A LessWrong Crypto Autopsy

It is a little bit unfair to say that buying 10 bicoins was everything you needed to do. I owned 10 bitcoins, and then sold them at a meager price. Nothing changed as a result of me merely understanding that buying bitcoins was a good idea.

What you really needed was to sit down and think up a strict selling schedule, and also commit to following it. E.g. spend $100 on bitcoin now, and later sell exactly 10% of your bitcoins every time that 10% becomes worth at least $10,000 (I didn't run the numbers to check if these exact values make sense, but you get the idea).

Upstream of not taking effective action was unwillingness to spend a few hours thinking hard about what would actually be smart to do if the hypothetical proved true.

In my case, it was about not-so-trivial inconveniences. Like Richard, I couldn't install the software and didn't know a reliable place to buy. A few months ago, when a friend sent me a link to BitStamp and explained what to do, I bought some BTC, which are currently at triple the price I bought them. Nice, but not as nice as if the same thing would have happened a few years sooner.

(I am in a similar situation with index funds right now. I agree that it is a good idea to buy them. I just don't know where exactly to go, what exactly to do, and what exactly will be the consequences for taxes. I am not an American, so I would need specific information for my country.)

But it is also my fault for not paying enough attention to this specific topic. Not realizing that this article is not the same as 99.99% of the rest; that this is the right moment to stop reading web and actually do something.

Some of us were smarter than others. Good for them! But if we want to help each other, and avoid having the same thing happen the next time, next time when you see an exceptionally important article, don't just think "others have read the same article, and they are smart people, so they know what to do". That's another form of illusion of transparency; after reading the same text, some people will jump up, others will just continue reading. Here are two things you can do to nudge your fellow rationalists in the right direction:

1) Imagine a person who has very little knowledge in this specific area, and for some reason is not going to study more. Can the whole thing be simplified; ideally into a short list that is easy to follow? For example: "Step 1: register online at BitStamp. Step 2: send them the required KYC documents. Step 3: do the money transfer. Step 4: buy Bitcoins. Step 5: HODL!" More people will follow this procedure, than if they just read "buy and/or mine some Bitcoins, find out how".

2) Offer help at your local meetup. Make a short lecture, explain the details, answer questions. When people are interested, guide them step by step.

All we would have needed to do was invest $100 (or a few CPU cycles) back when people on LW started recommending it.

All we needed was someone who would make a lecture about Bitcoins at a meetup and then say: "If you are interested, bring a laptop and USD 100 to the next meetup and we will do this together." Today, you would have a local rationalist millionaires' club. Think how awesome that could be!

More generally, if we want to win, we need to seriously improve our teamwork. Sometimes that means to cooperate with other people. Sometimes that means to lead them. It is not true that each of us needs to play the game of life alone.

I'm one of the 3% who made over $100K (I made ~$500K).

I have to agree with other commenters that it was genuinely difficult to buy the cryptocurrency in the first place. It took me about 5 solid hours to learn how it worked, and then several days to funnel the currency through the various necessary conversions, any of which might've unexpectedly eaten my hard-earned cash for some incomprehensible reason.

In hindsight it's easy to see this as "5 hours' work for $100,000/hour, plus some waiting", but at the time there was no such guarantee of success. The only reason I persisted was because I was interested in the cryptography aspect and wanted to be a part of an up-and-coming technology.

To take a different set of data points in the community, MIRI and CFAR easily filled up their respective funding gaps recently (largely as a result of crypto), and if this continues to be the new normal then I'll consider us to have passed fairly well (maybe a B+). If it's a one off hit then I'll agree to the C grade.

Edit: Fixed the links.

This is pretty low on the list of opportunities I'd kick myself for missing. A longer reply is here: https://www.facebook.com/yudkowsky/posts/10156147605134228

I suspect it was the trivial inconveninece of setting it up that stopped most of those who were considering it.

A hindsight solution for rationalists to have reduced the setup costs of buying bitcoin would have been either to have had a Rationalist mining pool or arrange to have a few people buy in bulk and serve as points of distribution within the community.

This suggests that if a future opportunity appears to be worth the risk of investment, but has some barrier to entry that is individually costly but collectively trivial, we ought to work first to eliminate that barrier to entry, and then allow the community to evaluate more dispassionately on risk and return alone.

