Some Thoughts on Cryptocurrencies

Update, March 16, 2018

Currently the bitcoin energy consumption is ridiculous, and so much more so the entire cryptocurrency space. This is a know issue, that is being dealt with.

But here’s the thing. I won’t buy a gas-guzzling car, I won’t invest in oil stocks, I turn my lights out when I’m not using them. Until this is solved, either by all cryptos going carbon neutral and/or a much more efficient blockchain is adopted, there are many other investment vehicles I can speculate though.

Original Post, January 4, 2018

Three things are clear to me about cryptocurrencies:

  1. The technology behind cryptocurrencies will play a huge role in how financial transactions, and many others, will happen in the future.
  2. It is still VERY early.
  3. There is a bubble right now in the cryptocurrency markets.

What does this mean to me?

That the technology is legitimate means that potentially it is a good place to invest in, as you might any other risky investment, whether that investment be an emerging market or business opportunity.

That it is very early means that there is no telling which coin, if any, succeeds in the long run.

Why do I say if any? Regulations are far from being finalized. There is a possible future where all governments crack down on the coin markets, that is unlikely but possible. What is feeding into the current bubble is that the markets are becoming more accessible and Bitcoin is in the news every day it dips or peaks.

I don’t think all governments will outlaw all coins, but it might happen. A lot of things might happen. But even if all coins go away, the underlying technology is a solid way to deal with transactions and is already being implemented in markets.

That it is very early also means that a few well-placed bets will make some people VERY wealthy, if all goes well. It is VERY early.

There is a bubble right now. That means that a LOT of people will lose money. I can tell you from the limited research I’ve done so far that there are also a LOT of scam coins and ICOs out there. Some coins have very little activity in their GitHub repository, yet are spiking. Other coins have a controlled central body actively fixing the price.

Would you invest in a company that fixes their user stats, or doesn’t actively develop their product?

What does that mean for you and me as potential interested investors?

If you don’t know enough about the technology, you’re literally playing a slot machine. If you enjoy that, invest whatever you would take to a casino, NO MORE, and have some fun. AND STOP THERE.

If you know something about the technology and think you can evaluate the opportunities on the market. Your investment is more like investing as an angel investor in a startup. If 9 out of 10 startups fail, you may not be playing at slots, but it still is a VERY risky investment. All high-growth portfolios have a small percentage in high-risk investments. But it’s usually a very small percentage.

Keep that investment strategy in mind if you’re flirting with investing in cryptocurrencies. Invest only what you wouldn’t mind losing today.

If you do happen to hit the jackpot, you probably might want to evaluate your wins. You might want to consider cashing a percentage out so you don’t hate yourself later if it all comes crashing down. IT IS VERY EARLY and a lot can change.