You can invest in cryptocurrency without completely divorcing the personal finance sector. In one of Debt Free Geek’s recent posts, his small investment in cryptocurrency set his net worth above half a million:
Also, Financial Samurai made his first $100,000 by investing only $3k in a little-known internet company during the dot-com bubble and getting out at the perfect time. He recently wrote an article about how to expose yourself to the crypto space without “losing your shirt.”
It’s possible. It’s happening.
At no other point in history did you have the opportunity to invest in a currency. Instead, you were always at the mercy of that currency’s value, which the government could inflate and deflate at will. You could build a business and hope that your government’s currency reflected the actual value that you delivered, but you couldn’t really choose to use different currencies.
Today, you’re being given an opportunity that no one in history has ever had the privilege to take advantage of, on an impossibly large scale. Some form of cryptocurrency will one day be ubiquitous, and this is only the beginning.
But that’s not to say the price isn’t headed straight down. Take this tweet from Charlie Lee at the peak of the LTC boom:
Ok, sorry to spoil the party, but I need to reign in the excitement a bit…
Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can’t handle LTC dropping to $20, don’t buy!
— Charlie Lee [LTC] (@SatoshiLite) December 11, 2017
The point is clear: If even the creator of Litecoin thinks his coin is overvalued and expects a “multi-year bear market,” then maybe it’s time to sell just a little bit.
HOWEVER, that’s just playing day-trader (i.e. professional gambler). If you want to hodl, by all means, don’t listen to me. I’m just saying that there’s a good chance this bull won’t run forever.
Just because the price might go down in the short-term, though, doesn’t make it a bad investment. There was a crypto bubble in 2013; there’s a crypto bubble now. There will probably be another one that sets the price of 1BTC above $100k in the next few years.
Chamath Palihapitiya, Former Facebook executive, current CEO of Social Capital, and a major investor in Bitcoin at $100, recently told CNBC that,
“I think this thing is a $100,000 a coin probably in the next three to four years. And I think it is in the next 20 years a million dollars a coin.”
Governments can’t go on printing currency forever. It’s even less efficient than bitcoin’s current infrastructure (which, I should note, is bound to become more efficient as advancements in renewable energy open doors that we didn’t even know were there). Here’s a video of the Fed burning and printing money in order to control the monetary supply:
The government still does this, even if it’s mostly electronic. Does that not seem horribly antiquated to you? Does that not seem prone to some form of human error?
More importantly, though, the technology exists for some form of trustless, decentralized system for digital cash. Knowing that, you have to ask yourself, “Is there a demand for this product?” Because the beauty of a free market is that, if a product is demanded, it’s created.
And, for all of you personal finance bloggers out there, consider a study from the National Association of Retirement Plan Participants:
- Participants’ trust in their retirement plan providers is 11%. That’s right: The general public has no trust in your precious Roth IRAs and 401ks (which is, of course, irrational, but the doubt still exists).
More generally, consider these facts:
The Edelman Trust Barometer, according to the Harvard Business Review, surveys tens of thousands of people across dozens of countries about their level of trust in business, media, government, and NGOs. What trend has emerged?
The distrust of virtually all authority:
- The average level of trust in all four institutions (business, media, government, NGOs) combined was below 50%.
- 71% of survey respondents said government officials are not at all or somewhat credible.
- 63% said CEOs are not at all or somewhat credible.
- Since 2012, the financial services industry has had the lowest levels of consumer trust out of any industry in the world.
This isn’t just happening in America; it’s a worldwide phenomenon.
Don’t get me wrong: People are becoming attracted to bitcoin because they think it will make them a quick buck. There are a lot of speculators. In the short term, I’m pretty bearish (especially as government regulations become more stringent in the near future).
Long-term, though, it’s clear that people desperately want an alternative to the central banking system, even if there are huge risks involved.
If we continue at our current rate of inflation, the value of a dollar will be cut in half every ~23 years. That’s not fair. In fact, I think that most people think it’s completely unacceptable. It’s an invisible tax against anyone who saves their money.
People have every reason to trust bitcoin more than the banks. The convergence of 1) blockchain technology and 2) all-time distrust of traditional authority will carry this movement to heights that no one believed possible.
And, at worst, we’re taking a bet on a better future.
That’s something I’m willing to lose money over. It’s not like it’s going to be worth much in twenty years, anyway.