THe Curious Case of Cryptocurrencies - Do They Really Have a Chance to Become The next Big Thing?

There is so much excitement around cryptocurrencies and deservedly so. They offer a chance to right some wrongs and break away from systems that purposely suppress people and rob them of their freedoms and livelihood.

The industry is in its infancy and is going through all sorts of growth challenges including trying to figure out what it is, how it will all work and waht real value it will bring to the lives of people.

As an investor in the first tech boom, I am constantly having deja vu. I remember back in 1996 being told about these hot companies and that there was a revolution coming that would disrupt the status quo. I did some research and got in, investing pretty penny into start ups with ambitious agendas and names. Some of the stocks I purchased cheaply. One I recall I bought for $3 a share and within 2 years it have rocketed to nearly $200. The markets for this new tech were flying high and people were getting rich quick. my broker at Bear Stearns had three years of over 700% growth and could not take people's money fast enough.

I can recall being at business meetings during those times and being pitched on companies that had no business plan just a few pages with no revenue projections. I was always told that revenue was not important only the idea is, so I should keep my imagination open and go with y gut feel rather than business fundamentals. It wa a crazy time and things were flying. We investor types were being shuttled by plane to meet some of these tech start up people. There were parties with $5,000 bottles of champagne and caviar. It was the best of times.

We know the end of this story. In 1998 and 1999 the market crashed hard, led by the new tech stocks. Because they had no fundamentals there was no bottom for them. For example the stock I mentioned earlier that went form $3 to nearly $200 was at 13 cents hen they haled trading on it. I was fortunately that my broker got me out at around $10. Most were not as luck. It was a blood bath. At the time everyone was saying that no one could have seen it coming, but in hindsight I do no think that this is true. I think that no one wanted to pay attention to the fact that it had to happen because you cannot create something out of nothing. To be clear, some really good companies came out of that time, Cisco Systems, e-Bay, Amazon, and several others and the time did usher in a changing of the old guard with new more agile and powerful companies.

In my humble opinion Cryptos will mirror what happened in the 90s with new tech. overall. There will be blood (great movie), but there will also be those tokens and companies that become cornerstones and if you bet right you can make a killing because you can get in early.

For me cryptos are the most difficult companies anyone has ever had to pick because their valuations are not based on anything tangible. Normally a company is valued based on some easily definable and attainable information (revenue, projected revenue, earnings per share, earnings per member, etc.), but cryptos don't have any of these things or even a fair conversation about these things only a prospect for disrupting a marketplace. Further they are able to establish their value completely on their own which is a new dynamic for traditional investors. If the tech companies in the 90s were able to do this, it might have gotten big enough to collapse the entire world's economy when things went down.

But there will be winners because blockchain and cryptos are definitely on to something. The questions is which ones will be around. I am asked by friends for advice on how to approach the crypto marketplace. I always say the same things.

1. None of it makes any sense.
2. Be very careful when you invest because thee is no floor.
3. If you invest step lightly and do not hold on to anything for too long. Figure out the rhythms of certain coins and if you put in the time you can make good money.
4. Keep in mind that no crypto currency has been proven to work in the use case it states. They are all speculative.
5. I will believe that 15 will survive and more than half of those have not been introduced yet.

I want to emphasize that I am bullish on the industry and the reasons way there is an industry. I am more excited than words that people want to take the power from the powerful. But keep in mind we do not eliminate power this way, we only transfer it. We should try and transfer it to the hands of those who have good intentions, morals and ethics so we have a better world for ourselves and our families.

Thanks for reading my evolving thoughts on this topic. Please share with me some of yours.

Thanks