Tulips and Crypto

Tulips and Crypto

By now, it has been well documented that my distaste and disbelief in cryptocurrency.  I’ve talked smack on it since day one and, well, why stop now?  I have never been, and as I am currently sitting here writing this, never will be a believer in cryptocurrency as it is currently constructed. 

This isn’t to say I haven’t had egg on my face as Bitcoin crept up to $30,000, to $50,000, to $100,000, to $130,000.  I’ve heard and read many pundits suggest that it is on a one-way collision course with $1,000,000 per Bitcoin, which to me is completely preposterous. 

I was inspired to write this today as two things have recently happened.  One, as of writing this, crypto is down about 40% since its high in October.  Second, I was reading about tulips the other day, but more on that in a moment.

Point 1

Let’s start with my first point.  The stock market, since real tracking has taken place, has dropped 40% roughly 5 times, and for context, that is over a 100-year-plus period.  When the stock market drops that much, you have pandemonium and people jumping out of skyscrapers.  Juxtapose that against Bitcoin, and in 15 years, we have seen 10 crashes of 40% or more, with 3 of those crashes clipping the 80% decline threshold. 

How is anyone still investing in this junk? I have no freaking clue.  That said, a lot of people, much smarter than I, believe in it, but heck, I simply don’t see it.  Also, why is no one freaking out?  Skyscrapers are seemingly safe from human projectiles, and it barely gets a mention on the first page of the Wall Street Journal.

Here is what I know: as a professional money management firm, it is simply uninvestable.  We can’t look a client in the eye and say the fundamentals look good, let us buy some more.  Or holy macaroni, the financials of this thing are a mess, let’s sell it all.

Point 2 

Who doesn’t love tulips?  Such beautiful flowers, full of such bright colors, they certainly warm the heart (it’s true, I may have lost my mind).  Anyway, did you know the first global financial crisis revolved around Tulips in the 1600’s?  That is right, a little bit of fun history for y’all (was just in Texas and as a Philly guy it sounds much better than youz).  You see, the Ottoman Empire introduced tulips to Europe, and the next thing you know is pandemonium.  The Dutch shipping merchants fell in love with these vibrant flowers and used their immense trading wealth to invest in these lil buggers.  So much so, they created the first futures market where wealthy individuals would purchase bulbs in the ground for exorbitant sums.  This drove up the prices of these rare and exotic flowers, creating the first real stock exchange.  This worked beautifully until people stopped showing up to tavern floors to conduct their makeshift stock market.  Suddenly, the values of these guys dropped 90%, and you had your first real crash.

Does this sound familiar to anyone?  This feels like a man-made esoteric cryptocurrency?  If you don’t believe me, ask your most fanatical friend who owns crypto why they believe in it so much and why they see the value.  I promise you, after listening to them for 15 minutes, you will never consider touching this stuff again.

At the end of the day, I see it the same way I always have. Crypto has no fundamentals, it produces nothing, it earns no revenue, it has no value, and thus it simply has no value except what the next guy is willing to pay.  That works until you realize no next guy is willing to throw their money away on this stuff, and guess who is left holding the bag.  This is why it is uninvestable in our opinion and thus impossible to put our clients’ hard-earned life savings in, regardless of how well or poorly it goes.

At the end of the day, if you ask me, instead of putting a dollar more into crypto, go to the local florist shop and go buy that loved one of yours some beautiful tulips, at least you’ll make someone happy that way!

As always, stay wealthy, healthy, and happy!