In today’s Exponential Investor…

  • Three Coronas
  • £27 million of bitcoin
  • See with your own eyes

The weekend just gone was a great weekend.

I don’t know about you, but for some reason I just really enjoyed it. Maybe it was because I could see green grass in the backyard instead of clumps of snow and ice. Maybe it was just a breath of optimism that we’re a weekend closer to returning to life as we know it.

I’m not sure.

But as I had a Corona (the beer) in the kitchen while cooking a leg of lamb with perhaps the best roasties I’ve ever done everything just seemed to be ok.

By the time I was on my third Corona, my mood had maintained its happy heights, but I also began to reminisce on some old times…times that were almost a decade ago… times that cost me tens of millions of pounds…

You’ve got to just laugh

Over the weekend you might have seen a couple stories circulating about bitcoin. Two in particular were outright jaw-dropping.

One was the story of a guy in San Francisco who managed to get into bitcoin very early in a very big way.

According to the New York Post:

Stefan Thomas has used 8 of the 10 attempts allowed by a secure thumb drive to reach his 7,002 digital tokens

Thomas, has around £189 million worth of bitcoin on a very secure drive. This drive is programmed to lock forever on 10 incorrect password attempts.

The problem is Thomas set it up so long ago he forgot the password and doesn’t have any backups of it. Hence, he’s now got two attempts left otherwise he can kiss goodbye to all of it.

Thomas has a little bit of hope, however. For a start, he’s got two more attempts to go, but really one, because if he ends up with nine incorrect, and just one more, then you absolutely wouldn’t go for it with one last attempt.

You’d just stop, and hope that one day someone smart comes up with another way to access them. Maybe it’s years away, maybe it’s not until quantum computing is the ‘norm’ that it can be cracked.

It’s not a good situation, that’s for sure but at least Thomas has his hundreds of millions’ worth of bitcoin.

According to the BBC:

James Howells had 7,500 bitcoins, a virtual currency, on the hard drive, which he mistakenly threw away in 2013.

James, from Newport, reckons the hard drive he mistaken threw away is in his local council landfill. He’s been campaigning for a couple of years now to get access to search for it.

That’s over £210 million worth of bitcoin potentially in a landfill. In other words, Howells had it and lost it.

I would find that harder to take than having it and not being able to access it.

And I can empathise with these guys a little bit. You see I had my own moment with bitcoin. Not quite as bad as these ones, but not too far away. And thanks to a message from a mate on Sunday afternoon, my happy Coronas turned into ‘sad Coronas’.

Back in 2011 I’d been toying around with bitcoin for a little while. Trying to understand it, trying to figure out how the technical side of it worked. Even looking into the construction of a custom computer (mining rig) to mine it.

I was undertaking this all with a mate from my work who also had a keen interest in it all after I’d introduced him to it.

After running the calculations on the cost of a custom built mining rig (a few thousand dollars) plus the 24/7 energy cost of running the thing, we came to the conclusion that we’d probably only be able to mine about $300 worth of bitcoin each year, and that it would likely take us a few years to pay off the cost of the rig and the power needed.

We then considered that maybe we should just buy some bitcoin instead of putting it into a rig and mining. But we were also worried about the wild volatility of it. We’d seen bitcoin go from about 30 cents to $30 then halve, and then continue to be worth less and less and less.

Ultimately we’d see it worth a fraction of its peak and languish at a level that made it too wild for us (at the time) and not worth enough to pay off the mining rig.

We also then considered the opportunity cost of sinking that money into all this as opposed to investing in some stocks.

Needless to say our decision at the time was the wrong one. Calculating that missed opportunity today, we would have been looking at around £27 million worth of bitcoin.

Every now and then I think about that time and how I’d do it differently. But back then it was wild, volatile, and I didn’t have the same comprehension of it as I developed over the years since.

Also, so early on, we didn’t realistically think in ten years’ time a few thousands not spent on bitcoin would be an opportunity cost of about £27 million.

Luckily it’s easier to get over something you never had in the first place than had and can’t access, or worse, had and lost.

See the bigger picture

But I also find it reassuring when I go back to those days. Reassuring in the sense, that while it might have been a decade ago, it really was comparatively just ‘yesterday’.

When I think about the evolution the crypto revolution has gone through in the short space of a decade, it blows me away. There has been so much development and innovation in this space, which only makes me more certain and confident of the next ten years we can come to expect.

It also reminds me that it can be easy to be caught up in short term pessimism, it can be easy to fall into the trap of listening to ‘traditional’ financial ‘experts’ who say this is just one big fraud and bubble.

It can be easy to lose sight of the bigger picture.

The bigger picture is simple. A new, revolutionary globally connected, distributed and decentralised financial system is in construction right now. It’s a work in progress that’s still in its infancy.

There’s a chance to get in and participate in this construction phase. A phase that I believe still presents huge long term potential for people who believe in long term wealth creation.

That’s the bigger picture you need to understand and focus on. The headlines in the mainstream can be misleading, they can be scary, and they can be funny and fun.

I believe that ten years from now will be wildly different to today, but the wider crypto ecosystem will be better, even more robust, and those brave enough to have stepped in early, as in today, which is still early, I think will benefit the most.


Sam Volkering
Editor, Exponential Investor