I think a large part of what prevented many people from investing in Bitcoin may have been the epistemic norms commonly referred to nowadays as "the absurdity heuristic", "the outside view", "modest epistemology", etc. In other words, many of us may have held the (subconscious) belief that it's impossible to perform substantially better than the market, even in situations where the Efficient Markets Hypothesis may not fully apply. To put it another way:

Well, suppose God had decided, out of some sympathy for our project, to make winning as easy as possible for rationalists. He might have created the biggest investment opportunity of the century, and made it visible only to libertarian programmers willing to dabble in crazy ideas. And then He might have made sure that all of the earliest adapters were Less Wrong regulars, just to make things extra obvious.

I think many of us considered this, and unconsciously dismissed it due to the obvious absurdity: surely things can't be that easy, right? Sure, we may be rationalists, and sure, rationalists "ought to win", but surely winning can't be so easy that the opportunity to win literally hits us on the head, right?

I think what this points to is a fundamental inability on our part to Take Ideas Seriously. Of course, most people don't have this ability at all, and we're surely doing much better on that count--but what matters in this case isn't your relative superiority to other people, but your absolute level of skill. (I'm using the pronoun "your" here to refer to the majority of rationalists who didn't invest in Bitcoin, not the few who did.) The corresponding solution seems obvious: work to improve our ability to Take Ideas Seriously, without dismissing absurd-sounding ideas too quickly.

Easier said than done, of course.

There's something I should note that doesn't come through in this post: one of the reasons I was interested in Bitcoin in 2011 is because it was obvious to me that the 'experts' (economists, cryptographers, what have you) scoffing at it Just Did Not Get It.

The critics generally made blitheringly stupid criticisms which showed that they had not even read the (very short) whitepaper, saying things like 'what if the Bitcoin operator just rolls back transactions or gets hacked' or 'what stops miners from just rewriting the history' or 'the deflationary death spiral will kick in any day now' or 'what happens when someone uses a lot of computers to take over the network'. (There were much dumber ones than that, which I have mercifully forgotten.) Even the most basic reading comprehension was enough to reveal most of the criticisms were sheer nonsense, you didn't need to be a crypto expert (certainly I was not, and still am not, either a mathematician or C++ coder, and wouldn't know what to do with an exponent if you gave it to me). Many of them showed their ideological cards, like Paul Krugman or Charles Stross, and revealed that their objections were excuses because they disliked the potential reduction in state power - I mean, wow, talk about 'politics is the mind-killer'. I think I remarked on IRC back then that every time I read a blog post or op-ed 'debunking' Bitcoin, it made me want to buy even more Bitcoin. (I couldn't because I was pretty much bankrupt and wound up selling most of the Bitcoin I did have. But I sure did want to.)

Even cryptopunks often didn't seem to get it, and I wrote a whole essay in 2011 trying to explain their incomprehension and explain to them what the whole point was and why it worked in practice but not their theory ("Bitcoin is Worse is Better"). So, it was quite clear to me that Bitcoin was, objectively, misunderstood, and a 'secret' in the Thiel sense.

And in a market where a price is either too low or too high, 'reversed stupidity' is intelligence...

(If anyone was wondering: I don't think this argument really holds right now. Discussions of Bitcoin are far more sophisticated, and the critics generally avoid the dumbest old arguments. They often even manage to avoid making any factual errors - although I've wondered about some of the Tether criticisms, which rely on what looks like rather dubious statistics.)

What sort of luck or cognitive strategy did this require? I think it did require a good deal of luck simply to be in LW circles where we have enough cryptopunk influence to happen to hear about Bitcoin early on. Otherwise, it would be unreasonable to expect people to somehow pluck Bitcoin out of the entire universe of obscure niche products like 'all penny stocks'. But once you pass that filter, all you really needed was to, while reading about interesting fun developments online, simply not let your brains fall out and notice that the critics were not doing even the most basic due diligence or making logically valid arguments and had clear (bad) reasons for opposing Bitcoin, and understand that implied Bitcoin was undervalued and a financial opportunity. I definitely do not see anything negative about most people for not getting into Bitcoin in 2011, since there's no good ex ante reason for them to have been interested in or read up on it and doing so in general is probably a bad use of time - but for LWers, we had other reasons for being interested enough in Bitcoin to realize what an opportunity it was, so there it is a bit of a failure to not get involved.

