Cryptocurrencies – The Wave of the Future!

by FI Fighter on May 25, 2017

in Cryptocurrencies

I just got back from dinner with some friends… and guess what we talked about the entire night? Yup, that’s right… cryptocurrencies! Bitcoin, Ethereum, alternative currencies, blockchain technology, etc. were the topics dished out tonight.

Ironically enough, though, this is how my day got started…

From CEO.CA.

The haters on the Technology don’t own any and will fail to tell you what Segwit is or what Proof of Stake is, etc. Its a joke ppl like @jayfire and (insert name) have something to say when they have no clue what they are talking about. FORGET THE PRICE COME AT ME WITH THE FACTS!!! I AM ON RECORD SAYING BUY ETHEREUM BETWEEN $6-$10. WHERE IS EVERYONE ELSE BACK THEN WHEN I WAS BASICALLY TALKING TO MYSELF????”

The above comment came on the heels of the following video that some friends and I recently recorded, discussing cryptocurrencies.

Yup, apparently I’m not only a “hater” but also a “loser”…

See for yourself below.

“Cautionary tale tellers that simply missed the train is all….as you losers are also completely missing the point just like those that questioned the internet, email, apple, smart phones, amazon, netflix, etc…as you also are completely out of the loop w/respect to it’s value proposition and adoption acceleration, it’s radical impacts in asia and/or africa, inflating fiats environments, corporate margins, commerce, exchange optimization, tax heavens and contracts in conjunction w/rfid tech to name a few as food for thought for ya’ll.”

And here come the bulls in full force!

“Got 4 mins in sorry but i cant listen to carp ill be back when bitcoin is worth a million dollars btw it is used heavily as currency do some more research.”

The video was uploaded last night, and it’s already got 5 thumbs down!

LOL!

Hey, whoever said that investing/speculating didn’t bring out strong emotions from folks? If you had your doubts, look no further than to the above quotes and tell me those comments don’t reflect the viewpoints of someone who is emotionally invested?

Why do I bring all this up?

It’s just how the game goes… and I think it’s so very important for us to keep tabs of human sentiment as it will ALWAYS be a good indicator of where things are in the marketplace at any given moment in time…

From Google Trends.

From The CoinTelegraph.

From The Motley Fool.

As I shared in the video, my own personal belief is that this current exponential rise in cryptocurrencies (the entire sector, not just isolated to Bitcoin and Ethereum) is something that is happening “too far, too fast”… So, investors/speculators who are still sitting on the sidelines should proceed with caution and be very cognizant of their entry points into the space…

Bitcoin is up 456% over the last year… and it’s essentially doubled in the last month or so…

What’s the first rule of investing again?

Buy low and sell high.

Does ANYTHING that is setting record highs and moving on up vertically suggest to you that you’re able to buy low?!?

Seriously?

C’mon…

This isn’t about knocking cryptocurrencies! You know, last year gold and silver had their day in the sun, and with the benefit of hindsight, I wish I had liquidated a (large) portion of my portfolio back in late August 2016… And around this time last year, as readers may recall, I was jumping up and down chasing after lithium, which was also going hyperbolic…

Yeah, well, we all know how that turned out, don’t we?

Does that make me a precious metals and lithium hater too?

Shit, why do so many people have to take such a binary and black and white approach to life?

I don’t think I could be any more bullish towards: gold, silver, lithium…

What about cryptocurrencies?

As I mentioned in the last post, I’m still doing my research and trying to get properly educated… Right now, my thoughts are that if I’m going to speculate in the space, I’m leaning towards purchasing some Ethereum (Ether tokens, or ETC).

Contrary to what those simpleton comments above might suggest, I’m actually a HUGE fan of technology! I mean, dude, I worked an entire decade as an engineer writing software code for crying out loud! If anyone should have a good appreciation for emerging tech and potential paradigm shifts, it’s me!

Here’s a fun story for you all:

I remember when I used to spend all day and night programming at work… Towards the end of the day, I would always hear the voice of one of my bosses in my head saying, “Jay, remember to back up all your hard work on a USB stick! You can never have too many backup files… Please make sure to also upload your files/code to the server so we never have to worry about losing it! What you are working on is too important to lose!

And everytime I started backing up my files, I used to sit back and chuckle… In my mind, I was always thinking, “Man, I can’t believe that all my blood, sweat, tears, and thousands of hours of hard work can all be stored in a folder that is only like 100 megabytes in size…

Everything that I knew… Everything that I had ever learned… All the thoughts, ideas, creations, etc. that I had… My entire worth in the workplace… was only 100 megabytes… which could be wiped out and eliminated in the blink of an eye…

So, although I was putting in REAL WORK and REAL HOURS each and every single day, I never questioned the reality of the situation… Everything that I was doing only existed in the virtual world… and that’s some pretty scary shit to try and comprehend!

