Allan Roth: This Is My Brain On Bitcoin

Allan Roth: This Is My Brain On Bitcoin

Lessons from my financial high from buying bitcoin months ago.

Reviewed by: Allan Roth
Edited by: Allan Roth

I’ve been on a high lately. A financial high, that is … and bitcoin is my drug of choice. Strange as it sounds, research indicates that what I’m feeling is not much different from an actual drug experience.

My “After School Special” began when I bought some bitcoin on Sept. 28, mainly to fact-check a piece I wrote on bitcoin basics for AARP. Since the purpose was only to verify the process, I bought a mere $200 worth. But in just about 10 weeks, my current value has more than quadrupled, worth $871.30 as of the time of this writing.

For those who think I’m exaggerating when I say I’m high, Wall Street columnist Jason Zweig, and author of “Your Money and Your Brain,” says it’s quite real. Zweig writes of the research that demonstrates:

… the release of dopamine, the brain chemical that gives you a “natural high,” is triggered by financial gains. The less likely or predictable the gain is, the more dopamine is released and the longer it lasts within the brain. Why do investors and gamblers love taking low-probability bets with high potential payoffs? Because, if those bets do pay off, they produce an actual physiological change — a massive release of dopamine that floods the brain with a soft euphoria. Experiments using magnetic resonance imaging [MRI] technology have found an uncanny similarity between the brains of people who have successfully predicted financial gains and the brains of people who are addicted to morphine or cocaine.

Emotionally speaking, I might as well be under the influence, yet a financial high doesn’t quite silence the sober part of my thought process that deals in logic and reality. Thus, as described in Daniel Kahneman’s book “Thinking Fast and Slow,” the two systems of my brain are engaging in a heated dispute.

System 1 Thinking: ‘Buy More Now, Stupid!’

Here’s what my bitcoin-addled brain is screaming at me: “Why did you buy only $200?! If you had bought $200,000, you’d have made some real money!”

You still have time, it assures me, since most people don’t own any. That little bitcoin bought at just over $4,200 a coin has skyrocketed to $16,890, and many argue bitcoin is worth $200,000, so you can still get in early. Then, just to torture me, my brain reminds me that if I had invested $200,000 in July 2010 at $0.06 a coin, I’d be worth $56 billion today!

How, it demands, can I be content with boring index funds when the next big/best thing since the internet has arrived? Fiat currency is going to be worthless, and two beautiful things about bitcoin are a limited supply, and a new technology that disintermediates financial institutions.

My brain winds up its emotionally seductive pitch by pouring on the delusional fantasy of achieving the level of wealth that, if I’m willing to sink half of my net worth in it now, will make that private jet tax exemption relevant.

System 2 Thinking: ‘Stop & Think, Stupid!’

My System 2 brain demands to know if I’ve completely lost my mind, along with any ability to apply logic. In some ways, maybe I have. Daniel Kahneman’s book, “Thinking Fast and Slow,” details how we think with two systems of our brain:

  • System 1 is an automatic, fast and often-unconscious way of thinking. It is autonomous and efficient, requiring little energy or attention, but is prone to biases and systematic errors.
  • System 2 is an effortful, slow and controlled way of thinking. It requires energy, and can’t work without attention, but once engaged, has the ability to filter the instincts of System 1.

Unlike the drama queen that is my System 1 brain, System 2 is the buzzkill. Before I sell my index funds, it calmly cautions that buying something after a more than 1,000% price increase typically ends badly. It reminds me that my “dare to be dull” slogan means that investing shouldn’t be exciting.

It points out that there are over a thousand different cryptocurrencies and, even if cryptocurrencies make it, who’s to say whether bitcoin will be the social media equivalent of Facebook rather than MySpace?

System 2 then advises me to step away from my Coinbase bitcoin account and think before I act. Like I said, buzzkill.


When it comes to my brain—or anyone’s for that matter—System 1 just wants to have fun, while System 2 is taking care of business.

Even though it’s only several hundred dollars, it’s an emotional joyride to have something quadruple in price in a matter of weeks. I like seeing people’s reactions when I tell them I own some bitcoin. It’s fun to imagine all the net worth possibilities that my slow and steady index funds will never get me to.

While I don’t know the future of bitcoin or cryptocurrencies in general, I know my System 2 is doing the right thing by being a party pooper. Still, it can’t silence my System 1 brain.

At least it will allow me to keep my puny bitcoin investment. System 2 says it’s OK to have a little fun, but don’t bet my family’s future on it. System 1, on the other hand says, “You’re going to be so sorry!”

Allan Roth is founder of Wealth Logic LLC, an hourly based financial planning firm. He is required by law to note that his columns are not meant as specific investment advice. Roth also writes for the Wall Street Journal, AARP and Financial Planning magazine. You can reach him at [email protected] or follow him on Twitter at Allan Roth (@Dull_Investing) · Twitter

Allan Roth is founder of Wealth Logic, an hourly based financial planning and investment advisory firm. He also benchmarks portfolio performance for foundations and other business concerns. Roth's website is You can reach him at [email protected] or follow him on Twitter at Allan Roth (@Dull_Investing) · Twitter