I bought 10 bitcoins back around 2012. I forget the exact date, but they were around ten dollars each. Today, that investment is worth zero dollars, because those bitcoins were in Mt Gox.

My point: there may be a nontrivial chunk of LWers who correctly predicted where bitcoin would go, but still ended up without any significant profit. (That actually would not include me; I just got into it to test a trading algorithm, then left a few bitcoins sitting around after the test was done.)

Collectively the community has made hundreds of millions from cypto. But it did so by getting a few wealthy people to buy many bitcoin, rather than many people to buy a few bitcoin. This is a more efficient model because it avoids big fixed costs for each individual.

It also avoid everyone in the community having to dedicate some of their attention to thinking about what outstanding investment opportunities might be available today.

Due to declining marginal returns, hundreds of millions is a substantial fraction as good as billions. So I think we did alright.

I have some Bitcoin, and have made some money on Bitcoin[1], and am currently a software engineer at a Bitcoin startup, where I've been working since the beginning of 2015.

I have complicated feelings about this. Obviously I invested in Bitcoin because I thought it was +EV, and I did make a nice profit by doing so. That doesn't necessarily mean I was correct to imagine that it was +EV, and I struggle to understand whether my choices were reasonable or just lucky. I think Eliezer's recent sequence about adequacy probably has something useful to say about this. But I also think that a lot of Bitcoin and cryptocurrency behavior is fundamentally a function of the psychology of the market, rather than actual value, and the psychology of the market is a dangerous thing to bet on.

Of course, it's not wrong to take dangerous bets with good upside. Ultimately I think cryptocurrency investing may or may not have been the correct decision for people depending on their circumstances. There's no conventional wisdom or obvious right answer to fall back on.

I might have more to say on this later.

[1] Bitcoin is very hard to store safely. Don't ask anybody how much Bitcoin they have (at least in public non-anonymously). They would be very foolish to disclose it, and the more it is the more foolish they would be.

Many people pointed out that the real cost of a Bitcoin in 2011 or whenever wasn't the couple of cents that it cost, but the several hours of work it would take to figure out how to purchase it. And that costs needed to be discounted by the significant risk that a Bitcoin purchased in 2011 would be lost or hacked - or by the many hours of work it would have taken to ensure that didn't happen. Also, that there was another hard problem of not selling your 2011-Bitcoins in 2014. I agree that all of these are problems with the original post, and that they significantly soften the parts that depend on "everyone should have bought lots of Bitcoins in 2011". Obviously in retrospect this still would have been the right choice, but it makes it much harder to claim it was obvious at the time.

I wrote about this post extensively [LW · GW] as part of my essay on Rationalist self-improvement. The general idea of this post is excellent: gathering data for a clever natural experiment of whether Rationalists actually win. Unfortunately, the analysis itself is very lacking and is not very data-driven.

The core result is: 15% of SSC readers who were referred by LessWrong made over $1,000 in crypto, 3% made $100,000. These quantities require quantitative analysis: Is 15%/3% a lot or a little compared to matched groups like the Silicon Valley or Libertarian blogosphere? How good a proxy is Scott's selection for people who were on LessWrong when Bitcoin was launching and had the means to take advantage of the opportunity? How much of a consensus on LessWrong was the advice to buy cryptocurrencies? These are all questions that one could find data on (I did a bit of it in my own post), but the essay does no such thing. Scott declares by fiat that 15% earns the community a C grade, with very little justification provided. This conclusion aligns perfectly with what Scott previously opined on the utility of Rationality [LW · GW] to things like making money, which doesn't engender confidence in the objectivity of his evaluation.

The idea behind this essay is very admirable; one of the main things we fail to do more as a community is to test ourselves against real world outcomes. And the fact that Scott gathered the data himself is laudable as well. But the essay in itself is more of a suggestion for a good research post than a good work of analysis in itself.

My biggest takeaway is that there's a chance I can beat markets which as far as I could tell ought to have been pretty efficient, so I'm personally going to attempt to do that more often in the future until I get evidence that it's not working.

