Crypto-Told-You-So

Crypto-Told-You-So

I have written in the past about my views, and skepticism, on cryptocurrencies.  In light of recent news, I figured why not write my update on the topic of crypto. 

For starters, do not worry we have not, and see no reason to add anything of the sort to any portfolios we manage.  Wanted to clear the air before I went too far down this rabbit hole, putting everyone’s mind at ease.   

That all said, what is going on with crypto, and what is my personal, AND VERY BIASED, belief on the validity of this industry?  I apologize in advance, as I do not want to offend any crypto believers, but I get asked about it all the time so wanted to share my personal views.  Granted, I could be 1,000% wrong on all of this, but let me share my take.

What we most recently saw with the implosion of FTX was extremely predictable to me.  We had an entire industry that has gone unregulated, with zero transparency for too long.  There is no sheriff policing this stuff; hence, when there is tons of money in play and zero regulation, it leads to exactly what you’d expect.

Now, I strongly believe we have just scratched the surface of how deeply entangled this mess will become.  We have a major player in the industry, that for way too long has gone unchecked, and now the house of cards is crumbling down.  I would not be shocked if this thing is so systemic that the crypto industry has a hard time recovering.

My beliefs on crypto

I stand by my overarching belief that if it walks like a duck, quacks like a duck, it is a cow (I mean duck).  I haven’t waivered my thoughts on this topic.  I witnessed a flurry of people investing in a digital currency with no real understanding of its efficacy or how it worked.  Anytime I asked someone who was a big believer to educate me on it, I left telling myself, oh man if they don’t understand it this is going to be scary. 

I witnessed an entire industry appreciation like tech companies in the early 2000s or real estate in the Mid 2000s.  I told myself, in both those instances I saw an unhealthy and unsustainable rise in values on things people didn’t fully understand.  Rinse and repeat here came cryptocurrency on the next meteoric rise on simply speculation and the fact the person who bought in after you was seemingly willing to pay more than you were.  Not because of their belief in it, not because they understood it, but simply because of the fear of missing out and trying to get rich quickly. 

Here is what I know about this industry.  It still does not produce anything.  If I am going to invest in something it must do one of two things, sell a product or a service, this seemingly does neither.  Next, I know that if this is going to be the future of currency then it simply cannot appreciate in a year by 1,000% then by the next year depreciate 75%.  It goes against the fabric of how a currency works. 

Let us take a year like this for instance.  If crypto was the default currency, and prices of goods are inflating at 8%, yet your default currency is deflating by 75% we would be in for a recession of the likes you can’t even imagine.  There is no Fed to help keep things in line.  You simply cannot have your cake and eat it too.  Either you are a currency, and act like one, or you are an investment.  Oh, and if you are an investment you better find something of value to produce as that has yet to be seen.

The Upside of crypto

Now that I have spent an entire page dashing your crypto dreams, I think it is worth my sharing my positive views on this industry.  For starters, I suppose I know as much as the next guy or gal, in there are plenty of highly intelligent people apart of this crypto thing.  I can 100% be wrong on all my views and I recognize that.  However, I feel it valuable to share my thinking for what it is worth.

Next, the underlying technology of cryptocurrency, blockchain, is a true game-changer.  I think there are tons of benefits and practicalities of blockchain technology.  I believe it is so innovative and impressive, that once it decouples from being so reliant on some made-up currency, it has the potential to be a massive innovative advancement across many sectors.  We have barely scratched the surface here and can be very exciting what lies ahead. 

Or to quote a classic movie flick….

“I want to say one word to you, just one word. Are you listening”

“Yes, sir.”

“Plastics!”

“I mean Blockchain.”

Here is the investing truth

All the above said the future is unknown, and I take no joy in the fact that the wheels are coming off the crypto train.  Can it recover?  Will it recover?  How far-reaching will this go?  These are all questions I am curious to learn about.  If you want to invest in this world, all I ask is to heed my warning.  It is extremely risky and not an investment.  Rather, it is a complete gamble, and treat it as such.

Hope I didn’t insult anyone but felt it necessary to revisit the topic as there are more things, I get wrong than right.

As always stay wealthy, healthy, and happy.

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