🤢 Montezuma's Revenge
FIRE BTC Issue #19 - Greed comes back to bite
I just got back from a resort in Mexico.
Beautiful weather, great food, all-inclusive — my kind of vacation. I even got to play a round of golf down there. All the while, it was cold and dreary at home. Perfect timing to get away.
We had smooth travel home. No issues getting to the airport, no flight delays. All good.
Then it hit me. “Montezuma’s Revenge”, a.k.a. “traveler’s diarrhea”, is commonly experienced by Americans traveling to Mexico and is caused by exposure to unfamiliar bacteria in the local food and water. Needless to say, this type of sickness is not fun — I’ll spare you the details of what I experienced.
Montezuma’s Revenge is symbolic for retribution after overindulgence. When you’re living it up in a beautiful place like Mexico, and the margaritas are flowing like the salmon of Capistrano (lol Dumb and Dumber reference), it’s easy to get a little careless.
Sometimes things seem like they’re on easy mode — everything’s going your way. Like when bitcoin goes from $20k to $60k to $100k within the course of two years and you’ve been stacking hard to reach your FIRE goal. It’s working, and you’re feeling good. You’re pretty freaking smart, eh?
So you think, “I’m good at this, and I bet I can outperform bitcoin.”
I’m here to tell you: That’s the margaritas talking…
Here are a few things that are sure to give you financial diarrhea and slow down your path to FIRE.
🔧 Buying bitcoin on leverage
Leverage can be a great thing for your finances if done correctly. In fact, I’ve written about this previously here and here, and I always look for ways to use the debt-based fiat system we live in to my benefit.
What I mean by “buying bitcoin on leverage” is using margin-style, callable debt at high levels.
Some exchanges offer 5:1, 10:1, 20:1, or even 100:1 leverage on bitcoin. Any of these options are hugely risky, and you are virtually guaranteed to lose your money. Avoid at all costs.
A safer way to buy bitcoin on leverage might be to borrow against your home or against your bitcoin stack (see my thoughts on these at the links above). Just be very careful. When the market is ripping, this can feel very easy. But if your timing is off, you’ll be feeling a lot of stress.
I’ve touched this stove before…
🕰️ Timing the market
I’m not a good trader. My timing is pretty terrible. I know this because I’ve spent way too much time, energy, and money trying to be good at trading.
I don’t think I’m alone. You’re probably not a good trader either. Thinking you can time the market by selling at the top and only buying at the bottom will most likely lead to you owning less bitcoin than you otherwise would.
Missing the best 10 days of bitcoin price movement each year puts you in a losing position. You can’t afford to do this.
The old adage, “Time in the market beats timing the market”, is true for 99% of us. This is core to the FIRE approach.
📉 Trading other assets to get more bitcoin
There’s always another sexy trade out there trying to grab your attention and your capital.
Here are a few recent examples:
The Magnificent Seven
Memecoins
XRP (talk about diarrhea…….)
MSTR (Strategy, formerly known as MicroStrategy)
Of course, some of these have more merit than others.
The Mag Seven has been a powerhouse in the traditional finance world, driving most of the gains in the stock market. However, all of these have underperformed bitcoin over the long term.
I’m a MSTR believer and I own some. But trying to trade MSTR, especially with options, in an effort to end up with more bitcoin, will like lead to less, not more. There was recently a LOT of hype around this trade. I’m not immune to it…
Memecoins and XRP should be considered outright scams and should be avoided at all costs. Good luck trying to get the timing right or have the inside knowledge needed to dump on the pump.
Just stay humble and stack sats.
Montezuma’s Revenge is inspired by the historical episode of the Spanish Conquistador, Hernán Cortés. When he met the Aztec Empire in the 1500’s, its ruler, Montezuma II, thought Cortés might be a god and showered him with gifts, including gold. But instead of satisfying the Spaniards, this only fueled their greed for more. Montezuma’s attempts to appease them backfired, and his empire was eventually conquered. Centuries later, though, foreigners continue to receive the payback for Cortés overstepping his bounds in the form of Montezuma’s Revenge.
It’s easy to be tempted to overindulge when things are good. We are all susceptible to it. This is where having a clearly laid plan to achieve your financial goals comes into play.
I’m feeling better now, but this recent sickness, and the recent volatility in the bitcoin market, gave me a firm reminder to resist the temptation to overindulge.
That’s it for this week. Thanks for reading!
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Until next time,
Trey ✌️