I think the percentages of 'successful' LW readers need to be recalculated. What percentage of LW readers were in the SSC survey, but started reading LW after the most profitable window for buying bitcoin had already passed? What percentage were students with no spare funds in 2011, or otherwise had too little risk tolerance to invest?

I started reading LW in 2014, took the advice of the 2015 post to the extent I could, but was only able to make a little money because I didn't have any savings and 1 bitcoin was worth $200. Later, I heard about ethereum very early on from a friend who bought a bunch and was interested in investing myself, but was in the midst of a job transition where I again had no spare cash to invest. I only reported having acquired about $1000 from crypto on the survey, but I count myself as having done about as well as I could have, given circumstances and timing.

When this article came out, I put a bit of money into alternate cryptocurrencies that I thought might have upside. They are now worth less than I invested.

I think it's good to review how you did in the past, but it's important not to overlearn specific lessons. In retrospect, I think that this article should have put more emphasis on that point.

At the time I took the survey I would have answered that I made no money out of cryptocurrency. Since then, I found out that some free cryptocurrency I had forgotten about, which was worth less than $10 at the time, is now worth several thousand. Given that I went to the (small) effort of noticing and signing up for the giveaway, but only did the long-term-hold strategy by accident, I'll give myself a D+. I'm also too lazy to sell it for now so hopefully there isn't a hard crash.

15% seems like a lot.

Maybe I have that impression because I tend to reach for a null hypothesis as my default model, which in this case is that LWers would do no better with cryptocurrency than other people who had similar levels of interest in tech. And 15% of people making $1000+ is way more than I would predict on that model.

It's one thing to know when to buy, it's another to know when to sell. In hindsight buying at 1.00 made sense with gwern's logic,(I don't think I had even heard about bitcoin let alone gwern's argument at the time) but what happens when it rises to 100.00? In that case, the same logic would tell you to sell, in which case if you had invested 100.00 you'd have made 10,000.00, hardly a life-changing sum. To have made it to 100,000.00 you'd have had to sit and watch as that not inconsiderable sum bounces around the hundreds range, driven by people whose only explanation is "it's going up" while not making hardly any headway in its intended purpose of being an actual currency used for legal transactions. The one person I know who mined it early on did exactly this, he sold it at around the 50.00 point and said it was a bubble when it was in the hundreds range. I still think he's right, it was and is a bubble; I don't see the value in something which has no actual value.

About the rationalists winning, we already 'win' in a lot of ways. We on average have higher incomes, better-managed finances, better health, fewer substance abuse problems, ect, than the average person. But little of that is due to rationalism per-se, as these "rational" behaviors are incorporated into the general suite of lifestyle advice given to the average "normie:" don't get in debt, don't major in that in college, ect. You probably followed them before you ever heard of rationalism. There are a few ways however that the common ideology of the upper-middle class people diverges from rational behavior, and which rationalists would gain an advantage:

1. On infertility. Don't get me wrong, few communities are as sterile as this one, but IF rationalists decide to get married and IF they decide to have kids, I would think they would be more aware of the fact that fertility takes a nosedive around age 37, relative to a non-rationalist of similar income level.

2. On marriage. Rationalists are heavily single, some of that owes to the general sperg-demographic, but I would bet that a lot of them remain unmarried due to a more accurate understanding of the family court system and the divorce industry.

3. On raising children. If they have them, rationalists will be more likely to understand the dominant role of genetics in shaping their children's upbringing, and will thus be spared a lot of expense and heartache caused by people's belief that they can buy IQ points for their child.

In all these cases, it's not anything that allows one to get rich quick, rather, it's the avoidance of a potentially very bad outcome. And that's all you should expect with the fact that the stock market is already rational ... and the corporate ladder largely isn't.(So our skills are of limited relevance there.)

Just for posterity and to try to make the success rate better next time, you should IMO seriously look at Ethereum now and decide what you make of it. Blockchain-based ledgers of stuff still seem to me like a good idea, the market has validated that opinion, and Ethereum is technically far in the front of the curve. (Some competitors, e.g. Tezos, Cardano have reasonable-sounding ideas but are way behind in terms of actual implementation and developer manpower being applied.) In the next two years we should see whether Ethereum's scaling plans work out or not. If they do, I can't understand any plausible future for Bitcoin.

My only problem is that it's confusing to me to understand how to compute how much an individual ether should be worth -- more confusing than Bitcoin, where it seemed to be competing directly with specific technologies like Western Union or Visa and I thought I could look at the fees and velocity of money through those as a comparison. So even if Ethereum becomes the technical infrastructure for a ton of random tokenized software I'm not sure how to estimate the future value of ether as a result. Perhaps I should be looking at potential tx/sec levels and estimating demand for gas in each case.

Disclaimer: Confusion notwithstanding, my money is where my mouth is.

It seems like a good idea to collect self-reports about why LessWrongers didn't invest in Bitcoin. For my own part, off the top of my head I would cite:

• less visible endorsement of the benefits than e.g. cryonics;
• vaguely sensing that cryptocurrency is controversial and might make my taxes confusing to file, etc.;
• and reflexively writing off articles that give me investment advice because most investment advice is bad and I generally assume I lack some minimal amount of wealth needed to exploit the opportunity.

So something like We Agree: Get Froze, might have helped. I also could have actually evaluated the difficulty of filing taxes given that I'd purchased bitcoins, instead of flinching away and deciding it was too difficult on the spot. I could pay more attention to figures that are relatively small even for someone with little wealth.

If surveys are still being done, that seems like important data to collect on the next survey. I would want to know if most people knew but didn't invest, or simply didn't know at all, and so on.

I do not think this is a strong analysis. Things were a lot more complicated than this, on many levels. Analyzing that in detail would be more interesting. This post seems more interested in the question of 'what grade should we get for our efforts' than in learning from the situation going forward, which is what I think is the far more interesting problem.

That's not to say that the actual evaluation is especially unfair. I give myself very low marks because I had the trading skills to know better, or I should have had them, and the spare cycles to deal with it as well, with the key insight being that the fact that it was super hard to deal with was actually a reason to buy, not a reason to avoid buying. But it wasn't until I worked with much better traders (who also, of course, all failed to bother acting despite knowing about it, the desk head said BTC was a "screaming buy" at $1 long before I got there, then everyone did nothing) that I figured out what the real mistake here was. Any good analysis, to me, has to say why we should have believed BTC but not fallen for countless other things, even if it turns out that BTC did so well that it would have fine to fall for 100 (or 1000!) other similar things at the same time, in some sense...

This post has been a clear example of how rationality has and has not worked in practice. It is also a subject of critical practical importance for future decisions, so it frequently occurs to me as a useful example of how and why rationality does and does not help with (in retrospect) critical decisions.

Very interesting, and I kind-of agree with the conclusion. However, as a few people pointed out, it wasn't as simple as just buying bitcoin, you had to sell at the right time, etc.. And buying bitcoin was complicated.

But the other problem is that there are thousands of opportunities, things you should do, etc, lying around, with a possibly good payoff in expected value terms. And how many of them do we do? How many of them do we even think about seriously?

Just a few off the top of my head (first two are obvious, then some others):

1. Cryo, obviously.
2. AI safety - tons of people in the community agree that's it's a serious issue, but how many actively work towards fixing it? (A decent amount, but I'd guess not as much as the "could" do).
3. CPR training - how many people do it? What is the chance that you'll one day be in a situation where you need it? I have no idea of the numbers, but considering this is a life-and-death situation, have you looked up the numbers and decided it's not worth doing?
4. Similarly, buying an emergency survival pack in case of a natural disaster. Again, not idea of the numbers here, but people do find themselves in situations where they're without food/water for some period. Do you know the numbers here to decide it's not worth buying canned goods?
5. How many people have even bothered to sit down and make sure their health insurance/life insurance/unemployemnt insurance/etc is handled properly?
6. Even more obvious - sending out resumes every year to find better job opportunities? Or taking a course/reading about finding a better job? This is likely have a massively higher impact than buying bitcoin, not only in monetary terms, but also in life satisfaction impact.

Etc, etc.

Most of the above are pretty obvious and trivial things almost anyone can do. I can probably list a dozen more, some more "standard advice", some more out there but still probably high in expected value. If I or anyone were to actually sit down and work through these one by one, we'd probably do little else for the next year.

So while bitcoin, in retrospect, may have been the most obvious and immediately high-value payoff, I'm not sure it's easy to seperate it from all the other things above. Then again, I'm not sure you should - maybe we should have a list of "these are things you need to take care of ASAP" somewhere.

