The Bitcoin Bubble
This is my boldest blog yet as I generally hate making generic investment statements. Furthermore, it is a terrible game to make big predictions on an entire asset class such as Bitcoin and cryptocurrency in general. That said in the words of my hero Popeye the Sailorman “I stans all I can stans and I can’t stans no more.” Read on to hear my thoughts on the Bitcoin Bubble.
The good news for all of you that own any of this stuff, if I am making this prediction, it will likely go up. There is an old saying if it walks like a duck, quacks like a duck, it’s a duck. That is how I view this crypto world right now. I’ve been working in the world of personal finance and investing for 20 some odd years. Every now and again there is a mania over a certain asset class that is seemingly unexplainable. Today that mania is cryptocurrency. Let me give a few anecdotes I’ve learned in my day that have served as my investing compass.
After the great real estate bubble in 08/09, I was at a conference. I had the pleasure to hear a fantastic speaker who was one of the most well-regarded economists at the time. He said something that has resonated with me since then and will always be something I fall back on. He said you know when it is time to run from an investment? When my hairdresser is giving me advice on it and I see infomercials playing at 2 in the morning with some scheme as to how to get rich in the asset class.

Bitcoin Bubble Example 1:
I started this business in the midst of the tech bubble of the early 2000s. I remember going to a friend’s house where his father was choosing to not go to his construction job. Why? Because he was making so much money on hot tips, he got from his friends on the latest tech stock he COULDN’T LOSE ON. He was perched in front of his computer all day counting his winnings and dumping all his money into this stuff. How did it work out for him you ask? Let’s just say he isn’t retired sitting on a beach sipping fruity drinks right now.
I recall seeing advertisements and commercials on how to get rich quickly on this stuff. Heck, I even had my most brilliant friend who was the youngest contestant on Who Wants to Be a Millionaire, during this time take a chunk of his winnings and buy into this stuff at 18 years old. Yes, he lost it all.
Synopsis- People who were uneducated on an asset class, were investing in this asset class due to FOMO, and the asset class lacked any sort of fundamentals or rationale for their values.
Bitcoin Bubble Example 2:
Shortly after that bubble burst, I noticed I was having friends who chose not to go to college to get into the real estate market. I have to admit I was quite jealous as they were making serious six figures and I thought for sure I made the wrong decision going into personal finance than real estate. Early 20-year old’s were making silly money and educating me how amazing real estate investing was. There were blueberry farmers who owned 8 properties and getting mortgages based on stated income. Heck, I even got a mortgage based on telling my mortgage guy I thought I’d make a lot more money than I actually did. I recall seeing seminars and speakers constantly touting their CAN’T LOSE real estate investment strategy.
Let me ask you all a question. How do you think it worked out for all these people? I can tell you this, not many of them are still in real estate and I’m glad I didn’t trade in my finance degree for a GED in real estate investing.
Synopsis- People who were uneducated on an asset class, were investing in this asset class due to FOMO, and the asset class lacked any sort of fundamentals or rationale for their values.
Bitcoin Bubble Example 3:
Bitcoin and all it’s crypto disciples. I’m in like 10 different text chains with different groups of friends. As the token finance guy, I constantly am having them ask me how much crypto I own. When I answer none, I get the same response, man you are missing the boat. I have my teacher friends and scientists spewing what they just listened to on the latest podcast they heard. When pushed none of them can answer anything about the fundamentals of this asset class (if you want to call it that). You know why? Yup because there is none. It is being propped up by simple supply and demand. But Andrew have you seen any infomercials on it yet? You got me I have not, but I’ve seen worse!

You see this picture here that says we sell Bitcoin. That is my local gas station getting in on the mania. When I am on stage a few years from now talking to a big audience about how I knew crypto was a bubble, you know what I am going to say? I remember when my local gas station was putting up huge banners selling Bitcoin.
Synopsis- People who were uneducated on an asset class, were investing in this asset class due to FOMO, and the asset class lacked any sort of fundamentals or rationale for their values.

Investing Vs. Speculation
I recently wrote about the difference between speculation and real investing. These scream spec investing. We have an asset class that is doing ridiculous things right now. Elon Musk comes out and says something on SNL or that he is no longer accepting it at Tesla and his minion sell it off in droves. The massive daily swings in cryptocurrency values aren’t something we should see from an asset that is sold as the future replacement for paper currency.
The reality is these are heavily unregulated investments, that produce nothing, have no intrinsic value, and lack all fundamentals to traditional investing. Charlie Munger said, “it is contradictory to the interests of civilization.” His good friend and partner Warren Buffett said “It doesn’t produce anything. You can stare at it all day and no little Bitcoins come out or anything like that. It’s a delusion, basically.”
Look, I get it. The idea of an electronic world currency sounds like something we’re destined to eventually have. The concerning part is that most investors aren’t looking at crypto through that lens, but rather in the same way they look at their sports betting app on their phone. As fiduciary advisors responsible for hundreds of households, there is very little justification we would have to invest our clients’ assets in this world right now. Investing in assets that are unregulated, lack liquidity, have no real intrinsic value or cash flows, and are at the center of trade manipulation globally just isn’t something we do or advise.
The Great Gamble
My best advice is to look at this stuff as gambling. You can get into it and can certainly make money on the supply vs. demand game. Just know most people investing in crypto don’t understand it and are getting advice from their hairdresser.
Here is a fun little video Bill Maher did on crypto I think you’ll enjoy watching. Until next time stay wealthy, healthy, and happy.