If we learned anything from history, it’s that even the brightest people in the world make the same mistakes repeatedly. 
Image Source: “It’s hard not to buy more Bitcoin ().”That’s the sentiment of many friends, a few who work for some of New York’s most prestigious financial companies.They’ve held Bitcoin for years. Me too.I’ve owned it for a long time as well—a small but surprisingly profitable endeavor since 2017.But with prices sitting at all-time highs, on the verge of $100,000… it’s hard not to buy more.Oh… man, I want more!
And I know better.I want to sell some of my best long-term positions – pipeline companies, firms with wide economic moats, community banks – REAL ASSETS.But I know three things way too well: Behavioral finance, history, and the story of Sir Isaac Newton.And those three things have given me restraint.Let me explain.
Don’t Do ItPsychology is simple: Humans make bad mistakes with money.It doesn’t matter if you have multiple degrees studying the history of bad decisions and financial crises… human beings make the same mistakes repeatedly.We think that this time is different.Even if we know better.That’s what happened to Sir Isaac Newton.He might have developed the theory of gravity. He came up with the Three Laws of Motion. He had some of the most innovative thoughts in mathematics of his time.And he created the basic foundations for modern physics.But wow… did he make one of the greatest blunders in the history of finance?Consider one of history’s greatest bubbles – one that has eerie parallels to today’s crypto market.In 1711, Britain was drowning in war debt following the War of Spanish Succession.There was an idea. The South Sea Company could solve the nation’s financial woes.The company would take on Britain’s debt in exchange for a monopoly on trade with South America and the Pacific islands.Sound complicated? It was supposed to be. Like many modern financial innovations, complexity was a feature, not a bug.
It Wasn’t RealThe company’s actual trading prospects were limited – Spain controlled most of South America and wasn’t exactly keen on British merchants.That didn’t stop the speculation.In 1720, the British government doubled down, allowing the South Sea Company to convert more government debt into company shares.
The stock price soared.Everyone wanted in – aristocrats, merchants, servants, and even Sir Isaac Newton.Newton was initially smart about it. He bought in early when valuations were reasonable.As the market grew frothier, he sold his position, pocketing a tidy £7,000 profit.That was a fortune in the early 18th century.He got out because the mania didn’t make sense to him.But then something happened. That little thing that challenged even the strongest minds. He was out of the investment, and people still in it were getting richer.Friends, colleagues, and even his servants were making fortunes in South Sea stock.The same psychology that tempts us to buy more Bitcoin at all-time highs got to Newton. He jumped near the peak, investing far more than his initial stake.Then… the bubble burst. Newton lost £20,000.That is equal to millions in today’s money.This was devastating wealth destruction that rattled him deeply.”I can calculate the motion of heavenly bodies,” he later said, “but not the madness of people.”
What Goes Up Will Come DownBitcoin’s history offers its own lessons in market cycles.In 2017, we saw BTC surge to $20,000 before crashing to $3,200.The 2021 cycle peaked at $69,000 before falling to $15,000.Each time, voices claimed, “This time is different”—institutional adoption, limited supply, mainstream acceptance.Yet each time, liquidity crises triggered massive selloffs.Smart money didn’t panic sell the bottoms. They stuck to their allocation strategy – treating each crash as a rebalancing opportunity rather than a reason to abandon ship.Speaking of allocation strategy – let’s get practical.Most traditional portfolio managers suggest limiting crypto exposure to 1-5% of your total investments, depending on your risk tolerance. More aggressive investors might go up to 10%, but remember Newton’s lesson: the larger your position, the harder it is to maintain discipline during volatility.Consider these allocation guidelines:
Conservative: 1-2% maximum crypto exposure
Moderate: 3-5% crypto allocation
Aggressive: 6-10% crypto allocation
Above 10%: You better have Newton-level genius (but even that doesn’t work).
Rebalance when your crypto position drifts significantly from these targets. Now might not be the time to add. It might be time to take some profits and rebalance.I can hear Michael Saylor arguing that people who aren’t buying are going to be poor. But I’ve studied enough financial history to know that this time isn’t different.If Bitcoin’s surge has pushed your allocation too high, consider taking profits.If a crash drops it too low, that’s your buying opportunity.Newton’s initial investment didn’t ruin him.It was abandoning his plan and allocation strategy when emotions took over.He let the madness of crowds override his own judgment.The hardest part of investing isn’t picking winners. It’s maintaining discipline when everyone else is losing theirs.When your Uber driver gives crypto tips…When your LinkedIn feed is full of Bitcoin millionaires…When your current allocation feels too small, you need to remember Newton.The man who didn’t understand that gravity also impacts finances.More By This Author:
