Feeling lucky? Bitcoiners who missed rally express relief and regret

Investing in cryptocurrencies is like playing roulette, some experts say, because no-one really understands what's happening.

Unlike stocks or bonds, where business trends or central bank decisions can affect prices, crypto values remain an enigma. (REUTERS)

Entrepreneur and songwriter Arianna O'Dell poses for a picture in New York City, New York, U.S., November 18, 2020.  (via REUTERS)

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Entrepreneur and songwriter Arianna O'Dell poses for a picture in New York City, New York, U.S., November 18, 2020.  (via REUTERS)

Akram Tariq Khan, an entrepreneur in New Delhi, got into bitcoin in 2017 with assets totalling $160,000 at their peak. But the 25-year-old got spooked as the price dove by almost 50%, and sold. In all, he has lost about $10,000 in capital.

"In retrospect, holding seems like the right decision, but when you've bought something at a much higher price and you see the price going down the drain there is a psychological impact," said Khan, co-founder of e-commerce company YourLibaas.

"Bitcoin could have gone to $1,000 and never come back."

'ZERO EXPECTED RETURN'

Unlike stocks or bonds, where business trends or central bank decisions can affect prices, crypto values remain an enigma.

Analysts rarely pinpoint causes when prices suddenly crash, or stall for years.

Even big fish are baffled.

Billionaire Masayoshi Son, CEO of Japan's Softbank, spoke for many in professional investing last week when he described how he had no regrets at missing out on the latest rally, having sold out in 2018 for a loss of around $50 million.

"Today it's maybe more than the price that I sold, but I feel so much better because at least I don't have to put my mind in something I don't understand," he told a New York Times event.

Michael Edesess, an adjunct associate professor at Hong Kong University of Science and Technology, described bitcoin as "a not very rational investment".

"To a mathematician and economist like myself, bitcoin offers a zero expected return – that is, the odds it will go up or down by the same amount, are equal," he said.

Some small investors did hold onto their bitcoin, adopting the "HODL" mantra, which stemmed from a 2013 post where a user misspelled his intent to keep "hodling" bitcoin instead of "holding" it.

But others were just looking for a quick buck and bought near the top of the market.

"They'll come in after their idiot nephew who still lives in their sister's basement makes $100,000," said cryptocurrency consultant Colin Platt.

'TALK OF CRASH COMING'

It is impossible to know the exact breakdown between retail and professional investors because transactions are anonymous, and exchanges do not share detailed information about users.

Many crypto experts say, though, that institutional investors have played a bigger role than this year than in the past. They cite demand for riskier assets amid unprecedented stimulus programmes to counter COVID-19, and expectations bitcoin will win wider acceptance as a method of payment.

They also point to improvements in market structure having attracted bigger investors, as well as significantly fewer Google searches for the term "bitcoin," which typically increase alongside amateur involvement.

However, some experts also say a new wave of retail participation may be ahead, since Main Street investors typically amp up participation at the height of a bubble.

For instance, Livi Morris, a London-based musician, saw her cryptocurrency portfolio lose 70-80% soon after buying into the sector in January 2018. She held onto the assets until June this year, when values were a fraction of the prices she paid.

Morris expressed regret about selling too early, but has started buying crypto again in recent weeks after reading that bigger companies have entered the market. She's focused on smaller virtual coins, hoping this time will be different.

"When I invested in 2017 there was a lot of talk of a crash coming," she said. "It feels like times have changed."