He Rode The Bitcoin Boom All The Way Up, And Down

I was just very excited about back, getting back into the rhythm and doing another episode with you. Right, we

we got the band back together, exactly. I'm also really excited about this one because we're going to return to one of our favorite topics, a recurring theme throughout Odd Lots, and that is bubbles, which I think we both agree is just an endless apply, a rich load to mind for topics to discuss and markets, absolutely and a fascinating experiment in human psychology and how people react to uh making a lot of money and then losing a lot

of money as well. Exactly. I mean, there are so many bubbles throughout history and you each have their own sort of distinct element, but it seems like the psychology element of how humans react to huge price swings on the way up to people making a fortune in a short period of time is very consistent throughout basically every bubble we talk about, and in fact, you even see charts that are sort of like the the cliche bubble of you know, fear of missing out and optimism and

then people buy back in at the top and this sort of there's a steady psychological component or cycle to every bubble that basically is identical. Absolutely, So, which particular bubble are we going to be discussing today, Well, today going to not only be talking about one of the recent most sort of extraordinary topical bubbles of our time. We're gonna be talking, of course about bitcoin and crypto

more broadly. We actually rather talking to some historian or some academic who's done a study, we actually have the good fortune of talking to someone who participated in the bubble on the upside and the downside, someone directly involved with it, so we can hear, you know, straight from the source, what it's like to ride an extreme bubble.

Our guest today, recently, uh did a tweet storm in which he talked about starting with a very small amount of money and making an absolute fortune in a crypto and most of it made in and then seeing much of it deteriorate in eighteen So we get to we get to go right for the source, I would say on this one. So I'm really excited about this one parta cularly since it's bitcoin and bitcoin it's not just

a bubble, right, It's almost a belief system. So I'll be really interested to hear what our guest has to say about whether or not he still believes in all things bitcoin slash creep. I agree, and I suspect he still does because with us today we have Peter McCormick. If you follow him on Twitter, he tweets a lot about bitcoin still. He's also the author of his own podcast called What Bitcoin Did. So I'm confident on that

last part, Peter. Peter, thank you very much for joining us and telling us about your experience, no worries, Thank you for having me on. And Happy New Year, Tracy. Oh god, So, Peter, tell us, how did you first get into a bitcoin? So really a couple of times. I first found it in two thousand thirteen. Um, I was worked in tech, so I heard about it and I can't remember the website, checked it out. Look kind

of interested in roade that bubble. For a kind of about a week or two, I was trading CFD s on plus five and you know, made and lost a small amount of money in comparison to the last year, and then kind of forgot about it. And then in December sixteen. It's quite a sad story, sorry, but my mother was dying from cancer and we wanted to get a certain treatment for her that was only available for purchase with bitcoin. So I said to my dad, I

can do this. So I went on to Google, did a search, found coin base, UM, bought a bitcoin, bought the treatment. Sadly she passed away. UM. But my parents lived in this like in the middle of nowhere in Ireland, so I was out there for a week and I just kind of went back on coin Base, transferred the leftover bitcoin back and there was this ethereum thing. So

I was in between. I was out of work. I used to have an advertising agency UM that fabulously collapsed at one point, and but I had money left over from that, so I thought, you know what, I'm going to check this out. So I checked out a theoryum and bitcoin and the whole journey started. Then I put twenty three thousand pounding. I think it's about thirty two thousand dollars, which I don't by the way, I don't think is a small amount of money. But and just

went on this epic ride for what's two years. Now. Well, I'm sorry to hear about those misfortunes. So you said, um, thirty two thousand dollars roughly. How much did you end up making at the very top. Well, it's funny, it's funny you say that. So I guess I didn't end up making any because I didn't cash in. But the portfolio value at its peak was over one point two million dollars, you know, so what if I was looking in my portfolio, that was the value and that was

about January sev. Now, talk to us about the psychology on the way up, because one of the things that I find really interesting about bubbles is it feels good to make a lot of money and see your net worth on the screen continue to go up. But what I'm always curious about it is like, did it stress you out? Also? On the way Up, Like, did you get upset with yourself for not buying more in the beginning,

