My Thanksgiving was full of good cheer, as I expected. The food followed the usual script: The dark meat was better than the white… the stuffing was better than the mashed potatoes… and the pies were amazingly good.
What was different? A new topic dominated the conversation.
Yep, you guessed it: cryptocurrency.
I sat next to Johnny, one of my favorite people and a really smart dude. I don’t see him too often. I live in Maryland and he lives in Virginia. He commutes to Texas every week, working for a global energy company. His specialty is oil. This week he’s in London. Next week, who knows?
We began talking oil, then North Sea oil, then Norway’s huge oil windfall, then its $1 trillion sovereign wealth fund, grown this large thanks to oil revenues. At this point, I commented, “It’s going to be interesting to see whether the fund will invest in bitcoin, some other cryptocurrency or a blockchain-based company.”
The Case Against Bitcoin
Johnny said, “Those cryptocoins? They’re awfully risky, aren’t they? Why would the government of Norway invest in those?”
Johnny was just getting started. He proceeded to cover the entire spectrum of reasons why he wasn’t buying into that “crazy crypto bug.”
When he stopped, he looked at me in anticipation of… what? A fierce counter-offense? A point-by-point refutation? Anything I could tell him about cryptocurrency that would change his mind right there and then?
Well, none of that happened. Instead, I said, “You’re mostly right.” And I meant it.
When he said that bitcoin was new and largely unproven, he was mostly right. Compared to gold, it was born a minute ago. Compared to most fiat currencies, bitcoin is still in its infancy.
On the other hand, it’s proven to help millions of people who use it to transfer money. It’s a proven store of value to millions of users trapped in countries with runaway inflation, like Venezuela.
But its track record is relatively brief. Johnny’s mostly right.
When he said bitcoin wasn’t real, he was also right. It’s a man-made fabrication, a convenience, a proxy for value, just a piece of code that represents value.
Of course, paper money is also a convenience (though one backed by sovereign governments). Bitcoin is faster and cheaper to use and is backed by thousands of computers around the world that track the bitcoin blockchain and ensure it’s not abused.
When he said that bitcoin was in a bubble, he was roughly right. Not that the current bullish sentiment lifting bitcoin’s price to new heights is wrong. But sentiment can be fickle and can turn against an asset class, driving prices down as quickly as they had gone up. Who am I to say that bitcoin is immune to such a reversal? Of course it’s not.
When he said that bitcoin was like a ship with no captain, he got that right too. But it’s not all that different from the internet. No single organization or entity controls or guides the internet. Blockchains (sometimes called the interchain), the technology behind bitcoin and other cryptocurrencies, is just as freewheeling… and unpredictable.
Invest Like a Business Would
As I said, for the most part, Johnny was right.
It was his conclusion that was wrong.
One thing I’ve learned as an investor through the years is that you can always find a reason NOT to make an investment. There’s no such thing as the “perfect investment” or the “sure thing investment.” There is risk and uncertainty in every investment. It’s the differences in levels of risk and uncertainty that give asset classes their unique attributes.
Bitcoin certainly has its share of risk and uncertainty. No bitcoin enthusiast would argue otherwise.
And it would certainly be foolish to invest all your money or too much of your money in bitcoin. But none?
This is where Johnny and I part ways.
Here’s the wrong way to look at it: If you’re risk-averse, don’t invest.
Here’s the right way: It would be extremely risky NOT to give yourself at least some exposure to the cryptocurrency space.
Investors who think otherwise need only look at what businesses are doing. These entities don’t experience our emotional ups and downs. They make cold-blooded business decisions. And they have to grapple with the same uncertainties investors do.
The blockchain technology is unproven and in its infant stages. Businesses aren’t sure if infrastructure and digital identity problems can be solved in time to allow industries to adopt tokenization on a massive scale.
The road forward is strewn with obstacles. Businesses can’t see the future of cryptocurrency any better than you or I can.
But, ready or not, hundreds of companies in industries such as banking, insurance, technology, international trade and healthcare are spending millions of dollars on exploring and developing blockchain technology to make transactions more transparent, timely and secure.
Here’s the thing: They can’t afford not to.
If massive tokenization of industries does take place, businesses simply can’t take the chance of being left behind.
And neither can you!
Early Is When the Serious Money Is Made by Serious Investors
At this very moment, tokens are funding the rollout of hundreds of decentralized (and disruptive) technologies.
A few examples include cloud storage (Filecoin, Storj), digital advertising (Basic Attention Token, adToken), marijuana (PotCoin) and dentistry (Dentacoin).
Sure, it’s early. But it’s not too early to capture some exposure to the cryptocurrency space. Whatever fits your comfort range, be it investing 1%, 3%, 5% or 10% of your investible savings, DO IT NOW. It’s not too late, but sooner is better than later.
Because investing early is how you make big money. It’s at the heart of the investing premise we take very seriously here at Early Investing. By writing just a modest check today, you’re giving yourself a chance to reap a huge financial reward down the road.
So let me share with you a piece of advice I’ve been giving to the paid members of our First Stage Investor service…
I don’t care who you are or what your investment goals are, you cannot afford to ignore [cryptocurrencies] and ICOs.
Message delivered. Now go ahead and enjoy your leftover turkey!
Co-Founder, Early Investing