The first Bitcoin transaction ever was by man who bought two pizzas. That arrangement would be worth over $123 million today. Regret was baked into Bitcoin from the beginning. Last year, somewhat inexplicably, Bitcoin’s price rose more than 1000 per cent. That number has since dipped, but a single Bitcoin is still, as of this writing, worth around $13,760.
Photo Illustration by Elena Scotti/Gizmodo/GMG
This boom has turned a small number of people into millionaires, modestly enriched a somewhat less small number of early adopters, and sent millions of others into a paroxysm of envy and regret. If you’d never heard of Bitcoin, you kicked yourself for not paying closer attention; if you’d treated Bitcoin as a joke, you probably still did that. Maybe you recognised right away that it was all unstable and unpredictable and not for you, while also privately daydreaming about how you might’ve spent your Bitcoin millions. Of course, for those investors who tried to jump in on the wave when it hit an all time high in December, regret means losing half of your money because you were too late.
How mad at yourself should you be for missing out on that perfectly timed investment? Is your lack of foresight here worth regretting? For this week’s Giz Asks, we reached out to cryptocurrency specialists, psychologists, an interfaith minister and others to help us answer those questions, and guide us through these trying times.
Brian Patrick Eha
Journalist and author of How Money Got Free: Bitcoin and the Fight for the Future of Finance
You know that Marilyn Monroe quote, “If you can’t handle me at my worst, then you sure as hell don’t deserve me at my best”? The same could be said of Bitcoin. So one reasonable answer is that you shouldn’t regret it at all – if you weren’t the sort of person to recognise Bitcoin’s value in 2012, when its market price was less than $10, or in 2013, or in 2014 or 2015, there is no sense in kicking yourself now.
A lot of people missed it: Another Bitcoin journalist is on the record as saying he didn’t initially expect digital currency to have any more staying power than the fad for pet rocks. Way, way more people missed the boat than got onboard – and plenty of early passengers bailed out when the going got rough. Even the ship’s crew (to stretch this metaphor to the breaking point), which is to say the early adopters and Bitcoin miners and startup founders and software developers who were advancing and advocating for the technology back then, had no guarantee they wouldn’t run aground. Along the way, there were plenty of reasons to doubt Bitcoin’s success: There were price bubbles and crashes and scams and arrests and epic meltdowns, which is what made it such an engaging story to tell.
While it may be too late to make a pile of money on Bitcoin, cryptocurrencies and blockchain technology have a lot of room left to run. The speculative frenzy and resulting press has obscured just how remarkable these innovations are, how smart and hardworking many of their creators are, and how varied and significant are the needs and problems – techies call them “use cases” – they are trying to solve. This isn’t investment advice, but anyone with an interest should not only research Bitcoin but look beyond Bitcoin to other projects, such as Ethereum, Dash, Zcash, Golem, Augur and SALT. Some are trying to be a powerful new medium of exchange, while others are meant to power software applications or provide users with new financial tools. Many are still early, too early to have proven themselves, but the excitement among those in the know is palpable.
Matthew D. Green
Assistant Professor of Computer Science at the Johns Hopkins Information Security Institute and Co-Founder of the Z-Cash cryptocurrency
You couldn’t have predicted this was going to happen with Bitcoin. The thing about Bitcoin is that it could be two dollars tomorrow. The one thing I’ve learned about these cryptocurrency prices is that they’re not rational: If you go thinking, “I could’ve seen this, I could’ve predicted this,” then all you’re going to do is make yourself feel bad. Nobody predicted how crazy this was all going to be, and nobody knows when it’s going to end, and everybody kind of thinks it’s going to end, or die down for a while. If you get all psyched out about this, and you convince yourself you need to go buy Bitcoin now, the chances are very good that you’re gonna end up losing a lot of money.
Teacher at Cambridge University and author of the 2017 Global Cryptocurrency Benchmarking Study
There are a number of reasons why people shouldn’t be too upset with themselves for not having previously bought bitcoin.
