Bitcoin: An Overnight Success a Decade in the Making | Opinion

Is it too late to buy some bitcoin?" "What about Ripple—I hear that's cheaper?" "Ethereum?" "Why didn't you tell me to buy earlier!" With the price of bitcoin hitting its all-time high on Monday, I'm starting to get more calls from friends asking these questions. I've been in the crypto world since 2011, covering it as a reporter and teaching it as a law professor, and such calls are one of the few certainties in this wacky market. In the current craze, which is at least the fourth I've lived through, it's important to remember that the best way to make money is slowly. Instead of reading crypto Twitter, anyone looking to succeed in this market should listen to the traditional investor most hostile to crypto: Warren Buffett.

When asked why more people don't copy his investing strategy, Warren Buffett famously answered, "Because nobody wants to get rich slow." This is especially true in the crypto world, where fortunes seem to be made overnight. In 2013, I wrote a story for Businessweek about a man who erased a hard drive that had 800 bitcoins on it. When I wrote the story, they were worth $200,000. They are now worth more than $15 million. Two years earlier, I lost a bitcoin poker game whose pot today is worth about $4 million. I'm not sure yet what these stories do to one's psyche, but as economic historian Charles Kindleberger once said, "there is nothing so disturbing to one's well-being and judgment as to see a friend get rich."

The flip side, however, is that money easily made is not as easily appreciated. There is an element of luck in making quick money—whether that meant accidentally leaving a mining machine running or hearing about bitcoin early through happenstance, chance played a huge role in the speed of getting rich.

A visual representation of the cryptocurrency Bitcoin on November 20, 2020 in London, England. The price of Bitcoin has risen sharply in the the last two months, to a high of around 18,800 USD, gaining nearly 100% since September. Jordan Mansfield/Getty

It is not luck that makes people happy with getting rich, but a sense of accomplishment and devotion to an ideal greater than money. Bitcoin represents such an ideal to many of its early supporters who have gotten rich slowly.

Bitcoin's value, at least to its early backers, is based on an ideology that sees the market as better at producing money than the government. Some people talk of the separation of church and state; those in the bitcoin community talk about the separation of money and state. This is not a new idea—economists like F.A. Hayek and Ludwig von Mises understood the power of the free market to produce a money that was not subject to the vicissitudes of politics. Buffett's father, a congressman from Nebraska, understood this as well and was a supporter of the gold standard and sound money. Whether you agree with this value proposition, there are many who do. Money has a reflexive quality to it, and the reason dollars have value is the reason gold or diamonds have value—because people believe they have value.

The early bitcoin pioneers were driven not by money, but by ideology. These are people like Nick Szabo, a pioneer of cryptography as well as smart contracts, who has been working at crypto for decades. His impact came through the slow work of building the intellectual edifice that bitcoin stands on. Reading Szabo's writings, it is clear that he is not someone who is in it for the money. Dedication to a cause—something we should all have—is what has allowed him to endure. Another example: I asked the hardcore bitcoiner Erik Voorhees in the early days if he was cashing out. To my surprise, he said he was almost completely cashed out. He quickly clarified, "...of dollars."

This is similar to how value investors are able to distinguish market prices from intrinsic value. My business partner, Burak Alici, is quick to note that volatility is not the same thing as risk or uncertainty. Although our firm doesn't invest in anything crypto-related, preferring boring businesses like elevators and train brakes, we are always cognizant that in markets, momentum does not always make right.

The only reason people like Buffett or Burak or the bitcoin millionaires were able to hang on and persevere is that they marched to the beat of their own drums. This is a good way to become rich (it is also a good way to march off a cliff). So, while it may seem that the bitcoin moguls got rich overnight, this is the kind of getting rich quick that the band Phish referred to when someone called them an overnight success. Drummer Jon Fishman said something to the effect of, "Yeah, we spent 9 years becoming an overnight success."

Max Raskin is an adjunct professor of law at New York University and the general counsel of QVIDTVM Inc., an investment holding company. Follow him on Twitter @maxraskin.

The views expressed in this article are the writer's own.