It all started in mid-December of 2017 at the current height of the cryptocurrency market and bubble when I couldn’t avoid the news story, facebook updates and conversations. I have subscriptions to multiple quant and value investing podcasts and it was even coming up on there! These were actual money managers and hedge fund guys not just a fraternity brother who made some money (had one of those too). I couldn’t go 2 days without someone asking me about crytpocurrencies. Bitcoin this, Litecoin that, Ethereum this, forks, hashrates, gpus mining equipment, ICOs oh so many ICOs! After my 22nd conversation (in December alone) and the 3rd part of the Hash Power Podcast miniseries from Invest like the Best – I decided that after the new year I was going to come up with a plan.
Why did I Finally Purchase Cryptocurrency
Before getting into my plan let’s go over the real, albeit completely ridiculous reasons, why I bought my first fraction of a Bitcoin…and boy, they are ridiculous.
The first reason was pure, unadulterated speculation. I admitted to myself (and the tens of tens of people who read the post) that I was angry at myself for not taking the silly flier years earlier when I first started to learn about the subject. As you’ll see in my plan below, I took a pure bet on the topic. This is nothing but a rounding error in my net worth so it is something I am absolutely comfortable losing.
The second reason is that I am so sick of watching from the sidelines. I’d rather lose the nominal amount than say I never at least tried to play the market. This isn’t my general attitude as I am very comfortable watching people make and lose money from the sidelines. I have even talked about watching friends and family taking their gambling wins and loses in weed stocks, penny stocks and even Multi-level Marketing
businesses scams. But this feels different because it isn’t the same record. I am not saying this time is different, but it feels different. It feels analogous to being in the dot-com world and believing something here is going to change the world and throwing a dart at a few of them and hoping/praying you picked google rather than pets.com (or these other fantastically interesting dot com bust stories).
My Plans for Investing in the Crytpo Currency World
The whole process to fund an account seemed pretty damn clunky considering the asset class I am trying to buy. From a guy who just bought physical gold, I can tell you that buying bitcoin, at least for a US citizen and resident, was not easier. I had to first fund a coin base account which asked a ton of personal information (so much for secrecy from the government, right?). Then I had to transfer money to the account which for some reason took approximately 6 business days! I am positive I can start and fund a brokerage account in less time. I decided my total speculation into this world was going to be $1,000. Despite the delay in funding, Coinbase locked in my purchase price at the time of funding, so as I sit today I am the proud owner of .0662 BTC…just so you don’t have to do the quick math I am down about 25% since starting this experiment a week ago. While that may seem like a tremendous percentage, for some reason everyone is cool with this asset class swinging double digits multiple days in a row..
Since this is a complete bet, I plan on making it just that. My plan is to spread around my speculation amount in the pure hope that I get lucky and pick up the next up coming pumped up, second coming of Jesus and it covers the entire bet. I am probably just going to spread around the amount on the top 5 or 10 popular coins that are not the ones on the news. As always, win or lose I’ll provide an update. If you have a feeling about the next up coming coin please share.
Why I am Still Really, Really Against Cryptocurrencies
Despite my speculation, I am still pretty against cryptos for a few reasons. I am not blind to the fact that there are a lot smarter people than I that are backing this asset class, but I haven’t been able to be satisfactorily convinced on a lot of my contentions. Notwithstanding, some of my fears are likely to be proven false and I could just be wrong one day when I look at this post in 3, 5 or 10 years. I am comfortable being wrong as long as my reasoning is sound. Similarly, I am also comfortable sharing when I was wrong like I was on facebook – boy am I pissed I didn’t buy at IPO!
Government’s Have Had a Monopoly on Currency for Centuries
I am not all that convinced government’s are about ready to give up their monopoly on currency. Being able to manipulate and tax in a currency that the U.S. Government controls is a really, really big deal. What if one day the US Government, or any other government, bans the currency in their country? Sure, a black market may appear like it did with drugs or alcohol, but doesn’t mean the rank and file person is going to operate with cryptocurrency in their portfolio.
The Supply is Not Clearly Defined
Everyone always points out that there is a ‘set’ amount of supply…until there is not. Hard forks allow for a change in protocol and allows those conglomerate of miners to move on and decide to issue new coins. A hard fork could cause a destabilization which could cause panic in your currency.
Not Everything Needs a Coin
I am not sure how many people read the white papers out there but they are fascinating. Some are convincing and others are terrible. Sometimes there is literally no need for a coin other than to try to get people involved in keeping up the blockchain. Whenever I see that situation, I always wonder how the hell is this thing going to survive? There is literally a Banana Coin.
Too Many Speculators
This problem will fix itself after the first nuclear bomb goes off. This rampant speculation is that of the dot coms. If you are over the age of 30 – how many day traders did you know? Eventually the business has to eventually get in line with the stock price. I know I keep going back to the dot com analogy, but wow, tell me history isn’t rhyming here? For these cryptocurrencies to work one day as an actual currency they need to stabilize. Even on the volatile forex market you don’t see double digit changes daily.
Do you own any cryptocurrencies? Which ones do you like?
I don’t own any personally but have been meaning to jump on the bandwagon. I just begrudge paying so much for a single coin at today’s prices when knowing full well if I had just been a little bit more proactive several years ago I could have hundreds for the same price. I’m also worried about waking up to a complete crash the day after I buy one.