That’s a legitimate concern!!

Same with this blog… Same with cryptocurrencies… Those things just aren’t hard assets like: real estate, physical gold and silver… You will always fucking worry about losing them if the power goes out… or they somehow get hacked/corrupted/buggy and stop working correctly!

Welcome to Virtual Reality! That’s not hating…

Anyway, despite all that, just as I felt then, I still feel now — The wave of the future will be paved by breakthroughs and innovations in technology. Therefore, I believe that blockchain and cryptocurrencies will be here to stay… for good!

But with that said, let’s get back to the main focus here and that’s investing/speculating…

Everyone who reads this blog should know full well by now that I swear no allegiance to any asset class… Once upon a time, I was an ardent stock market and real estate bull… Guess what? Prices went up like crazy, so I switched my tune… When I finally checked out of buying real estate in 2015, do you know what some of my old acquaintances labeled me as?

A traitor…

Yes, that’s right… They called me a traitor because I was no longer buying up rental properties hand over fist!

Now, fast-forward to 2017, and I’m being labeled a cryptocurrency “hater”.

See how this all works, everyone?

Fucking human emotions…

If “buy low and sell high” is the first rule of Investing… Do you know what the second rule is?

 

Never fall in love with an investment.

 

Hah!

 

Much easier said than done… Trust me… Very, very few people can pull this feat off…

 

When it comes to investments, people are just way too fucking emotional… and they also love to chase price action, buying high!

 

Sigh…

 

I wrote this on CEO.CA earlier today, “defending” myself, which I’ll share with you all here.

Being skeptical of ANYTHING that is rising exponentially does not make one a hater (insert name)… That’s way too simple and binary an accusation to make. It’s no different when it comes to cryptos, internet stocks, gold/silver, lithium, etc… When an entire sector and EVERYTHING in it is going up seemingly everyday and all your friends, family, social media, Google trends, etc. are all up in arms clamoring about why you MUST GET IN NOW, it’s an indicator to proceed with caution. I think all of us agree that blockchain/cryptos will ultimately succeed and have a key role to play in the future, but as we mentioned in the podcast, this is still VERY EARLY DAYS, just like the internet in the 90s… Not every single one of the alt. coins will make it and many will blow up and revert back to their intrinsic value of ZERO. Right now it looks like bitcoin and ethereum are good/safe bets, but nobody can say for certain what new technology and developments will be made next. Again, early days, so now is the time to do research and learn more… But chasing up hype as it reaches a fever pitch? That will hurt #newbies more times than not. And I don’t care what asset it is that you’re talking about. Eventually, when the hype subsides a bit, I’ll probably take a swing and purchase some coins myself. Does that still make me a “hater”? LOL, I swear when it comes to investing/speculating if you’re not a 100% bull on something, the diehards are just gonna wanna come after you like you’re attacking their first born or something…

 

When it comes to hating, I feel like I do my best to be an agnostic investor… But if you wanna accuse me of drinking some Haterade, I guess it’s fair to say this:

 

I hate any (and all) assets that are expensive!

 

Really, I don’t give a shit what asset we are talking about… If any asset goes hyperbolic (even if I own it), I have no qualms with reversing my outlook from bull to bear… Look at my track record and current thoughts on real estate as a prime example… I rip on real estate all day long now… Does that mean I never want to buy back into the sector? Do I think real estate is an inferior asset class that isn’t worth owning? Far from it!

As it pertains to the cryptocurrencies, right now, I think prices are going bonkers in part because the entire sector as a whole is getting a justified re-rating of sorts… This is very similar and no different than what was happening with gold and silver last year… But even if we want to argue that these alt. coins like Bitcoin and Ethereum are only beginning to scratch the surface of their massive potential and have much more room to run… a bubble is still a bubble… Yes, even if it’s just a short-term one and prices continue to head much further north in the not too distant future…

Just think about internet stocks back in the 90s… Many legit companies like Amazon (AMZN) and Google (GOOG) are now trading for many multiples of their share price back in the 90s/00s… but that still doesn’t change the fact that the Dot-com bubble was a pretty massive bubble…

And that’s how I feel about the cryptos right now…

The overall interest is fast accelerating and you’ve got a lot of latecomers looking to pile on in… so I’m expecting a ton more volatility in the short-term… A 40-50% correction wouldn’t be uncommon (or scary) to witness at all… In fact, I think it would be justified… Just look at many of the gold and silver stocks and chart their performances from August 2016 to now… Same deal.

 

Yes, I want to get in the cryptocurrency sector too, but I’m gonna be patient with this… I’ve got to learn from the mistakes I made last year when I was chasing gold/silver/lithium stocks up to the moon…

 

If being cautious makes me a hater, so be it…

 

 

Fight On!

