The Rational Crypto Optimist
By now, I hope I have made it clear that I like to approach my investments holistically.
characterized by comprehension of the parts of something as intimately interconnected and explicable only by reference to the whole.
I do not blindly accept the word of experts, nor do I confirm my biases by only reading information from sources that tend to sway one way over the other. Most importantly, I also allow myself the flexibility and freedom to change my mind should the facts or my intuition change about any specific investment.
My approach to gathering information includes reading, reading, and finally, more reading. Reading is the single most powerful way to educate yourself.
I also listen to several interviews and podcasts, I follow technical commentary on forums, and I expose myself to as many aspects of an investment as possible before I decide to execute a trade.
I kick the tires, aiming to answer classic questions of what is my risk/reward setup, what is my end goal for this investment, what is my contingency plan should I be wrong, what is my timeline for holding, what sorts of events/volatility am I willing to hold through, and what sort of things would have to arise for me to exit the position?
However, there are much more important pieces to the puzzle that I find many investors miss in their analysis. So far, all that my research has included is digesting the opinion and analysis of others. Sure, several of these individuals that I read and listen to are likely smarter than I am in their respective fields.
Yet, when it comes to connecting the dots, plotting a course of action, and carrying through on that action me, myself, and I is the most qualified individual to make decisions as they relate to my money. Same goes for you.
While we can rely on others for gathering information, information alone is not actionable; information alone is not enough to make an intelligent decision.
We must turn this information into something more useful: actionable wisdom.
In this information age, I witness countless people mistaking information for wisdom.
I find that many are quick to react to the latest tip. They respond to the latest price action as a confirmation that something is about to “blow a top” and take off “to the moon”.
Many do understand the risks involved with investing in such a nascent marketplace as crypto, and as such, they are properly allocating small amounts of capital to these highly speculative positions.
Yet, I am now seeing some truly disconcerting signs that people are “betting the farm”.
People are overextending themselves via loans, liquidating physical assets in order to raise capital, and they are willing to extend themselves via margin on various exchanges.
They are also losing patience, and abandoning limit orders in place of market orders, essentially chasing the market price higher. I suspect these sorts of individuals are the ones who will be easily shaken from their positions, and I suspect the so-called “whales” in the space will be the ones who shake these people from their positions.
The whale (aka experienced investor) will be able to buy this overextended money for a nice discount at some point in the future, when any sort of noticeable price decline will cause those overextended to sell out of fear.
This is normal in any market, but judging by the current quality of money coming into the crypto-asset space and the rate at which it’s entering the market, I see smart money patiently waiting on the sidelines and waiting for the trees to develop low-hanging fruit.
Market seems a bit frothy, wouldn’t you say?
I like my investments like I do my beer, without excessive froth.
Now, I will not speculate on any sort of timelines or any sort of price predictions, but I will say that the price of bitcoin responding as it has in the past several weeks (up to $4000 from $1800, as of this writing) seems reasonable to state that the market is pricing in the cloudless blue sky scenario.
This scenario likely prices in the value of larger block sizes, lightning network, and any other number of field-specific computer engineering items that are truly too technical for one to digest without any sort of background in computer science.
I am bullish on the long-term picture for crypto-assets. However, I have yet to read anything that truly explains why I am bullish.
So, in my coming posts I will be digging deeper into the world of crypto and I will attempt to structure my thoughts in a way that is clear, logical, easy enough for anyone to follow, and ultimately open-ended enough for you to develop your own working thesis on the space.
Unlike many others covering this market, I am not inclined to engage in commentary about hard forks, scaling, this v. that, them v. us, crypto v. the world type of views.
My bias is to focus on larger, ubiquitous, unstoppable trends and how human nature and politics will inevitably pry themselves into the picture.
Some of the overarching questions I will attempt to answer include:
- Is the crypto market really in a bubble, and if/when will it burst?
- Is the crypto market driven by return on investment, or marketing?
- How will institutional money enter the space and what will that look like?
- Is Bitcoin the de facto reserve cryptocurrency, or is it gradually being undermined?
- Can we still make boat loads of money in this space, or are we too late to the party?
Before reading my coming posts on crypto-assets, I hope that you will revisit my previous posts to better understand my philosophy towards investing, and to better understand my tone of voice so that I can communicate my thoughts to you more clearly.
I will not pretend to know how the future will play out. The truth of the matter is that nobody does, nor will they ever.
“Information is not knowledge. The only source of knowledge is experience.” — Albert Einstein
DISCLAIMER : This content is for informational, educational and research purposes only. This post is not to be taken as personalized investment advice.