This article originally appeared on The Basis Point: Crypto Asteroid destroys banking dinosaurs
I have this Economist image on my desktop for the past 7 days, and it will most likely become my wallpaper this weekend when I finally launch the May 29th issue. I call it Crypto Asteroid destroys banking dinosaurs. Their artistic work is always strong and this one speaks to me. Notice the dollar signs on the dinosaurs necks.
Of course, the room itself is deeper than that. The question is whether crypto is a side issue or a legitimate part of finance. It is primarily focused on Bitcoin, but notes in a critical line that Ethereum has a more compelling use case.
I’m a banking dinosaur who only forms opinions on crypto, including:
– Only bet what you can lose: For now, it’s better to see crypto as a purely speculative bet than an investment. Treat it like a trip to Vegas. If you’re going to spend a few thousand dollars on a weekend in Vegas and are also interested in the markets, maybe avoid Vegas and buy the crypto. But treat the purchase like you would treat the trip to Vegas: lost money unless you’re lucky.
– Know your blockchains: The Bitcoin blockchain and its bitcoin currency are viewed by fanatics as a universal replacement for cash. We’re a long way from that, so bitcoin’s scarcity of gold (just 21 million coins) and fame is fueling the case for an inflation hedge and a good long-term investment. The Ethereum blockchain has much wider applicability – it’s essentially a global computer on which developers can build new businesses and applications (much like the web was built from the http protocol). As for its ether currency, it is much more confusing because it doesn’t really have a supply cap. But of course, MUCH smarter people than me have theses as to why this is a big long bet too.
– Know what is / can be built on your blockchain: I’ve asked people who’ve bought Ether to explain what they’re interested in being built, and they’re immediately stumped. Not a hit on them, just proof that there are a ton of speculators out there. I recently bought my first crypto called Hash which is the currency of Origin blockchain, which aimed to modernize mortgage and consumer lending – among many other use cases. I’ll explain more in another post, but for now I’ll say that I bought it partly because of the fixed parts supply (albeit large from 100b), and mostly because I have the impression of understanding the potential of this blockchain and what is being built on it. This is my thesis more than the price of the associated currency.
– Buy slowly: And of course, I don’t know anything about currency. I bought in the early days that Hash went live, and it’s been halved since then. I thought the recent rout of major cryptocurrencies would result in more investment in this new coin, but not enough people are familiar with this one yet. Also, I should have bought slowly to be able to bid on more shares on the downside, but instead I just took all the money I planned to bet and bet it at the same time. Stupid. But regardless, it was 15 cents per share. And I don’t plan on selling anytime soon. Because my thesis also thinks that the Provenance blockchain game is only just beginning.
Did my first foray into crypto investing – I mean betting – turn me into a dinosaur that was destroyed by the crypto asteroid in a different way? More on that next time.
For now, enjoy this image. And the links below on the piece / artist it comes from.