Crypto is where the profit potential is these days. That’s why we’re here – it’s a new asset class still building towards maturity and mainstream adoption. That means it still has plenty of room to grow, and deliver massive profits.
On top of that, crypto is a technological triumph, made possible by a groundbreaking innovation that has made possible something that had never been done before: automated decentralized and secure ledger-keeping without the ability for any centralized authority to interfere.
That’s something that’s excited users ever since Bitcoin (ADA) launched right after the Great Recession.
And, hey – plenty of people are interested today. There’s plenty of buzz out there surrounding crypto. It’s good that people are talking about crypto, but what they’re saying isn’t useful to investors on the ground.
More often than not it’s actually harmful – or at the least very expensive.
Do Not, Under Any Circumstances, Sweat Daily Prices
This is virtually all some people can talk about. Today Bitcoin was up 1%. Yesterday Ether (ETH) was down 3%, some coin or another hit six-week highs and yadda, yadda, yadda.
Those movements really don’t matter, and hyper-fixating on any one day’s price action can blind you to the overall truth – the “big picture.”
That’s because, in the world of crypto, what we’re looking for are big overall trends that can make a major financial difference over the medium-to-long term. Our timescales are months, years, decades.
Two things are true in the world of crypto: firstly, crypto as a whole market is highly volatile, with up and down movements much larger than those of other assets on a day-to-day basis.
That’s because crypto is still relatively small and illiquid by the standards of an asset class. Its total value has been hovering at below $1 trillion during this bear market, which is less than one-tenth the total market cap of gold, which has no innovative capacity at all and very few practical technical uses.
Like I said, this means crypto is very illiquid. Diversified investment portfolios with crypto exposure tend to make big waves in the crypto market as they react to forces that often have nothing to do with crypto. This causes wild daily fluctuations.
As I write this, one of my favorite cryptos, Cardano (ADA), is showing daily gains of more than 5%. That would be a great number if it were a stock, but I’m not going to get excited, just like I won’t get despondent if it takes an equally big daily loss.
That’s because five years from now I expect it’ll, at a minimum, 25X or 30X my money. Why would I sweat 5%?
From January 9, 2021 to January 10, 2021, Bitcoin suffered a decline of more than 5%. In just over three months, it had enjoyed gains of about 50%. That’s the trend that I’m watching for and about the shortest time-span I want to even consider.
Ignore Celebrity Crypto Bulls – Even Rich Ones
Names, names, names, the crypto press is full of names. At the moment, it’s the names of scumbags, con artists, and fools. It seems like every other mention of crypto right now is just one invitation to gawk in horror at Sam Bankman-Fried. And yeah, he’s a crook, and if there’s any justice in this world, he’ll rot in jail.
Ok, great, good riddance to him. A new field like crypto is going to attract a lot of grifters, and then, as the asset class matures, most of them are going to get filtered out. Does anyone today remember the 1720s “South Seas Bubble” when everyone and their mother was selling shares of the South Sea Co.? It was one of the first big stocks, the Microsoft Corp. (MSFT) of its day… except unlike Microsoft it was an almost complete sham and never had any chance of making money. That didn’t stop people from gobbling up its stock, though. This happened a lot when stocks were new, and we’re seeing a very similar arc in cryptocurrency. I wish I could say we’ve made huge progress in 300 years, but…
We still need to watch out for shady characters like Mike Novogratz, Michael Saylor, and Changpeng Zhao. These are the kinds of people who will do or say anything to make a buck, or who have convinced people (maybe even themselves) that they’re money-wizards even though they only got lucky once. Naturally, you shouldn’t trust any of them.
And on the other hand, there are also genuine visionaries who are doing or have done great work in crypto. People like Vitalik Buterin, Charles Hoskinson, and Dr. Ben Goertzel. The thing is, these people don’t need a hype machine to secure their reputation. Plenty of them avoid the spotlight whenever possible. These dudes are wizards, of a sort, and their work speaks for itself.
Regulators Will Never Really “Get Tough”
Is there any bigger joke out there than trustworthy government? I mean, politicians saying one thing and doing another has got to be a cliché so big that even riffing on it here feels like a cheap shot, and I guess it is, but the point is still important to us as investors.
Big regulatory agencies, individual politicians, and parties are always saying that they’re going to regulate this or ban that. In democracies, all that stuff should be considered hot air until proven otherwise. In dictatorships, the country is usually run by an arbitrary psychopath and you can’t trust anything about their regime, end of story.
And when it comes to crypto, a new asset class that the broader economy is still feeling out, that effect is magnified. So, financial regulatory bodies and politicians are always going on and on about some big new crypto regulation they have in store, or think they need, or whatever.
And to be clear, some new regulations are almost certainly going to come along at one point. Which ones are actually going to stick, though, is not going to be clear at all. It won’t be clear until later which of these regulatory ideas the crypto market will actually need to contend with.
Until that happens, stay cool. Ignore everybody going crazy and speculating about what is going to happen to the crypto world if they go into effect.