What’s up guys!
Hope everyone had a wonderful Christmas and enjoyed some well-deserved time off.
I spent a significant part of it reading up further on bitcoin and cryptocurrencies to demystify the market and try to determine if there’s a future in this.
After the previous posts, I’ve had a couple of friends come up to me and share their stories of wild success regarding people they know, people who have invested early in crypto.
“Man, if only I had put $200 on, I’d be retired by now”.
“Well, of course DC – but if you knew what you know now – you’d put $200,000 on.”
Hindsight is always 20/20 right?
Here’s 4 thoughts on what I learnt so far!
Don’t be the greater fool.
Who you callin’ fool, fool?
The greater fool theory is one of the classic theories of behavioural finance. It states that people will continue to buy an asset, irrespective of valuation in the hope that there is someone else willing to pay a higher price. For example:
Shaniqua leaves her local convenience store after buying 1 apple for $1.
Turning the corner, she bumps into her neighbour’s classmate Jose, who offers her $5 for the same apple.
After Jose completes the transaction, he walks to the local mall, when on the way, he’s called over by his cousin’s girlfriend LinLin.
LinLin sees the apple in Jose’s hand and hands over $20 for it.
Just as LinLin is about to take a bite, she hears her name called by her best friend’s sister’s ex-boyfriend Abdul.
Abdul leaves LinLin $50 less but 1 apple more.
Abdul then sees his brother’s, work colleague’s nephew’s girlfriend Shaniqua and trots over to her thinking whether she’ll accept $100 for an apple…
This is what the cryptocurrency market is like currently.
There’s definite potential.
Despite all the media and hype surrounding the price movements, there’s been very few words said about the potential and purpose for cryptocurrency.
The backbone of cryptocurrency is the blockchain – a general record-keeping ledger which transparently records every transaction that has occurred on every machine in its network.
My opinion is that we are perhaps a decade, maybe two, too early to properly understand the power and potential of the blockchain.
This is what happened with the internet when it was invented in the 60’s, developed in the 70’s, grew in the 80’s and took off in the 90’s.
Similarly with 3D printing, invented in the 80’s but became a game changer only recently.
The potential for a company to truly hit it big on the blockchain is enormous and distinctly possible, whether it exists now or in the future, you just don’t know.
Let them fight it out.
That’s why I believe that eventually there will be a consolidation in the cryptocurrency industry and only the strong remain. It happens in every industry.
Perhaps it may come in the aftermath of a bubble burst – similarly to what happened in the aftermath of the dotcom bust, there will be only a handful of survivors.
But reading through the names that remained such as Amazon, Apple, IBM – well, they did more than just survive.
If the cryptocurrency industry is to mature, you should see a couple of big names emerging when the dust has all settled.
Not necessarily bitcoin mind you – my personal opinion is that it is where it is now purely off the back of its early entrant status.
Which leads me to Altcoins.
Alt? As in Ctrl + Alt + Delete?
No… Alt as in Alternative.
As the name suggests an altcoin is a currency which is an alternative to bitcoin. There are literally hundreds to choose from. Each with a purpose and use different to bitcoin.
This segment of the market is the riskiest of the risky, where anything goes and where your wildest dreams and scariest nightmares walk side by side.
The market for altcoins has ballooned astronomically due to rampant speculation which has driven a number of altcoins to many multiples of their listing price.
But you only hear success stories – how many times have you heard stories of those investors fallen prey to hacks, theft, scams, fraud and other nefarious means? Rarely.
There you have it! Some of my thoughts on what I’ve learnt so far.
Hey TheFrugalSamurai – is there is money to be made in cryptocurrency?
For sure, but please be mindful it is very volatile and very risky. If you want to go in, go in with your eyes wide open and make sure you understand you can lose everything you went in with.
End of the day though, whether you are a trader, investor, amateur or professional – the aim is to turn $1 into $2.
I remember almost the exact same time last year, 2016 – when I was remarking to a good friend half-jokingly how we both should jump aboard bitcoin because it will make us rich, neither of us took it very seriously, it’s price then?
Just under $1000.
Writing these last few posts has definitely triggered my curiosity to explore the concept of the blockchain further. I think it has more legs and potential there.
It reminds me of the movie “Fight Club”, saying Fuck You to the man.
But it also reminds me of the concept of communism – a social utopia but in reality controlled only by those in power.
Far out, so much to learn, so exciting!
What do you think? Did you enjoy this post? Please help me out if you enjoyed this and click on the little “follow” button at the bottom right and be a follower! Thank you greatly!
P.S. Every post is the personal opinion of yours truly, please do your own research before committing to any investment decision, your wallet thanks you.