I thought Bitcoin, specifically, was a bubble/pyramid scheme. I still think so, as well as thinking it's a colossal waste of energy.

Obviously, that doesn't mean I couldn't have gotten rich by buying it, or that I wouldn't want to do so. And I've also adjusted my beliefs; I think I understand how it has failed to crash, and so I could imagine it continuing to have something like its current value for even 5 or 10 years more.

But it is very, very hard for me to imagine a world in which I am able to make a large pile dollars from something I so deeply distrust and dislike. And I don't think "I coulda been rich" is an outstandingly compelling reason to radically update my values and/or epistemology.

This post distinguishes between the success of the LW community on identifying crypto and the relative failure on acting on crypto in a way that reminds me of how important it is to actually act on information instead of just processing it mentally.

I think this failure mode of understanding a problem but failing to act on that understanding is a very common one for me and I would expect for other readers. I think both emphasizing that this is a part of the problem to be solved, and illustrating specific benefits from solving that problem in a historical context, where you can actually assign monetary value to those outcomes, is a great way to emphasize the specific value involved in rationality.

Also the discussion quickly converges on a relatively cheap solution of writing up tutorial style documentation for processes like this that you've found to be high value. That kind of intro tutorial is one of the most valuable things to read for exactly this reason, because it can close that "understanding->action" gap and I would love to read more articles inspired by this notion that there are plots of value ready to be grasped.

When such a situation arises again, that there's an investment opportunity which is generally thought to be worth while, but which has a lower than expected uptake due to 'trivial inconveniences', I wonder whether that is in itself an opportunity for a group of rationalists to cooperate by outsourcing as much as possible of the inconvenience to just a few members of the group? Sort of:

"Hey, Lesswrong. I want to invest $100 in new technology foo, but I'm being put off by the upfront time investment of 5-20 hours. If anyone wants to make the offer of {I've investigated foo, I know the technological process needed to turn dollars into foo investments, here's a step by step guide that I've tested and which works, or post me a cheque and an email address, and I'll set it up for you and send you back the access details} I'd be interested in being one of those who pays you compensation for providing that service. "

There's a lot lesswrong (or a similar group) could set up to facilitate such outsourcing, such as letting multiple people register interest in the same potential offer, and providing some filtering or guarantee against someone claiming the offer and then ripping people off.

>When I first saw the posts saying that cryptocurrency investments were a good idea, I agreed with them. I even Googled "how to get Bitcoin" and got a bunch of technical stuff that seemed like a lot of work. So I didn't do it.

Hum. I believed on various "weak efficient market" arguments, that this Bitcoin was unlikely to be profitable. So I didn't invest. Does this makes me worse or better? I had worse epistemics, but it wasn't a failure to act on things I thought I were true...

Hmm, now I'm starting to wonder if Satoshi is a rationalist

It's not like the opportunity is gone. Making money on blockchain hype is still easy enough. But it feels more like a bubble/scam now, so I'm out.

Who is our control group? I can think about two candidates:

1) "Rational"Wiki

David Gerard (RW admin) writes articles about how you can't actually sell Bitcoins, and those articles get highly upvoted on Hacker News. I would take that as a weak evidence he doesn't have any.

2) Logic Nation

Athene (some guy who tried some weird financial scheme on LW, and then started his own cult) is selling his own cryptocurrency (actually, two of them; you can use the former to buy the latter).

Seems to me that Less Wrong is somethere in the middle. I guess that makes us merely average weirdoes.

So this is where we are. Cryo: some are taking it seriously, but not enough. The bet is still open, but yet to pay off. Cryptocurrency: some took it seriously, but not enough. The bet paid off magnificently in the past. It may still be open to a significant extent, though maybe not with BTC.

Are there any candidates for a current thing in the category of things that someone informed about, smart, and having comparative advantage should be leaping into? Broadening from personal gain (although that's my interest here), maybe x-risk, AGI x-risk, defeating aging, and EA would count. Anything else?

I got a lot of extremely valuable rationality advice from Lesswrong, but even if I had read the arguments about Bitcoin, I would not have bought any. Like someone else said, it feels too much like a penny stock.