 

P.S. I could have just as easily titled this article: Cryptocurrencies – We Are in a BIG FAT UGLY BUBBLE

 

But you all know that so many people out there have selective reading… and I don’t want any more thumbs down! :*(

{ 5 comments… read them below or add one }

1 Oliver @ Appreneurinvestor.comNo Gravatar May 26, 2017 at 12:28 am

It’s such a ridiculously huge bubble. I’m still bitter than Coinbase messed up an order I placed on over 1000 shares of ETH back when it was $1/share. Would have been almost $200K. Its crazy how much luck can do. I know that’s a terrible way to look at things tho. “Could have”. BTC vs ETH is pretty interesting. Different tech. Also BTC has a hard limit of 21 million. So it will get rarer and rarer. Vs ETH is unlimited. You can easily argue forever why ones better than the other.

Reply

2 FI FighterNo Gravatar May 26, 2017 at 12:47 am

Oliver,

Yes, BTC is rare and capped at 21 million coins, but if prices surge too much and competing coins are seen as a viable alternative, I would imagine that many users would switch over to cheaper options which would keep prices at a sensible level.

But who knows? Maybe we do see BTC at $1 million as is currently predicted by so many people… 😉

In any case, I think all this interest in alt currencies is a sign that the world is waking up and tired of the old paradigm and fiat currencies… The people want a free market!

Long-term, I think if alt currencies do well so will gold and silver… It’s funny we now live in a world where real physical hard assets are indeed viewed as “barbarous relics”…

Sign of the times…

Cheers!

Reply

3 FundamentalAnalysisNo Gravatar May 26, 2017 at 1:52 am

One aspect I don’t here many mention is FX volatility. The devaluation of so many currencies against the USD has been phenomenal in recent years. (CIS countries, Real, Tenge, Tugrik, African Currencies, Turkish lira, South American currencies, Mexican peso etc…. even the sterling, canadian dollar). With such a devaluation there is no way people can have faith in their own domestic currencies. I know many people abroad in various emerging/frontier countries (who don’t trust their domestic currencies) and thus take out most of their wealth and pile it into the “reserve” currencies and properties/stocks in those markets. Bitcoin more so must be getting some sort of traction on all this FX Volatility chaos (i.e an awakening, or a solution to the problems they face including capital controls) ….its basically a way to keep wealth outside the system and not in govt control. (Most citizens of countries worldwide can’t actually buy physical gold, so bitcoin is really one of the few ways to take money out) – Think Venezuela where currency is devaluing constantly you need to do something IMMEDIATELY. The market does appear frothy at the moment, but just like some of these commodities for example cobalt and the EV story …..Bitcoin does have catalysts to propel some more momentum (perhaps after a short tem correction).

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4 FI FighterNo Gravatar May 26, 2017 at 6:47 am

FA,

Yes, you bring up a good point about FX devaluation (which is the fundamental goldbug narrative) and that’s a strong and underlying reason why many investors are flocking to alt currencies like Bitcoin and Ethereum… Gold/silver have traditionally been a store of value and hedge against fiat currencies being devalued but as everyone knows, those instruments are kind of a pain in the ass to store, transport and move around… and of course those markets are heavily manipulated and controlled by Big Brother (governments and the big banks).

Cryptos are convenient, decentralized and unregulated… for now, I guess until governments feel the need to interject and disrupt the “free flow”… I can certainly see the appeal with them; they act like gold/silver substitute in the digital space which is why many are calling them digital gold…

And I hear what you are saying — I always think that if I was one of these people living in a country where the local country was getting crushed relative to the USD and other currencies, it would be like my first priority to exchange depreciating paper and convert it into something that could at the very least retain its value… If gold/silver weren’t viable options or too cumbersome, no question I would turn to cryptos like Bitcoin… Not mentioned in this article, but clearly that’s what some affluent folks in China, Japan, Korea, etc. are doing right now.

Cheers!

Reply

5 HristoNo Gravatar May 26, 2017 at 4:53 am

Hi Jay,

I thing we are in the very beginning of the cryptocurrencies story. What will happen afterwards I do not know. But I do know that at this stage of the story there is a not of enthusiasm, emotions and blind hopes. I can compare it with the renewables from a decade ago. If the technology proves to be viable, then there would be a couple of winners, but there is no way to avoid most of these cryptocurrencies to crash and become only a part of the history.

On the hallmarks of each “new thing” is that there are always people that are trying to make money for themselves or put another way – fraud. Here in Europe we already have that experience with OneCoin. German authorities suspect that OneCoin is a financial pyramid and have suspended the accounts of the company that manage that cryptocurrency. So, I would definitely be very cautious and wait for better times to enter.

One last thing. I wonder whether there is a significant regulatory risk associated with these crypto things. Can’t the government just try to ban them in case there are evidences they make possible illegal actions by criminals? Something like what they are trying to do with cash and as of now are succeeding.

Regards.

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