Avoiding Financial Pitfalls: Lessons from a Google Techie’s Crypto Misadventure

September 18, 2023: Today, we delve into the journey of Ethan Nguonly, a 22-year-old software engineer at Google, whose foray into the cryptocurrency market resulted in triumph and tribulation.

The early beginnings

Ethan’s financial journey commenced long before he even reached his teenage years. With the guidance of his parents, he ventured into the stock market, laying the foundation for his future investments. Fast forward to 2023, and his investment portfolio boasts over Rs 1 crore in retirement and brokerage accounts, along with two valuable properties. Impressive, right? But there’s a twist.

The Crypto gamble

While the allure of cryptocurrencies beckoned, Ethan decided to take the plunge. He invested approximately Rs 33 lakh in Bitcoin and Ethereum, two of the most prominent players in the crypto sphere. Additionally, he dabbled in altcoins like Shiba Inu and Dogecoin with a few hundred dollars. The excitement was palpable, and the potential for substantial gains seemed within grasp.

The margin misstep

Ethan’s biggest mistake was investing in cryptocurrency on margin, a financial maneuver that involves borrowing money to amplify one’s investments. During its peak, he had leveraged around Rs 12 lakh, allowing him to acquire more Bitcoin. This strategy initially appeared to be a stroke of genius, as he saw his holdings surge by approximately Rs 42 lakh during the crypto market’s bull run.

However, as we know, the cryptocurrency market is notoriously volatile. The market took a sharp turn, and by the summer of 2022, Bitcoin’s price plummeted by over 70 percent. Ethan got caught up in a financial mess, with losses totaling Rs 67 lakh, including Rs 24 lakh of his original investment and an estimated Rs 41 lakh in unrealized gains.

The crucial lesson

Ethan’s hindsight wisdom is both instructive and cautionary. He does not rue his decision to invest in cryptocurrencies; but regrets the imprudent use of borrowed funds. According to him, “That’s why my losses were significantly amplified.” It is a stark reminder that investing with borrowed money can be a double-edged sword, capable of magnifying gains but equally intensifying losses.

A cautious approach

Today, Ethan continues his crypto journey, albeit with a more prudent strategy. He has learned to tread carefully, primarily focusing on Bitcoin and Ethereum, steering clear of the riskier alternatives. His mantra is clear: “Only invest money you have and don’t go un-leveraged into very speculative investments.”

Ethan’s story underscores the volatile nature of cryptocurrency markets and the importance of financial prudence. While his journey had its setbacks, it also embodies resilience and the ability to learn from mistakes. As investors, we can draw valuable insights from his experience, emphasizing the significance of responsible investment practices. In a world where financial success stories often overshadow the pitfalls, Ethan’s misadventure highlights the wisdom of investing within one’s means.