You migh call Bitcoin "Pascal's Investment Scheme"

This is a very important post to read concerning Bitcoin "billionaires", from one of the guys who helped code its software:

Not as rich as you think… - http://gavinandresen.ninja/not-as-many-as-you-think

It goes like this: 

People assume that the people who worked on Bitcoin in the early years are fabulously wealthy.

That’s a bad assumption, for lots of reasons:

It is important to understand why we fail

Thanks for rubbing salt in the wound. (Only a tiny bit serious.)

Back when mining was possible on a standard desktop computer I mined a block in my first week, and received 50 bitcoins. A couple years later, I found that bitcoins were trading at the mind-blowing sum of $1 each, and cashed in. (In my pitifully weak defense, I was really short on money at the time.)

If I had done something sensible, like sold a few each time the price went up 10x, I'd have a pile of cash and probably some bitcoins left.

Weep for me, oh ye internets.

I'm one of the 15%. Given declining marginal utility of money , high-risk-high-financial-reward bets have never appealed to me; the financial EV would have to be ridiculously high for the EV in utilons to be positive. I considered getting some BTC as a curiosity in 2011 but decided it was too much hassle. However discussions in the aftermath of the 2016 election led me to conclude that holding a small amount of cryptocurrency could decrease overall risk by mitigating certain legal risks (e.g. money you can memorise might be good to have if you're a fleeing refugee), and so I bought some in early 2017, despite assuming that the then-current price was basically efficient and so expecting 0% average returns. I have of course been pleasantly surprised by the returns since then, but continue to make decisions based on the assumption of 0% expected returns going forward. (I'm waiting to rebalance out until the capital gains are long-term for tax purposes.)

1: Our epistemic rationality has probably gotten way ahead of our instrumental rationality

I would defend the instrumental rationality of having a rule of thumb that unless you're quite wealthy, you don't bother looking into anything that appears to be a 'get rich quick' scheme, or seek to invest in high-risk high-return projects you can't evaluate.

Yes sometimes it will fail big, if you miss the boat on bitcoin, or Facebook or whatever. Every strategy fails in some scenarios. Sometimes betting it all on 23 red will have been the right call.

But because it i) lowers risk, ii) saves you wasting time looking into lots of dud investments to find the occasional good one, iii) makes you less of a mark for scams and delusions, I think it's sensible for most.

Is this taking the assumption that it was a sound investment based on its underlying value and therefore predictable? Or is this saying that the explosion in price was predictable even if unjustified?

My belief on bitcoin is that it isn't a viable fiat currency alternative and won't be (nor will any other crypto) because governments won't allow it. I believe this because it wouldn't make sense for a central bank to volunarily give up one of its few economic levers. A government could kill the bull proposition for bitcoin by making it illegal for all transactions to registered businesses and making you pay tax in fiat currency as well. If law abiding businesses are unable to use it then it can't be a good currency. Then it's only useful as a volatile currency store and for buying drugs on the internet, although cryptos with better anonymity will eventually take that over.

If you think I'm missing or wrong about something here please let me know. I'm really curious as to how this will play out.

I am not convinced that people in 2011 should have bought bitcoin. If you gave 2011 me the epistemic skills of 2018 me, I would not have bought bitcoin. I don't know how one could reliably distinguish bitcoin from, say, a penny stock that makes promises of 10,000x growth.

Or perhaps a slightly stronger argument would be venture capital. Many startup founders have plausible stories of why their company will one day be worth billions of dollars. Surely it's worth investing even if there's a 0.1% chance that they are correct? But if VCs invested in every company with a story they thought was 0.1%-plausible, they wouldn't make any money.

If you could figure out a general epistemic strategy that would lead to buying bitcoin in 2011 but not buying penny stocks, or not investing in the wrong startups, that would be great. I don't know how to do that.

This is especially a concern in markets, where making an argument that an asset will appreciate isn't enough; you have to also explain why other people (including very smart people, and people whose entire job is to find assets that will appreciate) haven't done it already.

I decided to buy only 0.5 BTC in 2013 as I thought that buying more will require too much my mental energy to think about how the exchange rate changes. The truth is that I still think about it a lot.

I also read a post about Davos-2018 where was said that older people think that all problems will be solved by AI, and younger ones think that blockchain will solve everything. Surely, LW people are more inclide to think that AI will solve everything and it explains the ignoring of bitcoin.