What You Can Learn About Investing From a Guy Who Made 3089% on His Ethereum Investment (…Sort Of)

Bitcoin and Ethereum sound like total science fiction topics, but they’ve been getting a lot of attention in the finance community this week.

To make a very long story very short, they’re cryptocurrencies – ways to exchange value that don’t rely on a central authority, like a bank, and that use entirely distributed systems to function.

Like if a Canadian dollar was all of a sudden an internet dollar, and answered to nobody. Kind of like that.

They’ve been making headlines because both currencies (Bitcoin and Ethereum) are experiencing massive growth.

Case in point: “Ethereum hits another record high after bitcoin and is now up over 5,000% since the start of the year.”

That’s not from TechCrunch, either. It’s from CNBC.

And sure, I saw the headlines, but I didn’t pay them much attention.

Until this popped up on my screen at lunch on Monday.

"I made hundreds of dollars in bitcoin and ethereum this weekend."

I’m sorry, what?!

That was The Boyfriend, who had checked in on his longstanding Coinbase account to see how his currencies were doing.

Here’s the thing: I always knew he was involved in mining cryptocurrencies, but even with all of these headlines, it never clicked that oh right, maybe I should ask about the financial performance of the hobby.

Bad personal finance blogger, I know.

Luckily, The Boyfriend agreed to talk to me – on the record – about how this all happened, and how he got involved in cryptocurrencies.

Even if you still don’t really know what we’re talking about, and especially if you’re thinking hey, this sounds like a great investment opportunity! – you definitely want to read this.

Me: I can’t believe you’re finally letting me interview you for the blog!

The Boyfriend: Oh god. I was promised this would be technical.

M: Well… not really. But kind of! So let’s dive in. When and how did you first get involved with cryptocurrencies?

TB: I don’t even remember when I first got into it, to be honest. Let me check my Coinbase account, which will at least give us a year… *pulls up Coinbase* I opened an account with Coinbase in March 2014, so I got started around that time. I’ve mined a bunch of different cryptocurrencies since then, including various Altcoins, but the ones people have heard of are Bitcoin and Ethereum.

M: Too many coins, but whatever. What made you want to start mining?

TB: It seemed like a good use of a computer that was running all the time anyways, and it was an emerging technology that I wanted to try.

M: Which is not something you hear a lot of people saying about how they spend their free time. Is it fair to say this isn’t your first technical rodeo?

TB: I don’t know why you’re asking me questions you know the answers to, but no, it isn’t – I’ve been working as a developer for 8 years.

M: (He’s right, I did know that.) Does mining use a lot of the skills you use from work?

TB: No – very little actually. There’s a bit of overlap, but very little. Mostly, the overlap is just scripting and automation, so I can use my work skills to tell the computer when to stop and start mining based on a set of rules (like if I’m playing a PC game, it’ll stop). But mining itself doesn’t really require you to be a developer.

[Editor’s note: He’s actually very technical and builds computers and stuff, so my guess is he’s downplaying the amount of base knowledge you’d need to get started.]

M: So back to your recently-lucrative adventures in Ethereum and Bitcoin mining. When did you start mining Ethereum specifically?

TB: I started mining Ethereum in August of 2016 – specifically, I started on August 17th and kept mining that specific currency until September 27th, so just about six weeks of mining.

M: And what made you start mining Ethereum back then? Like, how did you even find out about it?

TB: I probably heard about it on the Bitcoin subreddit, although I can’t remember for sure where the first place I heard about it was. I know that people were talking about Ethereum being the new good currency, that it had a lot of the big names in the community behind it, and that it had a large, organized community of support, so I gave it a shot.

M: Did you think at the time it would make any money?

TB: It was very clear upfront I would not make any money – actually, that I would lose money.

M: Wait, you’d lose money?

TB: Yeah, because my hardware isn’t that powerful, so the power consumption to hashing ratio [editor’s note: tech stuff, and yes hashing is a real thing apparently] was nowhere near what the pros were already capable of.

To profitably mine, you need to spend a lot upfront for powerful hardware, and even that is likely a short term gain, because it could become unprofitable to mine again in six months.

M: Do you think people who are finding out more about cryptocurrencies right now should get into it?

TB: Not unless it interests them, since they’re both at such a high point. The last time Bitcoin peaked like this it dropped significantly for the following year. It’s more of a hobby than a money-maker for me. Many people have made plenty of money from Bitcoin though, by investing in the technology at the right time.

M: But… you did make some money. Out of interest, how much did you mine and how much was it worth at the time?

TB: During the six or so weeks I was mining Ethereum, I mined about 0.311 ETH, although they do go to eight decimal places for accuracy. At the time, it was worth $4.86, and I probably spent about four or five hours getting everything set up to start mining.

Right now, the same amount of Ethereum is currently worth $155.

M: So are you going to take the money and run?

TB: No, because it’s never been about the money for me – as I mentioned, it’s more of a hobby, and a technology I wanted to understand. I’ve also got some Bitcoin that I purchased for about $75 that’s now worth $392, and I won’t be selling that either. It’s more about being involved and understanding it for me than it is for the profit… especially since it was never going to be a profitable project to begin with.

M: As someone who blogged for a whole year before making a single dollar, I get that. Thanks for agreeing to talk about this, Boyfriend!

TB: You’re welcome. It was passably technical.

So what does any of this have to do with regular people, who likely aren’t going to start mining on the internet, and how we invest our money?

Well first and foremost, to reiterate The Boyfriend, do not go out and buy Bitcoin just because it’s in the news.

Instead, think of Bitcoin like you’d think of any single stock out there.

The people who are most likely to make a zillion percent, or 3089% in The Boyfriend’s case, are the ones who get in early, because they know more than most people about a specific industry, technology or trend that’s taking place.

The Boyfriend has been involved in cryptocurrencies and mining for three years now. Not only is he familiar with the technology and the infrastructure, he went as far as to understand how the currencies are validated by mining his own.

And if you’re at the point where you understand a specific business or industry that well, and you’re involved enough in the industry or community to know when something looks like the hot new thing and be right about it?

Yeah, you should probably invest in it. You stand a better chance of doing well.

Maybe you’re that person about the stock market, and you would spend hours and hours reading about it, and following it, even if you didn’t stand a chance of turning a profit. When you’re that level of interested, you should 100% be involved, and dare I say it – actively manage your portfolio, or part of it.

But if you don’t particularly want to spend hours learning about how to mine cryptocurrencies, or reading financial statements? The net outcome is the same: Don’t invest your money there either.

Robo-advisors will do just fine.

If you want to find out more, Bridget at Money After Graduation did a great explainer video that’s just the right amount of detail for personal-finance folks! And if you’re deeply technical and this was all way too light for you… Sorry friends. This is a money blog.