[AYBABTME]

If from the Coinbase IPO, you just got out of lockout and you're new to that amount of money. You're probably still near 100% invested in Coinbase and need to divest into something more diversified and less volatile than Coinbase before you can sit on your hands and look at the number in your brokerage account as if it was real retirement grade money. Plus you'll need to pay a ton of taxes on the capital gain.

So don't chill out too much. Divest out of Coinbase, continue life as before and get used to the money. Take your time before changing everything and increasing your spending levels. In a year or so, hopefully you'll have diversified and your head will have cooled from the new money, and you'll be more leveled and realistic about what this money enables you to do, and how to handle your life going forward.

As far as I can tell, it seems like a large (20-50) percentage of people who have a large windfall... end up losing it all because they don't take the time to learn how to handle it.

Good luck and happy birthday!

[muzani]

There's a Ask HN thread, maybe a few, of people who hit it rich and later lost it. The common theme is it's easier to make lots of money than it is to keep it, which is a little unintuitive.

[gitfan86]

The scenarios where that can happen:

1. Bad budgeting or lack of diversification. "95% of my money was in Enron"

2. Confirmation Bias. "I build a successful company once, I can do it again, but this time with my own money"

3. Hedonic Treadmill. "Flying commercial is so annoying, I'm going to fly private, and figure out how to pay for it later"

[benjaminwootton]

Do you have a link to this one please? Sounds interesting!

[muzani]

https://news.ycombinator.com/item?id=20521902

The good stories are around the middle.

[davidajackson]

Is it really unintuitive? Most Americans only save about 7% of their income IIRC, wouldn't it make sense that they would mismanage most windfalls by default? In recessions, this number jumps up dramatically, proving that it's mismanagement that contributes.

[muzani]

I don't believe anyone gets a windfall by saving 7% of every paycheck either. Those who ran a startup make it a habit of burning through millions a month too. What's really unintuitive for me was seeing that CFAs are terrible at personal money management.

[ebanana]

thanks for sharing, storing thst up in the noggin

[mkleinstadt]

Not to mention that there's a nonzero chance of Tether bringing down the entire crypto ecosystem (temporarily) within the next year, Coinbase stock included

[akuji1993]

I'm trying to figure out crypto right now, could you explain why you believe this? Or link somewhere where I can read about it?

[XorNot]

Tether has been extremely opaque in what assets they hold to ensure the 1:1 USD/Tether peg. It's been observed that at least as one point they definitely didn't have enough USD-equivalent for it, and they've been issuing new Tether at quite a clip since then with flow on effects to the BTC market.

Now if they actually had this financing in place, this would all be fine - but nobody can find a proper accounting of who they're doing business with at the scale they claim to be doing business, beyond the observation that none of the big US players seem to have any business with them - so what assets are actually backing tether?

https://www.forbes.com/sites/nicholasgans/2021/05/13/tether-...

Note that the vast majority is "commercial paper": basically short term loans to companies with relatively risky backing. The problem is that's all we seem to know: no one knows from who they've been buying these. It might be large US companies with 50 year histories, or it might be Chinese property developers at risk of bankruptcy (at which point international debtors will be the first to lose their money).

[Traubenfuchs]

Tether is just one of many cryptocurrencies -wouldn‘t its implosion lead to people pulling out and investing their money in other crypto, hence consolidating the market and making every other coin rise?

[CircaSurvive]

Would you trade me a dollar for 12 cents? If it implodes who’s going to trade you the other coins for something of questionable value?

Additionally, say you hold 50% tether and the rest in a mix of coins. Your portfolio would be cut in half. How does that result in other coins being purchased if people are uncertain of tethers true value and unwilling to trade for it.

Then there’s the whole using tether as margin for leverage or if your margin is based on tether, and that disappears, your position will be liquidated. Now add the layers of derivatives that are quoted and settled in tether. Additionally what exchanges can you trust that will let you cash out in an event like this? People will run to the doors and liquidity will disappear creating a larger sell off as people seek shelter in liquid assets.

[Traubenfuchs]

God I hate "crypto". It's all a big fucking "get rich quick scam", all of it, without exception. Hopefully I will cash out at the right time (probably not).

[qPM9l3XJrF]

What are the most common reasons for losing it?

[qqqwerty]

The number one reason for folks who won the "IPO lottery" is they fail to cash out/diversify their stock, and at some point in the future the stock price drops dramatically.

For example, during the 2001 tech boom/bust a lot of tech companies went bankrupt in a very short period of time. As a result a lot of tech employees saw the value of their stock/options drop to zero (effectively). The speed in which the bust happened caught a lot of people off guard.

It is generally a good idea to move at least some of that money into a diversified portfolio as soon as possible. But folks often put this off because they don't want to pay the cap gains taxes and/or they think the stock will keep climbing.

[laurent92]

I guess I did the right thing: Atlassian IPOed in 2015 at $21, despite everyone suggesting to cash out, I wasn’t interested, and I sold only since 1 year between $180 and $320, and kept 1/3rd. BUT it keeps climbing, $480, so you aways feel like you’re missing something, whether you sell or not.

There is no right way of doing it, you’ll never sell at the top. At least the right moment is when you can use the money for a project.

[gryn]

sell half, keep half (or whatever ratio you're comfortable with)? that way if thing go bad they are not as bad as ending up with nothing and if they get better you still benefit a little bit.

[prox]

My econ teacher always said to keep the money invested you want to lose. Couldn’t you take out a sum, but keep investing a sum you dare to lose?

[OJFord]

Hence GP says 'diversify'. If you weren't an employee, or were one with no related stock in the company, would you buy so much, invest ~everything, in that (or any) one company? No? Well, don't treat holding differently to buying. It's the same, modulo fees & tax.

[amelius]

My econ teacher taught me nothing about personal finance. Is this normal?

[prox]

I dunno, got taught in Europe, got micro, meso and macro in different years, and sometimes semesters. My econ teacher was also a bit weird in a good way, a real character with a lot of knowledge. Ofcourse I didn’t do anything with it, wish I had.

[tata71]

Michael Saylor says only invest the money you can't afford to lose.

This is likely closer to reality, if one is cryptocurrency savvy.

[prox]

I don’t really get this point… how does that work?

[tonyedgecombe]

I'm guessing lifestyle inflation, divorce, bad investments ...

[OJFord]

> As far as I can tell, it seems like a large (20-50) percentage of people who have a large windfall... end up losing it all because they don't take the time to learn how to handle it.

I agree with all your advice, but I think that^'s impossible to tell. The vast majority of people successfully and sensibly handling such things are (partly as a result or even 'input' of it) not talking about it.