die on this hill. Joking, but not really.
What would it take for HODLers to sell?
Great question, thanks for asking. Price is probably not an answer. If bitcoin falls below my lowest entry point ($3.3k) — I would be concerned, but I wouldn’t necessarily sell. I would need to assess the situation first. If the network is healthy, I would hold and buy more. If the network is affected with a permanent issue such as an inflation bug — I would pop smoke, and buy gold or another hard asset.
In conclusion — HODLer behavior is due to HODLer conviction, and HODLer conviction is earned through research. I don’t know everything about Bitcoin, but I know enough, and I’m trusting the code experts all over the world to give me the green light about the network. Understanding the concept of Bitcoin, and some of the important features will lead any sensible person to graduating from a Skeptical Dave, and becoming a HODLer.
Until next time,
P.S. — I’ve been trading (including day-trading) lately, and so far so good. I’ve either been very lucky for the past year, or I’m decent (not great) at timing the market. Some popular narratives in the bitcoin community are always leading people to believe that HODLers outperform day-traders, but I don’t necessarily agree.
The point of trading bitcoin is to earn more bitcoin, so logically — successful day-traders will outperform HODLers every time, because traders are constantly earning more bitcoin, and HODLers have an unchanging amount. However, maintaining the status of a successful trader is probably very difficult. Hope I don’t get wrecked.