Crypto Investment

ZOMG! IT’S ALL CRASHING!


Cryptocurrencies are having a rough go of it lately, and there’s a lot of fear in the market right now with articles like this springing up everywhere:

But, are they really doomed?

Only if you’re not thinking about them correctly.

Cryptocurrencies aren’t an experiment in non-fiat approaches to money. They’re an incredibly powerful dynamic that hinges on multiple disciplines like the internet, cryptography, powerhouse computing, and more. It can be a complicated subject, but here’s what’s at its heart.

Treat crypto as a trading opportunity, and you’re going to lose everything. Treat crypto as an investment opportunity, and you have everything to gain.

Take the long view. Speculators are losing their shirts as the brand new market finds its legs. Remember, people tend to vastly over-inflate a new technology’s short term capacity, and vastly underestimate its long term possibilities.

Not All About Confidence

Commentators love pointing to the “falling confidence levels” in crypto as a currency, but here’s what they’re not talking about: crypto’s cap isn’t based solely on the market’s confidence in crypto. Its value is also a function of the market’s distrust of traditional fiat.

Crypto and the decentralized approach to transactions are a direct assault on the FED’s continued efforts to deflate the dollar’s value.

Zoom Out

But, before we get bogged down in the “traditional vs. new blood” conversation about fiat vs crypto, let’s take a minute to zoom out and ask:

What is crypto good for, anyways?

Bitcoin was lauded as an ideal currency due to its distributed, trustless, cryptography-backed nature, but with transaction fees (or mining incentives if you prefer) skyrocketing, its viability as a day-to-day option for purchasing small goods has evaporated with them.

Is that a bad thing? Not necessarily.

Function of Money

In the history before money, exchanges were done directly. One thing for another; barter.

Bartering is extremely limited. What if I have something you want, but you don’t have something I want? No trade is possible, and we both lose out.

And, what if I want to move somewhere else? If all my value is stored in actual goods, I could potentially lose everything I own in one fell swoop.

That’s the two purposes of money:

  • Facilitate trade by abstracting goods & services away from what they are to a representation of what they’re worth
  • A store of value

The first money technology was receipts for rice stored in government silos. Then metal coins came along which was a significant advancement in market potential. Now, a single coin could represent massive amounts of actual goods.

Then, along comes paper money, but you have to trust the government who is in charge of printing the money to not print too much of it (otherwise its value goes down due to that pesky supply/demand thing).

Problem with paper currency, however, is its lack of privacy (try moving anything over $10,000. There’s a hell of a lot of paperwork. Why should I have to get permission from Dad to get what’s mine?), tons of fees (every time someone’s involved in a transaction, they get their cut. When completing a payment there are multiple banks, intermediaries, processing houses, etc involved), possibility of false duplicates (forgery, anybody?), and on down the list it goes.

Cryptocurrencies solve all those problems.

At the barter level I have to trust you. On the paper currency level I have to trust the government. On the crypto level I have to trust thousands of years of scientific progress and math.

So, while traditional entities like government benefit from centralized control of fiat currencies, cyptocurrencies offer a bright future & alternative to staying in a rigged game against progress and development.

Buy in for the long haul, and you’re betting on human progress.

It’s a sure thing in my eyes. But don’t just trust me; it’s smart science, too.