O Bitcoin, Bitcoin, whatfore art thou?
We have come to the juncture where it is impossible to ignore the existence of the cryptocurrency universe, as much as we have tried to shelve the personal confrontation aside, which has ballooned into a nearly 2 trillion dollar market and spawned a parallel universe of NFT’s (non-fungible tokens) for people who spend their lives online and prefer to pay more for a virtual Gucci bag than the real thing and we cannot wrap our heads on how a Dogecoin which is unlimited in supply has become a household name and come to command a market cap of USD 38 billion and overtaking Goldman Sachs at one point.
We decided we cannot be dismissive nor disparate any longer, to take a constructive stance this time, to put it down on paper and talk to people to understand more about the psyche and mindset of a crypto investor for assets that are volatile, with less privacy than we imagine, a threat to the environment and exacerbate inequality.
Unfortunately, most of the crypto folks in our wider circle are day traders (gambling addicts) in the 24-hour crypto casino and those who really know are either too rich or secretive to talk to us, but by a stroke of luck, we managed to dredge out a proper crypto investor from, out of all places, a dear friend’s dating app, who was willing to share and this is his story.
A conservative middle-aged banker in the risk business, his curiosity in crypto was piqued in 2017 because of his past dalliance in the IT business and he was keen to know how it worked given it had survived all the nay years. He started his foray into the market before exiting his entire holdings in 2018 on Coinbase when they stopped bank transfers and shifted to card payments.
A divorce (and hence the dating app) subsequently took up most of his time but he spent 2020 watching the markets meteoric rise before taking the plunge in January 2021 with a Coinhako account that is supported by DBS for bank transfers while sheepishly admitting it was 95% due to FOMO with the excuse to diversify his ultra conservative portfolio which was mostly cashed up or in conservative funds and for the additional thrill of adventure.
What do you understand about cryptocurrencies?
Cryptos are speculative investments comparable to assets which are not currencies yet but with the intention to replace currencies, central banks and disrupt finance. Admits to partial understanding of the decentralized ledger and unaware of regulatory developments like China’s clampdown on Bitcoin or crypto carry trades or crypto savings accounts.
Which are the investible ones? What about NFT’s?
Definitely not the new ones in the 11,000-coin universe. Only Bitcoin, Ethereum, Ripple, Zil and Dogecoin etc. Many of the new cryptos are destined for failure with little hope for mass adoption and created for the sake of satiating the need to punt and gamble. Would have laughed at the idea of NFT a few years ago but it is not crazy anymore with growing adoption and would like to consider it as “progressive thinking” on the part of the market participants and adoptees.
What is the strategy?
Haphazard. To put aside money each month as savings in cryptocurrencies, with no set time or amount, to eventually build a portfolio. So far has almost $100k sunk in and down about 20% for the year with losses in Bitcoin and Zil. Checks on prices about 3 times daily, read articles to keep abreast and decide on next trade with a long-term view.
What doubts did you have and what were your emotions during times of volatility?
It is a risky decision for portfolio allocation and all value could be lost (which is why only the reputable coins). One must be prepared to lose all so there was little emotion felt (not unaffordable?) during the melt-up when he bought Bitcoin at $50k only to watch it fall to $35k because it is a HODL strategy. Intends to keep investing (and doesn’t know that bookie markets are projecting a drop to $10k for Bitcoin and DCG’s CEO just came out to say that 99% of cryptos are overpriced).
The idea that an increasingly number of institutional investors are vested with banks warming up to the idea sends the message that the market has grown too big to fail is a comfort along with the fact that third world countries like El Salvador (which has run into the crosshairs of the World Bank) are adopting Bitcoin as legal tender. The utility for Bitcoin is enormous in Africa and much of LATAM given the instability of their national currencies and the payment systems.
What are your thoughts on the moral hazards of meme stocks and the likes of Robinhood allowing fractions of stocks to be traded by children?
As a believer of liberal systems, stock markets should be opened 24 hours and there is no moral hazard in allowing fractions of stocks to be traded with the caveat that proper caveat emptors be in place, accompanied by financial education or perhaps some form of financial accreditation be required. Financial literacy should be included in school curriculums and maybe this meme stock movement could be better contained for the risks that it is posing to the many vulnerable retail traders.
End of story.
“The need to be right is the sign of a vulgar mind” ~Albert Camus
Our reaction was a big WOW.
Have we been such narrow-minded purists on our parts to fancy ourselves as financial professionals to miss out on an alternative asset class because we decide to condemn to failure 10 years ago? Just how good is fiat money anyway with the runaway inflation in asset prices all around the world as central banks continue to pump liquidity into our imploding systems?
Just because we happen to know that authorities are worried about stable-coins just as Titan stable-coin (like Tether which is pegged to the US dollar) collapsed from $60 to zero in 24 hours; that Uranus soared 50% after another Elon Musk tweet and that 95% of Bitcoin trading is a hoax, the pump and dumps manipulation in cryptocurrency markets, the Defi100 exit scam and we are following the Binance scandal as central banks around the world plan to launch digital coins.
So much was our prejudice that we have been religiously documenting every single Bitcoin absurdity we can endeavour to collect for the past 3 years and take every opportunity to lambast something that is gaining mass acceptance, noting that millennial millionaires have at least 25% of their wealth in crypto. For all the occasions we had cheered any signs of regulatory pressures (that are building up rapidly) in China, India and even the Netherlands, we cannot ignore that “at some point, something is just real… if our collective imagination has given them value, now we just think about them having value”, to quote Sam Bankman-Fried, CEO of the FTX crypto exchange in Hong Kong and that is how liberal systems are supposed to work.
Take a look at our friend, he is no weed smoking, irrational rebel of the system, quite unlike some of the viral videos we had watched on the recent Miami Bitcoin conference with drugged-out-looking folks stripping off on stage to Dogecoin outfits. Bitcoin has come full circle indeed and we have missed the forest for the trees, best explained by the cartoon below (that is us in the room).
Yes, no or maybe?