First, many people who did actually buy Bitcoin early on have either mishandled and “lost” their bitcoins (meaning lost access to their cryptographic private keys) or had their bitcoins stolen in one of the numerous hacks that has afflicted bitcoin holders. Hacking-related losses continue to be a big problem, and many of the people who did get in early have nothing to show for it except a sad tale to tell over a pint at the pub.
Another potentially good reason to not be too upset with yourself is because many very smart, well respected experts (including Nobel Prize winners) failed to recognise bitcoin’s potential utility and value. For example, Paul Krugman infamously dismissed bitcoin back in 2013, stating he was “deeply unconvinced” it could work. Many of the most influential economists, including Brad DeLong, Tyler Cowen, and others who looked at bitcoin early on arrived at the same conclusion. So don’t be too hard on yourself.
Assistant Professor of Computer Science at NYU
I’ve been working in the cryptocurrency space for maybe six years now, and teaching university-level classes each of the past four years, so I’ve had every opportunity to buy into both Bitcoin and Ethereum, and I personally never moved a significant amount of money into cryptocurrency. A lot of the researchers that I respect the most have also not invested very much – though some have, and some have done quite well. But even the people working in this space who really know the technology the best – the researchers who could get up for ten straight hours at a whiteboard and explain in detail how the entire system works – it was not an obvious buy, to that crowd of people.
If you’ve only heard about Bitcoin in the last year, and said, “Oh, if only i’d heard about it a couple years earlier…” – well, I had heard about it, and not only heard about it, but knew really well technically how it worked, and was in the process of writing a textbook about how it worked, and teaching all these students, and at every point it hasn’t been clear to me where the valuation was coming from, and why I should expect it to grow. Maybe I’m a computer scientist who’s clueless about finance – that’s certainly one way to look at it – but I think another way to look at it is it’s really hard to predict these things. Even in the last month the prices have gone way back down. It’s a market, it’s reasonably efficient. There’s not easy money to be made.
Associate Professor, Department of Psychology, Miami University
Regret seems to be a pretty functional emotion. I often compare regret to the physical pain system in the body. If you put your hand on a hot stove, it’s actually really important that you feel physical pain, because that’s your body signalling: Hey, this thing you’re doing, it’s going to hurt you, stop! Regret is basically our emotional system doing the same thing for non-physical mistakes. It’s the negative emotion you feel when you realise that things could have turned out better if you’d acted differently. In some ways, it’s a sign that you’re learning from your mistakes. Broadly speaking, it’s a good thing.
One of the complicating factors of regret – one relevant to Bitcoin in particular – is that it’s driven by what we call counterfactual thinking: Imagining a reality that didn’t really exist. And the patterns of how counterfactual thinking occurs aren’t necessarily grounded by logic.
I think it’s really easy for most of us to imagine what it would be like to suddenly be fabulously wealthy beyond our wildest dreams, especially if it’s something really simple – “Oh, if I had just bought this thing a year ago!” But one of the things that we know about counterfactual thinking is that counterfactuals are also really tied up with the experience of what’s called hindsight bias. Hindsight bias is kind of like the Monday morning quarterback effect: I knew it all along. Once you know how something turns out, it’s really easy to say, “I should have known all of this stuff!” Whether it’s Bitcoin or other stocks, people feel like it should have been obvious that this was about to take off.
Looking back, people tend to be really biased – we’re able to pay more attention to the stuff that supports the way things really turned out, and to overlook the stuff that suggests things were actually much less certain in the moment.