did you start to stress out about timing the top? Like, talk to us about what that was like from this sort of you know, not a nothing investment, a modest investment to an extraordinary amount of money. That's sort of just let's talk about the psychology of the Way Up a bit. No, I wasn't really stressed out. I mean a couple of times I thought, you know, I should

have put some more in. You know, I had more money available at the time, but I didn't really worry about that because you know, when you're at one point two million, you kind of it doesn't really matter, does it. You're just like um. And it wasn't stressful at all. It was just a lot of fun and opened a lot of doors for me. I've met a whole bunch of people. I've launched this podcast and it's created a whole life for me. So, you know, it wasn't stressful. It was a lot of fun. Um. I was very

careless with money. You know. I bought a very expensive watch, I bought a new car. I gave a lot of I gave I gave a lot of money away. I mean at Christmas last year, I gave my brother and sister each like like five thousand pound each. UM, I bought my dad a brightly. I paid for the hospital where my mom worked before she passed. UM they needed six thousand pounds for regard and so I paid for that.

So I kind of paid for all this stuff, just being frivolous, But I was paying for it out on my savings, not out of my crypto, so that was kind of stupid. But no, look, it was just it was It's been so much fun. It's been a hell of a ride. And no, there was no real stress on the way up, and strangely enough, it hasn't been stressful on the way down either. I definitely want to ask you more about that, but before we do, I just want to sort of back up a little bit.

What was the ball case for you when it came to bitcoin, you know a little over a year ago, Like, what was it that you thought was happening here and what made you want to stay in bitcoin and I guess some other crypto coins versus going into more traditional and sms. It was just innovation, right, There was this whole wave of innovation around cryptocurrencies and crypto networks, and it just felt like the start of something new, a bit like. You know, I was part of the dot

com era when it first started. I worked at a dot com and I spent twenty years in digital advertising, so I experienced that and it kind of had similar feelings, not exactly the same, but you know, I don't ever believe the crypto networks would ever be as big as the Internet itself, but it did feel like a new way of you know, transacting, sending money, building things. So at the time I kind of brought into all of it.

You know, my opinion over time has changed, but I did buy into all of it because I just thought this was something new, something cool. But I didn't invest the money at the time thinking I was going to make a lot of money, right, you know, when I first invested, I just I just thought, yeah, there's an opportunity to make something here. But in no way did

I think, um, what was going to happen happened. I think my prediction at the start out of two thousand and seventeen was that wouldn't it be great if by the end of the bit coined hit two thousand dollars and ended up hit in twenty thou dollars. So you know, it was just it was a very strange ride, um but nothing played out exactly as I thought it would.

One of the things you said in your tweet storm that I think was interesting, which is that on the way up, well, you know, for people who sort of maybe don't remember their history, it's um as Bitcoin sort of peaked in December and it was still pretty high in January. We saw an even crazier explosion in a lot of alt coins, other cryptocurrencies, many of them of

extremely dubious quality, half big projects. I think things they were sort of like mediocre to anyone who looked at them, But that's something you see in bubbles in which the real trash really surges at the end. I think you said in your tweet storm that on the way up you started buying other non bitcoin in assets more and more. Tell us about the decision to do that. Well, at first, there was no strategy around it. I was just learning about things, reading about things, and just wanting to try

it out. So I bought Dash because that seemed like a different kind of bitcoin. It seemed kind of interesting. I bought Ethereum because it was like this world computer that sounded interesting. I bought Minero because it was a private coin. I bought ripple Coin because it was a banking coin. I just kind of bought everything, just went

for it. And then over time I started to consider maybe more kind of fundamental analysis, so I started looking at things to see if they kind of had value or they had a purpose, and then kind of refined my strategy. But still up until the under two thousand and seventeen, I believed in, you know, most of these networks and most of these coins as being an opportunity. I had an expectation lots would fail, but it was

kind of like the dot com era. You know, web Van sounded great at the time, Boo dot Com sounded great at the time. They just weren't ready or just weren't built in the right way. And I just thought, you know, spread my investments, and the things that always successful I'll make money from, and the things that fail I won't. But with a diverse portfolio, yeah I should

be okay. It's only since, like I think a bear market is very good forget you, to get you to be a bit more rational and look at things and a bit more detail. Now I've kind of like my opinions changed a lot. So with that background in mind, when you saw all these coins plus bitcoin sort of going up together, did you at any point kind of think this is weird or this is too easy? Yeah, definitely, I definitely thought this was too easy. But you know, I just rode it. I just you just went with it.

