This was supposed to be an easy article to write. In January of 2022, I spent a few bucks investing in bitcoin. My plan back then was to wait a year, and then write an article (this one, in fact) showing how much I gained (or lost) over the course of the year. It was to be stunt writing at its best.
But that’s not how its turning out. Oh, sure. I lost a huge percentage of my investment. But I can’t just throw bitcoin (or even cryptocurrency in general) under the bus and claim that crypto is a bad investment. That’s because a wide range of investments (especially tech) plummeted in 2022.
We’re way beyond the scope of a “correction,” where the market adjusts for an unexpected bout of exuberance. But we’re not at the legendary (but not necessarily true) tulip craze either, where investors get their comeuppance for believing in some bonkersly stupid investment idea.
No, we’re at the beginning of 2023 and much of the market has tanked. This isn’t a tulip or crypto or craze sort of story. Instead, it’s a story about the vagaries of investment and how you need to be careful where you put your hard-earned money.
My bitcoin journey
On January 1, 2022, I bought $50 worth of bitcoin through PayPal. That was an interesting process all on its own. It cost me a buck fifteen in fees to make the purchase, so all-in, I spent $51.15 to embark upon this grand experiment.
Within minutes, I lost 25 cents. After one night, my losses amounted to a whole 32 cents. But, of course, that was just the beginning.
I next checked in seven days later and my investment had dropped again. This time, I was down a total of $7.08, for a 13.84% drop. I checked again at the end of January, and my holdings had dropped again. In three weeks, my losses doubled. I was down $14.38, for a total drop of 28.11%.
Then, I waited. I gave it a full six months. Exactly six months into my bitcoin investment, I checked into my vast holdings. As of July 1, my $50 was worth $20.30. My portfolio had lost 60.31% of its value.
Now, we’re at a full year. I haven’t looked at the value of my bitcoin since July. Let’s check it together. I’m about to login to PayPal and take a look.
Well, that’s interesting. My bitcoin investment lost 60.31% percent of its value in the first six months of my holding it. But it lost only another 5.63% in the second six months. My bitcoin investment is now worth only a paltry $17.42.
Considering how volatile it was during the first six months (and especially the first month of 2022), it’s been remarkably stable these last six months.
The rest of the story
Now is the time when I expected to mock bitcoin. After all, losing 60.31% of your investment in six months is a terrible loss. I expected to discuss how it would be better to invest in something that wasn’t totally fake, yada, yada, yada.
But life isn’t that simple.
Okay, look. I’m about to start discussing stock values and investments, so a massive disclaimer is in order. I am not a stocks or investment expert. I’m not telling you any of this to give you investment advice. I’m just reporting on behavior based on publicly available data. So, before you go betting your money on anything I talk about, think again.
Frankly, beyond the fifty bucks I gambled away on bitcoin, I have no other investments. I’m not big on gambling. Since I don’t have confidence in my ability to spot a sure thing, I’ve avoided investing in stocks and crypto altogether. End disclaimer.
Let’s get back to the whole crypto investment theme. To do that, we need to take a pause and look at the news of the day.
When the markets closed for the final time in 2022 on Friday, investors were shaken by how much of a beating they’d taken overall. CNBC reported, “Stocks fall to end Wall Street’s worst year since 2008.”
If you look at the major indexes (the Dow, S&P, and NASDAQ), all were down for 2022. These are aggregated indexes of companies across industries and, as such, reflect business performance overall.
But these are index stocks, which means their value is representative of the movement of all their members. If some members do great, but most do poorly, then the entire index will trend down.
The biggest tech stocks did particularly badly in 2022. Apple lost 26% of its value, Amazon lost almost half, and Meta (Facebook) dropped almost 65%. IBM, on the other hand, did particularly well.
Stocks across other industries had more varied performance. Retailers like Home Depot and Walmart lost value, but health providers and oil companies continued to grow in value. This list is far from comprehensive, but it helps showcase that parts of the economy did rather well, even as investment performance in tech — particularly the top tier big names — didn’t do as well.
What does it all mean?
So, the top-line conclusion is simple. Investing is something of a gamble. You could gain a lot. For example, if you’d invested $1,000 in Exxon Mobile at the beginning of the year, you’d have $1,802 today.
But if you’d invested that same $1,000 in Tesla last January (and yes, we all know the whole Twitter/Musk story is part of this), you’d have only $349 left.
But you can’t blame all of tech stock’s loss on Musk. A thousand dollars invested in Facebook a year ago would have been worth only $357 today.
This is why investing seems like gambling to me. Last January, I considered my bitcoin investment to be an experiment for the benefit of ZDNET readers. I thought there was a (very) slim chance I might make a few bucks, but I was pretty convinced I’d lose a few instead.
But had you asked me whether my bitcoin investment was more chancy than, say, an investment in Tesla, I would have told you “sure.” After all, bitcoin is all magic rainbows and unicorns. It’s imaginary currency and nothing is real. On the other hand, Tesla makes fine cars and has factories and technology and such.
The idea that a thousand dollar investment in Tesla stock on January 1, 2022 would have the same value on January 1, 2023 (within pennies) of a thousand dollars invested in Bitcoin would have seemed ludicrous.
As I said, you can’t blame it all on Elon Musk, no matter how much he seems like a comic book villain. A thousand bucks invested in Facebook last January is worth just a few bucks more than a thousand dollars invested in bitcoin, and Musk had nothing directly to do with that collapse.
Timing matters, of course. Back in the day, I actually started my first company using the profits I made from an Apple stock investment. But had I made that investment in Apple in 2022, I wouldn’t have had any profits to use to start much of anything.
Investment is about (hopefully) buying low and selling high. It’s not about buying according to a calendar entry. So no sane investor would buy on January 1, 2022 and plan on selling on January 1, 2023. Instead, a good investor would expect to hold onto an investment until it’s time to sell. That concept became such an issue of controversy among crypto enthusiasts, though, that a misspelling of the word “hold” launched a mocking meme for traditional investment strategy, HODL (hold on for dear life), in response.
So, what does it all mean?
I started this experiment at the beginning of 2022 expecting to show you that cryptocurrency was a much less reliable investment than more traditional investment vehicles. I’m ending 2022 showing you that it’s all a crap shoot.
My experiment was, essentially, a data gathering expedition that didn’t come home with reliable results. I can’t tell you to avoid crypto. I can’t tell you to invest in crypto. I can’t tell you to avoid stocks. I can’t tell you to invest in stocks.
What I can tell you is this: if you have no idea, don’t risk your money. Unless you know a lot more about stocks and investment and crypto than I apparently do, hang onto your cash or invest it in whatever is considered safe these days. That’s probably something like mutual funds, but at this point, I wouldn’t feel comfortable making any kind of recommendation.
Do your research. Ask around. Listen to your gut. And definitely don’t invest more than you can afford to lose.
That said, I have a good overall feeling about 2023. Have a great year, folks!
How are you feeling about cryptocurrency investments after 2022? What are your plans for 2023? Let us know in the comments below. And hey, if you had a great New Year’s weekend, let us know about that, too.
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