“What do you think about crypto?!” may be the question I get most often. I don’t talk about it much, but figured it’s a good time to post my own crypto portfolio and my feelings about it!
Note that I didn’t use the word “investing” in the image. I don’t see it as investing, but rather as speculatively exchanging US dollars into cryptocurrency. Because crypto isn’t a productive asset that pays dividends or rental income. “Investing” in crypto is simply converting your dollars into a digital currency on a bet that someone else in the future will pay you more in the future than you paid today.
That said it’s an extremely cool technology, and may indeed change the way we transact. Here are some of the pros and cons of crypto:
• Not created or manipulated by any government
• Limited supply
• Purely digital
• Store of value
• Hedge against fiat currency inflation
• Trades 24/7/365
• No real industrial use
• No internal product, profits, innovation, etc
• Not productive asset (does not provide dividends or income)
• Limited track record
• Very speculative
Crypto stands in stark contrast to the things I invest in: stocks, bonds, and real estate. Those asset classes are productive because they pay me just for owning them. The longer I own them, the more money they produce, which I can reinvest to create that compound/exponential growth. I see crypto the same way I see commodities or currencies. As a store of value and a speculative bet that someone will pay more in the future. Historically, commodities and currencies get crushed by productive assets.
That said, you can’t argue with the results over the last 10 years, and it’s anyone’s guess what’s gonna happen the next 10. That’s why I decided to invest a tiny bit per month as a release valve on my FOMO.
Should YOU invest in crypto? Well, I have no idea because I can’t see the future, but if you choose to I’d suggest a couple things:
1. Keep contributions very small (<5% of your portfolio) 2. Don’t get all of your investment advice from some dude on instagram giving it away for free. Don’t forget the two rules. -Jeremy