It was. It was continual the whole year. There were three or four crashes. I remember once I was flying out to l A and I'd gone into the airport lounge and I'd always wanted to have a brightly watch, right, That's something I could never normally afford, and I just bought it and I got on the plane, and when I got off the plane, the market dropped thirty. I was like, whoa, Okay, that was a lesson and exactly

the same. And when I bought the car, I bought Mercedes, right, And when I was in the garage picking up the keys, the market dropped again. But each thirty drop, the market always rebounded. So when it dropped again January this year, I expected it to come back. You mean January. Yeah, I want to hear more of what you bought things that you bought just like everything. Um, you know, I took my kids on loads of amazing holidays to America, to Florida. As I said, I gave a lot of

money to my family. I bought my dad a watch, I bought a car. UM. I flew first class for the first time, something I've never done. It's nothing I could ever normally afford. And I was flying back from l a and I had a date book with a girl in London, and I was on a flight which meant I would be landing in the afternoon. I knew i'd be tired. I thought, you know what, I'm a millionaire. I'm just going to get myself a first class flight, which I did as well. Uh like, not in a um,

not in an idiotic, idiotic way. It's just the way I always think about money is is you know, use it and enjoy it. Um you might not have it tomorrow. So funny enough, it's turned out, and I'm glad. I did you know, I got to experience a bunch of things and do a bunch of things I could never normally do. Saying for my kids, my kids got to experience and do a lot of things they could normally do. And yeah, it's been it's just been a lot of fun. Did you in your mind on the way up have

some number for your portfolio? They got Okay, if it hits there's I'm going to sell have or if it said hits this, I'm gonna sell everything, like because at some point you had to maybe worry I think that it was all going to crash. So did you have some sort of exit strategy that you thought or some sort of when to get out? Well, I used to take out um so every time my portfolio kind of as I at the end of the month, I used

to take the profit out. But as I got towards the end of the year, I was thinking, gosh, if this carries on for another six months. I've always had this goal in life. I wanted to buy my local football club. I know it sounds stupid, but I live in a very small town called Bedford, right, It's just a nothing town. Our football club is in the lowest of the low divisions, are not in the Football League. About a hundred people go and watch him each week. So I had this kind of price in my head.

If I could make five million, I could buy the club, and like I was working through it with one of my friends and we figured out, you know, that would be enough money to buy the club and get him in the football league. So I was like, right, if I can hit that by middle of two thousand and eighteen, I'll cash out the majority of it, go and buy the football club. I know it sounds so stupid our reflection, No it doesn't. I know someone else who has a dream to own a small town football club and it

is possible in the UK look at Swansea. Right. Anyway, when did it all start going wrong? Because it's great to listen to the list of stuff that you bought, but in the end the portfolio kind of evaporated in value. So it's funny. I don't see is it going wrong. I see it as losing portfolio. But I actually, on reflection, I think two thousand and eighteen has been a great year for for the crypto category personally myself. Of you know, it's a real lesson I've never had it in life.

Like we have securities laws which stop people investing who aren't the credited investors, but if you don't invest, you won't learn. So two thousand and eighteen has been a huge lesson in money for me, you know, conserving capital and protecting capital. Um. You know, so from about January I started it started happening, but I thought it would be another a bounce, you know, I thought it would drop and bounce back. I would say. From about March,

I was thinking, Okay, this isn't coming back. And my biggest mistake is I invested around four thousand dollars into mining because you know, I wanted to have another way of growing my capital, so I bought all these different A six and that's where I've lost the majority of my money because the equipment isn't worth hardly anything now, and I was locked into power contracts which were costing

more than the bitcoin I was mining. So across the year, you know, it's it's just been something that has happened over the whole year. But again, I don't reflect on it in any kind of negativity. I'm not bothered by it. I'm actually I'm still very positive about bitcoin in the future, and I'm I'm glad it's all happened in a kind of weird way. I mean, obviously I wish I had a cashed out, but I haven't. And you know, we always make the best decisions we think are at the time.

