Crypto currencies are getting demolished right now.
Half of me is annoyed because the money I have left in Bitcoin and Ether is obviously down. The other half of me is laughing because the recent Bitcoin crash could really be laid at the feet of the Bitcoin bros. The bros created a religion that artificially inflated the value of an asset. Now that reality is setting in, all these bros are losing their money.
I wrote about this exact possibility last year and the bros dog pilled on me and called me stupid. I remember it vividly because I was in Sedona AZ with my wife and it was the first time I ever got rage tweeted at. We were laughing about it together.
A quick side note, I am not laughing at the people who are losing their money. There is nothing about seeing people in pain that makes me happy. It’s the entirety of the market that I think is funny. Unfortunately, the market is taking people down that don’t have money to lose, which is terrible and a clear down side of meme land.
Some Context about Why Bitcoin is Crashing
China has been mining around 60% of all the Bitcoin.
Since China is a one party dictatorship, the government recently banned “crypto services” for many reasons. Some of the reasons are that Bitcoin miners are destroying the environment in China and there have been a few accidents at mining centers that have lead to deaths.
But ultimately, we all know that China’s true intentions are to create a digitized version of the Yuan.
I think this is a terrible idea for China, and one more example about how one party authoritarian states eventually implode on themselves. The isolation China is creating for itself will give the U.S. a huge opportunity in global financial policy and expansion.
At the end of the day, the announcement from China is absolutely demolishing the crypto markets.
Enter the S&P 500
No matter what rational people say, we will never stop day trading / speculative investing. It’s in our nature to want to ride a wave, especially when there is social proof attached to it.
However, history repeats itself. Once again, it’s looking like investing in the S&P 500, and letting compounding do it’s thing, is the easiest way to hedge against inflation and to get a return on your capital.
One of the trophy points that young crypto investors hold onto is that the return on crypto has created the best returns out of any asset over the last 10 years. But, that data point lacks a lot of context because it is all based on the assumption that people are investing low and selling high, which we know happens only 50% of the time (luck) when you are day trading.
The S&P 500 rides the wave of the entire market, so unless the economy crashes, it’s likely that the S&P will see yearly, incremental growth. Over the years, compounding will take effect and create huge returns.
The problem is that long term growth requires you to be patient, and that’s the last thing you want to do, especially when social media continues to trick you into thinking everyone is a tech billionaire except for you.
Play the Long Game
Look, I’m guilty of this as well. I’m not a financial advisor and the last thing you should do is listen to me for financial advice. I took my money out of Tesla 4 years ago and then bought back in at it’s absolute highest value. Same with Shopify.
Resisting these urges is difficult, but at the end of the day, I’ve continued to dollar cost average money into the S&P each week since I was 26 and I’m up 26% on my earnings.
Investing is about sacrificing today for a better tomorrow. Riding meme stocks and crypto is about instant gratification.
So what am I doing?
I’m keeping about 10% of my net worth in crypto. I think this China ban will backfire on them and the U.S. markets will gain control of the crypto supply. I’m also investing in long term growth stocks. But most of my investments go into the S&P.
I’m in it for the long haul. I believe you should be as well.
I’m not a finance professional through formal education. … The contents on this site are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else.