When I was 11, I collected baseball cards. We had a “dealer.” He taught me something very important…something is worth what someone is willing to pay for it – no more, no less.
Haejin Lee is a technical analyst on YouTube and Steem for Bitcoin. I watch his videos – you should too. The other day, he said something that resonated with me and led to an epiphany last night (epiphany is a bit farther down). What he said is that Bitcoin is the truest reflection of market sentiment. The idea behind charting isn’t a bunch of lines; it is social psychology – crowd psychology. He was saying that at this point sentiment is the holy grail of price movement for Bitcoin.
I got into OTCQX:GBTC, a pink sheet fund that only invests in Bitcoin, about two years ago. I did it because I thought it was stupid, literally. And I had seen too many things I deemed stupid go on to turn into huge things, such as Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN). I didn’t put much money into it as all I could use was my IRA and it was depleted from some withdrawals during bad years. Never having had more than 20% of my IRA in the fund, I have a 12-month average return exceeding 125%. Even after that, I did not realize what is really going on.
So, I’m not doing an introduction into cryptocurrencies; if you are reading this and want the basics explained, there are sources for you to learn the basics. Today, I’m sending this out because not sending it out, not telling the people I know that what they are witnessing is the largest inflection point of their lifetime would be wrong. This is the dawn of a new age. You may or may not remember life before the internet, or cell phones, or smart phones. But stop and think how long each one of those took to be fully adopted and what impact it ended up making in the long run. HUGE! Right?
This is bigger and will happen faster. Each successive one of those technical innovations had a shorter adoption cycle. While cryptocurrencies have been around for almost 10 years, they have just now hit public awareness; before now, maybe the 5% of really technical people might have known what bitcoin was – now, at least most people have heard of it.
The epiphany I had was simply this – the new coins, as they come out, they are not currencies, they are not a representation of ownership, they are – in short – the representation of an idea. People then vote for that idea with their money. So, that idea might be a quick way to exchange money across the globe in a private way, or it might be a new way to rent your next home and run your rental company through digital contracts and tokens. The value is crowd-sourced; this means people vote, in this case, with money. YES, some people are there to ride the ups – get out and then find the next one. There is nothing wrong with that. But, this is not equities, this is not CD with a specific return. This is valuing an idea through crowd-sourced funds.
So, where are we in the adoption cycle? We are crossing the chasm – like a rocket. On the other side is a ton of money about to come in through hedge funds, ETFs, futures, swaps, and whatever other financial instruments people can come up with.
Bitcoin is the most uncorrelated asset there is when compared to the stock market. This means it doesn’t move in any type of relation with the market. That means it is a great investment for someone looking to diversify their portfolio, because owning non-correlated assets is the goal of large fund managers and should be for you, as well.
Where does it end? I don’t think it does. It is not a bubble. Individually, one coin may or may not have a large return, but as a basket, the returns will continue to be in the never before seen category for the immediate future. Simply because of where we are in the cycle. There are even tokens that simply invest in other tokens. THAT is a brilliant place to put your money. Buying the basket will even out the risk. But honestly, given where we are, you could buy ANY coin with an active team working on it and the value will go up. I know that isn’t going to compute for many of you, but literally, I believe you can buy ANY coin and experience large returns. There are coins made as a JOKE that have a total market capitalization in the hundreds of millions of dollars.
I am NOT a financial consultant – you are welcome to look at my profile. I have a degree in chemical engineering and an MBA with an emphasis in Management Information Systems, plus 20 years in data architecture. I cannot “recommend” that you invest in these things. I can tell you I have and will continue to. I can tell you that alt-coins are generally mined with graphics processors and that you basically cannot buy ANY decent processor for anywhere within 25-50% of the price it should cost and you cannot buy them in bulk at all. They are all being bought by very large currency mining companies. They will continue to be bought by such companies for the foreseeable future. There are two more investment ideas for you if you know where to look.
I really love my job, but if I see a situation that makes me think I can retire in a few years, you can bet I will be working towards that in every spare minute I can find.
Disclosure: I am/we are long ARKW, GBTC.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long Bitcoin, Ethereum, Litecoin and many altcoins and upcoming icos.