And every time I've considered cashing out and I haven't, that I believe was the right decision. So I don't have any regrets when you think about, say, going back in March and realizing that something was different, that this bounce was not going to be like one of the plunges, or that this dropt was not going to be like

one of the inges. In twenty seventeen, was it harder to sell or do you think it was it was harder to make wise trading decisions because you had hit a high water mark of one point two million, and you felt like that is sort of like where you

should get back to. Because I do think this is a phenomenon of all traders, and not just even in bubbles, where somehow like their portfolio hits a certain level and then psychologically they sort of find it very hard to sell anything below that level, and even if all the other data points and charts and their brains sort of tell them that they should still cash out and take profits.

I think one of the difficulties was selling is there was so much good news and so many could think things happening in two thousand and eighteen, there was especially for bitcoin, there was you know, real Wall Street adoption in terms of um, you know, futures, another derivative products. You know, there was the news of potentially ts. There was so much good news happening that I was I kept every time we kind of hit another low price, I thinking, well, it's not going to go lower than that.

I think that was my problem. It wasn't that I was looking to get back higher. I just never thought it would go lower. And each time it went lower, I was like, Okay, maybe that's the base. But you know, I'm not a trader. I've got no experience with this. I think pretty pretty experienced traders would have recognized this pattern, right. And you know what, in a year, two years, if the same happens, I'll probably be better prepared than I

was this time. I have a really boring question, but I think in your tweet storm, I seem to remember you mentioned something about, you know, after taxes, you didn't have much left. How did you actually calculate taxes on your crypto investments? So I have an accountant for all of this. UM, what I did at the start is I registered everything I do as businesses, and I've used the same account of for years, so that's something that's

completely handled by them. I wouldn't even want to get into the right in my own tax return for crypto because it's hugely complex. So yeah, I just used an account of for that. So talk about where you are today. You started, I think you said, with thirty two thousand dollars, wrote up to one point two million dollars. You spend four hundred thousand dollars on mining equipment, crypto mining equipment that's now worthless as you put it. You got into

all these long term contracts, you paid taxes. Are you just back to square one? No, I'm not. You know, some people wrote to me thinking I was completely wrecked and broken. So I'm not broken. I have a I wouldn't tell you the amounts now, but I have a small, very small amount of bitcoin which I've got left over. So what I ended up doing I just sold all my old coins cashed out a certain amount just to

give me a bit of breathing room. Because I'm a single father with two children, so I have to be responsible. So I cashed out a certain amount to give myself a few months breathing room and retained a small amount of bitcoin, and I've got some minera as well, but the mining operation is still there. I'm still paying those bills, which is frustrating. But at the same time, I guess one of the other reasons I'm not too worried is my podcast has been really successful. I think last month

I went over a hundred thousand downloads. For the first month's profitable. You know, I'm selling adverts each month. I think revenues for this month is around ten dollars, so you know, I've got a sustainable business. Let's come out of the back of this. So I think that's probably one of the other reasons I'm not too worried. It's not been hugely upsetting. A question I meant to ask earlier.

So you had all this bitcoin in your portfolio, it's surged, and then the other things you did were sort of de facto doubling and tripling down on bitcoin, just through different ways. So obviously you mentioned the huge outlay for the mining and the power contract, and you've started this successful podcast about bitcoin. Did it ever seem concerning to you that you're sort of unhedged that you had essentially all these different eggs, but they were really the same

egg and there was all in one basket. No, not really. I didn't think about it too much. I've just I've always been entrepreneurial. I've always run businesses. I've always kind of thrown mud at the wall and see what sticks. So No, I was perfully, perfectly comfortable doing it. I mean, I fundamentally believe in bitcoin, especially you know, over a

long enough timeframe. I fundamentally believe in it, and I have a curiosity with other parts of crypto, although I would say I'm heading down the maximalist route at the moment. But no, I was never worried, and I'm not worried now. I'm still invested, and I'm still you know, essentially some ways, I'm still doubling down on bitcoin because you know, I don't do anything else. This is still my full time job, and it looks like I may have survived the bear market,

