‘I lost more money in Bitcoin than most people will earn in a lifetime’ DEREK ROSE Last updated 00:01, March 16 2018 ROBERT KITCHIN/STUFF
Katie Kenny and Laura Walters introduce their new podcast, Superfad.
For the second episode of Stuff’s new podcast series, Superfad , hosts Katie Kenny and Laura Walters talked to Bitcoin speculator Derek Rose, who invested his life savings in cryptocurrency. Here, Rose shares his story in his own words.
I was a bit nervous when my former colleague Katie Kenny asked me if I wanted to tell the story of how I had lost nearly $10 million worth of cryptocurrency.
I figured people would listen to the story and say, “Jeez, what an idiot”. And honestly, I wouldn’t blame you if you think that.
It’s kinda true: I ignored the advice of my friends, a financial advisor and random people on the internet in making larger and larger bets on Bitcoin and similar instruments, which paid off … until they didn’t, and I lost a small fortune.
All I can really say in my defence is that I’m not asking for anyone’s sympathy or pity. I only lost my own money, not anyone else’s.
And it was just such a rush, turning an investment of around $70,000 into almost $3 million by placing leveraged bets on two cryptocurrencies called EOS and Iota in a few weeks during November and December. HOW TO LISTEN HOW TO LISTEN
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My first moves were smart, involving patience and careful research. But rather than take profits and, say, buy a house, I bought more Bitcoins on the same mysterious website I was using, called Bitfinex. And that bet paid off as well, at first.
I bought half a million dollars in Bitcoins when they were less than US$8000, only to see their value rise to over $14,000 in a few short days. So I bought more (and more). And just about every cryptocurrency I could buy on margin on Bitfinex.
At the top of the market in mid-December, my account was worth over US$7m (around NZ$10m) and I had borrowed US$14m (NZ$19m) to buy more cryptocurrencies. I was paying thousands of dollars a day in interest, but for each US$1000 rise in Bitcoin’s value, I was making about half a million dollars.
And in those heady days, Bitcoin was making $1000 gains every other day.
I was so giddy and high on emotions it was hard to work out, because I was spending all my testosterone and adrenaline checking the balance of my portfolio multiple times each day. It was a hell of a rush.
Looking back at my texts with my friends from that time is, well, interesting.
“If you are right that having 1 BTC [one Bitcoin] is impressive in the future then what you have now is more than enough. So you can sell a bit and hold some cash,” one wisely counselled.
“I want to own a sports team though,” I replied. “And have a yacht.
These things add up quickly.” (Yes, I really texted this).
I would diversify into real estate, I boasted to my buddies, only once my portfolio reached $100 million.
“If you are right, then half your bet is enough,” that same friend countered. “If you are wrong, you are broke.” Ad Feedback
“It’s more exhilarating this way,” I said.
And that’s what it was really about: The thrill. It was so exhilarating, knowing I was risking huge amounts of money.
I don’t really think buying cryptocurrencies is like gambling — it’s a valid investment in a groundbreaking technology — but I’ve got to admit there were some parallels. It’s a heady thing, making half a million dollars on paper in a day. SUPPLIED
Derek Rose put his life savings into cryptocurrency, lost big, but is still winning overall, he thinks.
So how did I get started on this wild path? I had bought my first Bitcoins in 2013, when they were worth less than $100.
I authorised a website called Coinbase to take $25 out of my US bank account each week, buying a quarter of a Bitcoin for $25. But then when I moved from New York to New Zealand later that year, I needed cash.
So I stopped those withdrawals and later sold half of my 10 bitcoins for around $500 to pay off some debts. D’oh!
Around May of last year, when bitcoin topped $2000 and another cryptocurrency called Ethereum hit $400, I decided that while I had made a big mistake, there was still time to rectify it. A wild idea hit me: cash out my entire US retirement account and put it into cryptocurrency. As a journalist, I had never made a lot of money, but I had been very good at saving up to 10 per cent of my salary, starting when I was in my early twenties. Thanks to the magic of compounding, two decades later, I had around US$200,000 saved, mostly invested in bland, safe index funds that mirrored the entire worldwide stock market.
“Why not just go for it?” I thought. Unlike some of my peers, I hadn’t bought a house or started a business.
Single and in my mid-forties, I was ready to take a risk and shake things up. It was nerve-wracking withdrawing my entire life savings — $3500 each day to avoid hitting Coinbase’s $25,000 weekly limit. Of course the market crashed soon after I started my plan, but I stuck with it and it bounced pretty quickly.
Then, right before Christmas, disaster struck (as you can hear me relate to Katie in the attached podcast). But at least I can laugh about it now, right?
I think it makes a pretty good story and I’m not telling it for any other reason than people might get a kick out of it. And really, as a journalist I’ve asked hundreds of people to tell their stories, it would be hypocritical not to tell mine just because it makes me look foolish.
While I have a lot of regrets, cashing out my entire life savings to invest in cryptocurrency isn’t one of them.
This was a huge blow, but it didn’t wipe me out. Overall, despite my Bitfinex liquidation, I’m still doing better with my investments than I would have if I had stayed in index funds.
This year is off to a terrible start as far as cryptocurrency valuations go, but we’re just a few months in. If in the end 2018 ends up being like 2017, I’ll have made back my $10 million by mid-year.
This time, I hope, I’ll be smarter about it.
Superfad is a seven-part podcast series, brought to you by Skoda. A new episode is released every Friday on iTunes , Stitcher or wherever you normally get your podcasts. Join the Superfad group on Facebook and look out for behind-the-scenes extras in a weekly Facebook Live discussion every Monday.
– Stuff.
