Crypto Confused

Last week I salvaged some lessons from NASA’s shortcomings and applied them to our personal finances. This week, we’re going back to the moon (sorta kinda). I’m going to tackle another idea brought up by a friend.

I was asked to predict the future value of cryptocurrency after the next bull run (bull is up, bear is down). I’m no wizard, nor am I a crypto expert. If I knew the answer to this question, I would not be writing this blog, but instead asking my butler Jeffrey to serve me another ginger ale (ahem, two cubes of ice, Jeffrey…).

But I serve my own ginger ale. And while I have no predictions, I do have some stories and thoughts to share about cryptocurrency.

First, the disclaimer: my experience with cryptocurrency

In June 2017, I took about 1% of the money I had and threw it at cryptocurrency, just like throwing a casino chip on red. I wasn’t expecting anything to come back. But a few months later, the crypto market went berserk. “To the moon,” as they say. When the price doubled from my buy-in, I thought, “Let me remove my initial investment, and play with house money.” I took my 1% back, and left an equal amount invested.

Then I just kinda let it sit there. The crypto bubble eventually burst. My remaining 1% quickly shriveled, but at least I had taken my initial investment out.

That shriveled investment still exists, just chillin’. Recent weeks have been good for crypto! But recent days have been bad. That seems to be a recurring pattern. But if my small investment disappeared tomorrow, I’d be no worse off for it.

Common questions, absent answers

There are some good questions that you could ask about crypto.

  • Why is it worth anything?
  • What’s special about it?
  • What happens if I lose it? Can it be stolen? Can I accidentally send it to the wrong person?
  • Why is it better, or worse, than the current system of cash and credit and banks and Federal Reserves?

I know how other people answer these questions, but I can’t pretend that I understand the answers sufficiently enough to explain them to you, my intelligent readers. It’s like when someone asks, “Why are there seasons, Papa?” and Papa says, “Cuz Earth is tilted, Loretta.” Papa probably heard it explained once, but the one detail he remembers is a poor stand-in for the full answer.

I’m Papa. You’re Loretta. And crypto is the question. I don’t fully get it. We’ll come back to this fact…

What do I know?

I want to change gears and tell you some things that I do  know more about, and do feel comfortable talking to you about.

  • Investing in low cost index funds.
  • Putting your savings in a high-interest savings account.
  • Creating a budget for yourself, your family, or your household
  • Minimizing debt, or at least informing yourself before going into debt
  • The “rent vs. mortgage” conundrum
  • Self-education, especially when it comes to finances

What do all these ideas have in common? They are simple, low risk, and fully within your control.

Is cryptocurrency simple, low risk, and within your control? For me, the answer was/is no.

Luck and Wisdom

Famous investor Warren Buffett once opined, “Invest in what you know, and nothing more.” He understood why people buy Ford pick-up trucks, why they drink Coca-Cola, why Microsoft Office is essential to modern business. That’s why he felt confident investing in Ford and Coke and Microsoft.

Do I “know” cryptocurrency? As I said before, No, I really don’t. My investment in it probably wasn’t wise, it was just lucky. I don’t want  to give advice about crypto when my own story is more about luck, and less about wisdom.

That said, there is a ton of information out there about cryptocurrency. I have many friends who have done way more research than me, and they have a firmer grasp of the fundamentals. I absolutely encourage you to self-educate. Read what the crypto bulls have to say. But also learn why the bears aren’t optimistic about it. I don’t want you to feel that FOMO (fear of missing out) if you miss an opportunity, but FUD (Fear, Uncertainty, Doubt) after a stupid investment isn’t fun either. Learn as much as you can, including the ridiculous acronyms. Perhaps you can make a decision based on wisdom, rather than relying on luck. I’ll become Loretta, and you can be Papa, Ph.D.

And if you all end up crypto billionaires, maybe give me a ride on your  Lambo to the Moon

Thanks for reading the Best Interest blog, we’ll see you next week!

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