so I should come out the other end of this. Okay, So You've touched on this at various points. But one of the remarkable things about bitcoin is sort of the community that exists surround it, and the fact that you have a bunch of people who are commenting on you know bitcoin, it's health or new coins, the underlying technology, or just the basic price movement, and when it comes to that price movement, it can be really volatile. You know, bitcoin,

it's a digital currency, it's moving every day. There's a lot of excitement around the way it trades. Do you think any sort of traditional or historic financial investments are ever going to be able to match the excitement that has come with cryptocurrencies over the past few years. I mean maybe who knows, right, I mean, you can't. You

can't predict this. But one thing I would say is I think the reason the bubble was so accelerated and was you know, it was such a quick, fast, crazy bubble, is that cryptocurrency is essentially broken down the wolves of Sorry, they've broken some of the rules down, so it's so easy to trade. Trading shares and stocks is quite difficult, right, you know, there's certain rules you have to follow, certain companies you have to go through. Trading gold is equally

to me, appears hard. I've never done it. I mean, if you want to buy gold and silver physically, you've got to order it and have it delivered. So technology seems to make trading easier and easier over time, and crypto just seems to be the easiest thing to trade. You know, you're buying digital assets from any Internet connected device, from anywhere in the world, So it just became very easy for everyone to just get on board and get involved.

There was very little regulatory framework around it. I only see technology becoming more advanced. So perhaps there will be something in the future which is similar. Who knows um, But it's very hard to predict that, right, Yeah, I wish we could predict it. I think we all wish we could. I have another question, and it's sort of dovetails with what Tracy asked about community. So you have your podcast, you have forty five thousand people who follow

you on Twitter talking about bitcoin. You have, you've made your identity around it. Do you think that publicly putting oneself forward, associating themselves with an investment or a movement or a trade makes it harder to change your mind?

Like if you sort of decided one day, or you came across evidence in your mind that okay, bitcoin is not going to be as big as you think it is, or for whatever reason, you thought the price had further to go down when you have that much of your identity and public identity wrapped up in the success of this thing. Does that make it harder to sort of make a rational investment decision to get out when the going is good. Not for me, I did, I think

it does for a lot of people. I think if you look across crypto, there are a lot of people who probably got doubts who are not admitting it, Like people who have raised money and an I c O. On a project, they're probably thinking, do you know what, maybe this isn't a goer anymore. It's kind of strange because most people don't want to admit they're wrong, but because they're worried about the impact on their credibility. But usually if you're kind of honest and transparent and open

it amit mistakes people respect you for it. The tweet storm, I did You've seen it? Right? Yeah? I mean I expected a response, not the response I did. You know? It's like eight thousand likes and three thousand retweets. Amongst that, I think there must have been like one or two negative comments where people are like, oh, you're an idiot, you know, you don't know what you're doing, blah blah, blah. Of the hundreds and hundreds of other comments, everyone was

like positive, Everyone was grateful. People say thank you for doing that. It needed saying, you know, it's good that you did that. I've had you know, yourself get in touch. I've had the Guardian get in touch various other news networks. You know, I think what people actually appreciate his honesty. It just doesn't happen enough because it's it just feels wrong, right. It's really hard to admit you're wrong. But usually when you do it, it's like the weight off your shoulders.

So I'd say you're right. Most people are scared, scared to do it, but I'm not. You know, if I'm wrong about bitcoin, so be it. I don't think I am wrong about bitcoin because I'm not really talking about price anymore. I'm talking about the technology, the technology and what's being trying to achieve with bitcoin, fundamentally believing even if it fails, I won't change my opinion that it

was it was the right thing to support. I just won't get behind price prices anymore because price predictions are so hard. You know, that's where you can really come come and stuck. Peter, I think that was a great conversation. Really appreciate your perspective, and I do think it's very commendable that you sort of put yourself out there like this, because there have to be a lot of people in your shoes who wrote it all the way up and

