Crypto is Having a Moment
Let’s take a journey back to 2017. It was a simpler time then. The stock market was beginning its journey of being juiced through corporate tax cuts. Even after years of QE and super low interest rates, growth was still not where economists were hoping. So, the solution? Grow the market instead! This is also right around the time that a little known financial instrument created in 2009 by “Satoshi Nakamoto” was gaining traction.
Bitcoin and other cryptocurrencies were around for almost a decade at that point but had failed to really break through. Crypto was a means of storing value in a de-centralized manner: out of the reach of governments, central bankers and other manipulative forces. It was mostly popular amongst tech heads, poker players and others that were using it to transact illegally (it is tougher to trace than cash). However, in 2017, crypto, and more specifically, Bitcoin, started to take hold. BTC started the year around $900 until reaching a high of $19,892 by December. Just your typical 2,110% percentage gain in a year. The comparisons came fast and furious – tulip mania, beanie babies, Pokeman cards, etc. Basically, the comparisons were any fad that was deemed unsustainable. I was even in the camp of mocking this new “currency”. I mean, its not currency if no one accepts it right? It’s not tangible like a precious metal. It’s not even backed by the good faith of a government. Plus, crypto was attached to a bunch of shady dealings for drugs, etc. on the Internet.
It was around mid-2017 that other cryptos started popping up, Ethereum, LiteCoin, Ripple, Dogecoin, Whoppercoin, Mooncoin, PiedPiperCoin…Ok, the last one is from “Silicon Valley”. But it was a fad. It added to the mania and definitely made crypto seem delegitimate. Then 2018 happened. BTC was in free-fall, going from the high of $19,892 to $3,428. 82.8% down. Most believed the bubble was burst. Everyone was now coming to their senses and investing through “proper” channels like the U.S. Equities markets and real estate.
Fast forward to 2020. 2019 was a good year for BTC, moving from $3,800 to $7,500. But, why would anyone trust this “digital currency” when stocks only go up. Well, as you know COVID hit and it has exposed the fractures in our society. It has shown that governments and central bankers alike have no clue how to deal with a crisis of this magnitude. Their solutions are to print money, nationalize businesses and not let anyone take a loss. You can’t lose if everyone is getting paid to stay home and you can’t get kicked out for not paying rent when the government won’t allow your landlord to kick you out. This is the moment Crypto was built for: a potential hyper-inflation crisis where fiat currency is being printed at a rate that will drown its worth. I’m not saying that you will need to carry a wheel barrow down to the supermarket in a couple of years like some failed states, but, we are certainly headed in that direction. Fiat currency is only as good as the faith in the government that is issuing it. Well, I have no faith. What is currently transpiring is a recipe for utter disaster. $1,200 once (maybe twice if McConnell believes it will help him hold the Senate) to every regular Joe, meanwhile buying ETFs, junk bonds and rescuing businesses that should die (Cruise lines!!!) is a great way to rescue the equities market. Notice how stocks went UP, while earnings are down and people are getting laid off in droves. So if you are invested, you were saved. If you had a 401k, you were saved. If you are a shit business that runs super lean and buys back stock with all profits instead of saving it for a rainy day (which is right now), you were saved. Every one else? KICK ROCKS.
Once they eventual hyperinflation kicks in – what will be important to hold is fixed, tangible assets. Land. Precious Metals (Gold is at an all time high). Real Estate. And Crypto. It seems silly, but just like land, they ain’t making any more of it. Sure, it has violent swings but that’s mostly due to the new nature of it. Not everyone is sold yet. But I have a feeling we will all be. All of us. Everything else has gone online. Why not money? Buying Crypto isn’t just a fade of the US Government (which certainly needs to be faded given the ballooning debt and the money printer going BRRRR), it’s a fade of any ONE person, organization, government, entity, etc. controlling values.
Now, I’m not one of those crypto bulls that thinks BTC will reach $100K, but I love it long term. I am not a financial advisor and you shouldn’t listen to anything I have to say about managing your own finances. This is my opinion. But for now, let’s all relish in this moment. Crypto’s moment.