Professor at the Jacobs Institute at Cornell Tech and Co-Director of the Initiative for CryptoCurrencies and Contracts (IC3)
You should only be mad in my view if you think you should be more expert than the experts – or you didn’t listen to your astrologer. The technology underlying Bitcoin is inspiring, potentially transformative scientific and industry advances. But the operative word is “potentially”. Bitcoin itself suffers from numerous problems: Appalling environmental destruction, fractious governance and poor scaling, i.e., an inability to handle high transaction rates. The transaction fee for buying a latte with BTC today would roughly amount to the cost of two lattes. Many of my colleagues in computer science have been intrigued by Bitcoin, but many more remain sceptical, and I think very few invested in it. Researchers and developers are working hard to address Bitcoin’s problems, but at the same time are developing compelling alternatives. There was no convincing technical reason a year or two ago to expect Bitcoin to dominate the financial world, and it would still not be surprising to see it eclipsed by alternatives.
Albert Fingerhut Professor of Finance and Business Transformation and Chair of the Finance Department at NYU Stern
This is a timeless thing where people have regret for not buying some investment before it goes up in value. But it’s impossible to identify these things, because the financial markets follow random walks and if you get hung up on regret you have no constructive way to channel your energy.
The good news is that even having risen, it may still be a good investment – one never knows. But you shouldn’t let regret and emotion enter your investment decisions.
Digital currency lawyer and founder of blockchain startup TBSx3
There are few who would not enjoy a fatter wallet. However, investment serves many purposes. Sometimes it can be to get a speculative return. More enduring satisfaction often comes when we invest to build something important.
Bitcoin’s price surge is of little enduring value to the world. In fact, it has severely damaged Bitcoin’s utility as a currency. Now something many of us have worked hard to build for years is at risk of becoming yet another store of wealth. Something transformative in design and use is being subverted to now have no more merit that art collections, real estate or prize thoroughbreds. Bitcoin can be so much more.
Don’t regret missing out. Instead, invest in something that builds and creates.
Professor of Law at Cornell Tech
Maybe you’re kicking yourself now for not buying Bitcoin back in the day. But if you bought it back then, you’d be kicking yourself now for losing your private key, or you’d be kicking yourself now for storing them with one of the exchanges that got hacked. And of course if you’d been optimistic enough about Bitcoin to buy them back in the day, you’d probably be too optimistic about Bitcoin to sell them now.
Assistant Professor in Information Systems Engineering at Concordia University
It is probably too early to tell. If the Bitcoin optimists are right that the current valuation is solid (or has capacity to grow), you might be rightfully disappointed. But if the Bitcoin sceptics are right and it’s all a speculative bubble, you shouldn’t be any angrier than you are on (presumedly) missing out on those Dotcom stocks or Synthetic CDOs that were lit a few years ago. This is still a perplexing situation for Bitcoin holders deciding between hanging on or cashing out.
It is also worth noting that everyone is kind of mad at missing out on Bitcoin, including those who didn’t miss out at all. Friends of mine who bought one 1 BTC wish they bought 100, and the ones that got 100K regret not going for 10M. Forecasting the future is hard. The happiest Bitcoin buyers are probably the ones that jumped in just to try out a cool, new technology – the appreciation in value was a bonus.
Psychotherapist, interfaith minister and the author of The Power of Off: The Mindful Way to Stay Sane in a Virtual World
When we’re busy regretting what happened in the past, which we spend a great deal of our time doing, we’re missing out on opportunities that are here right now, in the present moment. We perpetuate this cycle of loss and disappointment. Our focus on what we missed out on is a kind of abandonment of the present moment, which creates regrets for the future. It’s a disservice to ourselves.
When we think: “I should have gotten into Bitcoin,” we’re expecting ourselves in essence to have been a person that we just weren’t at the time. The work is more in forgiving ourselves for not being there yet in understanding what Bitcoin would become.
Regret doesn’t change anything about what happened. Instead it keeps us, paradoxically, from learning the lessons that we need to learn from whatever choice we hadn’t made. We’re not taking the lesson, so that now, in this moment, were there to be a Bitcoin-like opportunity, we wouldn’t know to take it. We’re rejecting any learning.