wrote it all the way down. I mean, there's the whole crypto Twitter community, and I don't think most of them would have come forward and talked about the money that they gained on paper and then lost afterwards. So I really do think you've done people a favor and I appreciate you coming up. So let me just tell

you one story. So I had I reckon. I had over three hundred d m s on Twitter from people saying thank you, telling me about their experience, and it was the same story over and over again, just different amounts. You know, it might be somebody invested a hundred who made who got up to like thirty thousand and lost it all. But there was one person who invested I think it was six thousand, very very early, road it up to eight figures, so somewhere over ten million and

lost the lot. So I think it's happened to weigh more people than than other people realize and you know, I think therefore is something that he's talking about. Especially I don't want another ball market to come and everyone thinks, oh, I'm going to make a load of money and not be aware of the risks. Because most of these crypto networks are zero sum games. Most of them are going to disappear, so you've got to be either a very good trader or happy to dump your bags onto somebody else.

And you know, I think if it opens the conversation, then it was definitely worth doing. Well. I really appreciate you are joining us. Peter McCormick. Thank you, thank you, Thanks so much, Tracy. I found peter story to be really interesting because I do think that there's so many people in his shoes and nobody. You know, as I was saying at the end, not many people are willing

to admit it. I think most people either psychologically just don't want to say they've lost so much money, or maybe they want to be smarter than everyone else and say they sold some at the top. But we know that the vast majority of people can't have sold at the top and they had a lot of people lost a ton of money over the last year on crypto, so it's kind of great that someone would just come

out and admit it. Oh, absolutely, And I thought, you know, Peter clearly has a very optimistic attitude about his experience, and you know, he says that he's learned a lot from it. One of the interesting things that I find about the bitcoin bubble, if you know, we can call

it that, is that we can. Yeah, one of the more interesting things is about just because we basically live our lives on the Internet now and people were so vocal about cryptocurrencies, and you kind of alluded to this in your question, people built up these big communities, People built new careers like blockchain experts and specialists out of this.

I do think it makes the interest in crypto kind of harder to let go, because if you think back to the tech bubble, Yeah, you had a lot of people, you know, working in um tech around the early two thousands in various ways, but I don't think we had like such an online presence where it became so visible.

I mean totally right. I mean, there were obviously message boards, but there are so many people associated with crypto who who went from say no one heard of them in seventeen or the beginning of two regular TV stars by the end of the year, and their entire identity is wrapped up essentially in this one trade. So how do you get off that trade if for some reason you're like, whether it's for technical reasons or just price reasons, you think it's over. You know what I think about it?

A lot is an interesting parallel is remember, and we still have them from time to time, like when hedge fund managers would announce a new longer short position and get up on stage at a conference and deliver like awe slide show. We definitely still Yeah, I think they've gone down a little bit, but it's like, how do you get up on stage and tie your identity to some trade and then get out of it at the right time when you've invested so much publicly into it.

I think that makes it even harder to essentially trade rationally or trade smartly. Yeah, And there's another thing that we've talked about on this podcast before which kind of feeds into this, but this idea of echo chambers existing on the internet. So you know, if you lose money, you can sort of go on a message board and find a bunch of like minded people in crypto who are telling you just to you know, hoddle or hold on for dear life, for whatever. I think it's very

easy to keep telling yourself the bowl narrative in that environment. Oh, totally right. I And I think, like you know, in the end, it's kind of all the same. All the data confirms your priors, and it's really hard to fight that tied psychologically when everyone is so excited as I think of Peter's story and countless others tell. But yeah, with social media and all of this stuff, echo chambers

it kind of it probably just makes it even harder. Yeah, So I guess it's it's uh, it's suitable that that digital currency was sort of the bubble for the digital age. I guess, yeah, totally right. All right, Well, this has been another edition of the ad Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Wisenthal. You can follow me on Twitter at The Stalwart. You should follow our guest Peter McCormick on Twitter.

Definitely check out his uh tweet Stormy has it pinned to the top of his bread, where he talks about his whole experience. He's at Peter McCormick, and you should follow our producer tofur Foreheads. He's at for heads Tea on Twitter, as well as the Bloomberg head of podcast, Francesco Levie at Francesco Today. Thanks for listening.