What I Got Wrong in 2018, in My Own Words
I kept notes through the last long bear market. Reading them back is an education in how confident bad reasoning sounds at the time.
I have kept a quarterly note since 2017. The 2018 entries are uncomfortable to reread and more useful than anything I have written since.
What follows are the four claims I made that year with the most confidence, and what each one turned out to be.
“The technology is fine, the prices were mania”
Written in March 2018. Half right, and the half that was wrong cost me.
The prices had been a mania. That part was correct and remains correct. What I got wrong was the implied conclusion: that a return to sane pricing meant a return to somewhere near where the assets had started the previous year.
Most of them never recovered at all. The mania was not a temporary overshoot on a sound underlying asset. For the majority of what traded in 2017, the mania was the entire asset.
I held several of those for far too long on the strength of this sentence.
“Institutional money will arrive within eighteen months”
Written in June 2018, with a list of reasons. Every reason was plausible. The timeline was wrong by roughly five years.
The mistake was not the direction. Institutional participation did arrive, and at a scale beyond what I predicted. The mistake was treating a directional view as a timed one, which is how people end up right about an outcome and destroyed by the path.
I have since stopped putting dates on structural predictions, because I have no ability to produce them and neither does anyone I have read.
“This is the capitulation”
I wrote this in four separate quarters. In two of them the price subsequently fell substantially further.
Calling a bottom is a category of statement I now avoid entirely. Not because it is hard, though it is, but because being right about it produces almost no benefit and being wrong about it produces action. Every time I identified capitulation I added, and the ones that mattered were the additions I made mechanically on schedule, not the ones I made because I had identified something.
“I will not sell below X”
Written in January 2018. The price went below X in November. I did not sell, which looks like discipline and was not.
I did not sell because the number had become so much lower that selling felt pointless, which is a completely different mental state from conviction. Had the decline stopped ten percent above X, I think I would have sold, and the record suggests that too.
The lesson is that a floor stated as a price is a promise about a feeling you have not had yet. My rules are all stated as conditions now: what has to be true about the network, the regulation or my own circumstances. Those are checkable and they do not move when the chart does.
What the notes are actually for
Not for prediction. My record on prediction is poor enough to be genuinely funny in places.
They are for calibration. Reading a confident paragraph from 2018 and knowing how it turned out is the only reliable defence I have against writing an equally confident paragraph today and mistaking it for analysis.
If you are holding through your first serious decline, start the notes now. Date them. Be specific. Include the reasoning, not just the conclusion, because the conclusion is worthless without it.
In four years you will read them, and the version of you doing the reading will be considerably better informed than the version doing the writing.
This is a personal account of holding through market cycles. It describes what one person did and why. It is not a recommendation, and past cycles do not predict future ones.