Bitcoin prices have gone up over 65% during the last few months. Even though Bitcoin is a recent invention, thousands of years ago, a storytelling slave named Aesop, told a fable that partly explains this recent trend.
The Dog And His Reflection
One day, a starving dog was searching for food. After weeks of hunger, he was desperate. While scavenging near a town, a kind butcher took pity on him and threw him a generous-sized bone. Thrilled, the dog took the bone in his mouth and hurried to his home in the nearby woods. As he walked past a river, he noticed another dog with a bigger bone in the water. Sensing an opportunity to get even more, the dog leapt into the river to fight for the other dog’s bone. Unfortunately, all he had seen was his reflection, and the river quickly swept him away. Eventually, the dog was able to survive the river, but, after his decision to try and get more, was now wet, exhausted, and bone-less.
The Butcher’s Bone
What does this bone have to do with Bitcoin, you may ask? In this fable, we are like the starving dog, trying to satisfy our needs. The butcher’s bone is the marketplace. It is a legitimate place for us to meet our needs. During our lives, most of us are given a very simple playbook: spend less than you earn enough to save 5-15% of your earned income into the stock market. This allows the stock market to grow your savings exponentially through compound interest, increasing the likelihood that you’ll have enough for when you can no longer earn an income.
This is a good “bone” to have and enjoy.
If we are content with this bone, we also help our community flourish. As we put our money into the stock market, we are purchasing productive assets that are producing jobs, goods, and services. This, in turn, lowers the cost of financing for the companies that are making products and services that are meeting the needs of our community.
But for many of us, seeing a bigger ‘bone’ in the reflection becomes too tempting.
Bitcoin Price Bone
When I was 15, I bought my first stock. It was 1995 and just about every stock went up during this time period. I bought the stock and instantly made money, which felt really, really good. This really good feeling is called ‘dopamine’. The more extreme the markets got for me (i.e., riskier markets), the more chances there were for me to experience big hits of dopamine.
As I watched my stock picks go up, I began to like risk. Risk meant more chances for big wins. The more I engaged in risky investments, the more my personality gradually began to shift. Before I made money in risky stocks, I was a normal “risk avoiding” individual. As a child, I was often the one that would study every possibility of being hurt before jumping into a lake. However, after the thrill of consistently making money from exotic stocks, I gradually changed into a “risk seeking” individual.
My brain craved the dopamine, and I realized that seeking risk was the best way to get more of it. Numerous studies have shown that our brains change when we receive regular doses of dopamine. In one study entitled, “Dopamine Agonist Increases Risk Taking but Blunts Reward-Related Brain Activity,” scientists discovered that participant’s brains were physically altered when given regular doses of dopamine versus a control group.
Easy Bitcoin Price Gains
This controlled experiment is being conducted in today’s culture. Easy gains over the last decade are turning an entire generation of young adults into risk-seeking investors. Many started with stocks, then moved to riskier crypto investments, and finally entered the completely untamed NFT/metaverse markets where a picture of an egg called ‘The Merge’ was sold for $91.8 million (I wish I was joking). The recent article from the Washington Post confirms this cultural phenomenon:
“As the cryptocurrency boom has swollen the ranks of everyday investors chasing a life of mansions and yachts, mental health experts say it is sparking a rise in addiction.”
This means that people who have enough in the stock market (the butcher’s bone) are now seeing a ‘bigger bone’ in Bitcoin and jumping into the river to chase it.
Devin Singh in his book, Divine Currency, discusses how the early Greek philosophers saw the dangers of simply accumulating faceless, lifeless money since it had the potential to fuel a person’s unlimited desires, whereas, buying actual productive goods for the sake of meeting physical needs was a much safer enterprise.
“Aristotle claims that the principal threat of money is precisely its capacity to fuel unlimited desire. Use of money to procure goods to satisfy finite needs is legitimate…but unlimited accumulation of money is illegitimate or unnatural.”
The Virtue Of Being Boring
There are thousands of ‘boring’ investors who simply bought and held a diversified stock portfolio and became financially healthy. There are also thousands and thousands of people who jumped into the water to pursue a bigger bone, bankrupting themselves both financially and emotionally.
In fact, this road to destruction is so well-worn that the Christian Bible has clear warnings about it: “Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions.” Luke 12:15, ESV.
Avoid financial short-cuts – chasing after get-rich-quick schemes is often just veiled greed. As you invest, you may hear whispers or loud shouts from your friends about easily gained riches. Resist this siren song.
Instead of fixating on Bitcoin prices, be more like my Nana, who stayed true to her sweet personality, saved automatically, and let her money grow steadily in a certain and ‘boring’ way.