The Wisdom of the Young

Crypto and The Wisdom of the Young

[December 2020 Update] The State of Crypto Investing

Sometimes life just isn't fair. When I was growing up in the 1960s, my parents said to me, "Listen to your elders. You need to learn to respect their wisdom. Someday when you're older, young people will listen to you." So, I listened to my parents and grew up respecting the wisdom of those older than I was. But that notion has been turned upside down: Nowadays, people my age need to listen to and respect the wisdom of people who are younger than we are.

Ideas from an earlier age in investing, success often depends upon the relative age of your ideas. Today, people of all ages are in trouble because their ideas aren't just old, they're obsolete.

One example of an old idea is that of the traditional job. Jobs are a centuries-old concept created during the industrial revolution. Despite the reality that we're now deep in the Information Age, many people are studying for, or working at, or clinging to the Industrial Age idea of a safe, secure job. Now people aren't just losing their jobs -- their jobs are migrating to foreign countries or disappearing altogether.

As Alan Blinder, an economist and former vice chairman of the Board of Governors of the Federal Reserve System, says, "A new industrial revolution -- communication technology that allows services to be delivered electronically from afar -- will put as many over 40 million American jobs at risk of being shipped out of this country in the next decade or two." That's double the number of U.S. workers in manufacturing today.

In spite of such alarming figures, our schools still program kids to look for jobs. Advising people to go to school to learn to be an employee is as obsolete as advising young people to become peasants and work for a landlord. People need to be trained to be investors and entrepreneurs, not employees.

Obsolete Every 18 Months

My point is this: In a rapidly changing world, nothing is more dangerous than an idea whose time has come and gone. Just look at how Amazon.com has changed the world of brick-and-mortar booksellers such as Borders and Barnes & Noble, or how Zoom is tearing down how monster corporations run their businesses.

Where do you think the people who work for those Industrial Age employers will be in 10 years?

As I said, people aren't losing their jobs -- jobs and companies are disappearing. I'm glad I listened to my rich dad and became an entrepreneur rather than the employee my poor dad wanted me to be. Most people today realize that knowledge is doubling every 18 months. Does that mean that we now become obsolete every 18 months? Maybe so. Personally, it makes me feel like I need to assign an expiration date to my ideas and update them regularly.

Much of my company's revenue comes from the web, even though I remain a technophobe. My company survives because I've learned to respect the ideas of people younger than me and recognize when my wisdom is obsolete.

While my age thinks of investing as an action done in the stock market, or real estate or gold, the reality is crypto investing may be where we need to get educated in and start understanding.

With that understand comes the search for a teacher. One of my teachers is Jeff Wang. What makes Jeff unique is his understand of Bitcoins and other coins, but also his understanding of the underlying technology, Bitcoin.

Jeff Wang

Happy New Year! What a crazy year and especially crazy month, with a flurry of continued mixed news for crypto, we saw Bitcoin break through its all-time highs past $29k.

The narrative has changed from “the world currency” to “inflation against the dollar”. We’re at the point of maximum media attention, fund exposure, retail investor hype. These are all signals that we’re near the last phase of the bull run and in need of a “reality check”.

That being said, I’ve never been more bullish on crypto, if you’ve read the newsletters in the past few months everything has played out as expected. The problem with investing, however, is that most assets take into consideration future value, and building a valuation model around Bitcoin and other crypto assets is next to impossible when they’ve all surpassed price projections from me.

Before we move forward, I just want to mention not sleep on Ethereum (ETH), while Bitcoin is up 288% this past year and is stealing all the attention, Ethereum is actually up 460% in the same time period and has a few more catalysts ahead in the DeFi and scalability space. In short, if you buy Bitcoin, you’re hedging against the dollar, if you buy Ethereum, you’re investing into blockchain technology shifting to real world utility. More on that later as well, let’s get to the newsletter!

What’s the current state of crypto?

 

The last month was a mixture of good and bad news, each with ways that have started to show hype and weaknesses in the markets:

For the good news:

 

  • Stimulus of $600 has passed in the United States, with another possible $2k stimulus in the works (though not likely).

  • Vaccines have finally started rolling out worldwide (though starting at a slow pace until supply chain infrastructure can be improved).

  • US Dollar index goes below $90, which isn’t good for the U.S. Dollar but has been boosting the “hedge against the dollar” crypto thesis.

  • There’s not much else to invest in, so Crypto is stealing the spotlight. Now for some reality checks, each with their own sections:

Regulatory authorities jump in as crypto surges gain too much hype.

You don’t make a few 100% gains this year without the scrutiny of the U.S. Government. But contrary to being anti-regulation, I do think that some measures need to be in place to prevent the uninformed crypto investor. For example, there’s still a ton of things wrong in the crypto space:

  • Coins are being listed every day and uninformed people are jumping in and losing a lot of money not understanding what’s going on (especially with so many scams).

  • Projects are still getting exploited/hacked which really screws over investors when the asset goes to $0.

  • People have no shame in baseless promotion of various crypto assets for the sole reason of boosting the assets they own so they can later dump it at a high price (“pump and dump” strategy). I’ve seen videos of people saying “XRP to $1000!” without even providing a valuation model or being based in reality (that would make it worth $100 Trillion...).

  • The same groups of people are repeating the same project ideas, cloning and listing them, and then exiting with all the profits.

The government has even more concerns, including money laundering, tax evasion, funding of crime or even terrorism. Globally, every country is worried that cryptocurrencies may disrupt the entire financial system. For example, what would happen when people flee a local currency, like the U.S. dollar to safe havens like Bitcoin?

Crypto will become more relevant as fewer investments become available

With bonds and interest rates at historic lows, residential real estate growing at the fastest pace in 6 years, stock markets at all-time highs, there’s really not many places to earn yield on money right now.

Crypto is taking a lot of the spotlight for that very reason. When everyone is looking for 3% (historic bond yield) or 9% (historic S&P 500 yield), crypto is up 300%. This is only going to cause more people and financial institutions to add crypto to their portfolios as FinTech companies open up more and more accessibility to getting it.

Add on to that, with more regulatory authorities stepping in, crypto will only become more mainstream. Bitcoin might be in the news now, but soon we’ll see other crypto projects appearing in mainstream news regularly (can you imagine “Ethereum 2.0 delegations go live!” on CNBC?).

Robert Kiyosaki

To my generation the idea of Bitcoin and cryptocurrencies is scary. It does not make sense to us. We ask ourselves, “How can money be made at of thin air? What is digital money?”

Not understanding something is not an excuse to ignore it. It is a reason to get educated. Cryptocurrencies are not going away. The investment opportunities are not going away. Jeff has explained to me that the crypto universe is slowing melding with the stock market. Cryptocurrencies are about to get the ability to be traded like stock options. What does this mean?

Cryptocurrencies will be able to make the educated investor profit when they go up in value, down in value or simply stay even. Once again, financial education is the key. And in this situation, an investor needs to get cryptocurrency education. That is why I speak to Jeff Wand and other cryptocurrency experts.

Ignoring the future is an old man’s game. It is time we not only look at the opportunities the younger generation create but take the time to understand them.

Original publish date: January 04, 2021