Why I Like Crypto's as Part of Complete Breakfast

Investing is inherently risky and, to a point, one definition of investing is specifically managing risk to match intended returns. Cryptos have a been shown to have a high rate of return (just look at STEEM over the last month!) and are correspondingly inherently risky. Prices can swing all over the place. They aren't guaranteed by any government agency, the coin could crash, or the devs are scam artists and run off, or any number of other risks of this Wild West Frontier.

As an investment strategy, though, it is important to compare the above statement in some context, as in, "Crypto's are inherently risky... when compared to what?" Obviously the answer there would be traditional stocks, bonds, real estate, etc. But the latter are priced in fiat, which is assumed by many to be so stable they are not considered in the equation. In fact, Cash is considered the safest investment of all.

But what if fiat and cash are inherently risky? After all they are constructs of of federal governments that have 100% authority and control over their inflation.

I'm probably preaching to the choir in the Steemit environment, but the proposition of cash being risky is not a new one. In the older days it was gold and silver bugs that were selling this story. And, to be sure, if fiat begins to crumble those will be good investments (In the future I will post how I like investing in gold in silver directly), however, Cryptos are proving to be a much more dynamic investment for a number of reasons:
They are there own currency and are not priced in fiat (like gold)
They are instantly and digitally transferable (not like gold)
But most importantly, they create commerce of their own.

STEEM drive a new social media / blogging paradigm, solarcoin incentivizes solar energy owners to produce more solar goodness, Gridcoin is like a color coin for SETI-like computing. When you own these coins, you own a part of a project (like stock in company). PoS coins also have annual returns like bonds. Cryptos behave nothing like gold other than being a store of perceived value (and by "perceived," I mean, you can't eat gold either). When you own cryptos you own part of a project that is free from a fiat underlying valuation.

A side-note on paper gold: Sure, one can say "Gold is digital, just buy the ETF GLD on the stock market." This is known as paper gold, and unlike a Crypto where you own the private key personally (assuming you don't hold coins on exchanges!), you don't actually hold any gold when you own GLD. If this is a big part of your portfolio, this tiny, little fact might keep you up at night.

So obviously everyone reading this far is convinced cryptos need to be part of a dynamic, diversified portfolio. But what kind of urgency really exists, I mean c'mon after all, it's summer, the BBQ is on, life is good. But that question gets more to the point of this blogpost. Consider the article Companies Could be Sitting on a $75 Trillion Dollar Timebomb, which starts out:

Corporate debt is projected to swell over the next several years, thanks to cheap money from global central banks, according to a report Wednesday that warns of a potential crisis from all that new, borrowed cash floating around. By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to S&P Global Ratings. Under normal conditions, that wouldn't be a major problem so long as credit quality stays high, interest rates and inflation remain low, and there are economic growth persists.

I encourage you to read the whole article and embrace what the author calls "Crexit." These types of fiat fissures, a result of CB's (Central Banks) around the world caught in a Catch-22 downward spiral of cheap debt they cannot stop issuing, are becoming louder and louder. This problem has no known solutions, and when it comes to a head, when the music stops and their aren't enough chairs, the actual truth is no one really knows what the consequences are going to be. This is why cryptos should need to be a part of your portfolio. Even if it's a small one, the probability of these returns effectively hedging against massive inflation or losses that wipe out other investments becomes greater and greater as the significance of the aforementioned problem is more and more underestimated.

It is also important to consider the relative scale of this article to crypto's nascent, burgeoning valuation. The author is describing $75 TRILLION DOLLARS. That's a big problem. The entire crypto universe is currently worth about $13B. So that's $0.013T, or some 5,800 times smaller of a universe. Imagine if cryptos eventually rise up to backfill for this type of credit problem. The market cap of everything you own would rise, on average, 6000X. Isn't it worth betting $100 on that, given even the most remote probabilities of its occurrence?

Gold has been rising with monetary-base inflation. Cryptos may be a better substitute for this going forward.

I've been on several stock boards over the years chirping up about cryptos to mostly a lackluster response. I am hopeful the STEEM environment will see more value in my assertions and advice. I've now personally witnessed multiple 100X returns (Bitcoin and Ethereum, among others), and even in the face of this, stocks and options guys simply find it too esoteric to "waste their time." A lot of these guys also don;t get ahead. One of the principle reasons, in my opinion, is their tendency to focus on the known (the now) instead of the unknown (the future), which is a huge investing mistake.

I've even suggested running an ETF that holds the top 50 coins by market valuation for them which has been met with basically crickets. Given that cryptos can produce phenomenal returns even in the absence of the massive fiat currency emergency they are designed to protect you from, I still don't get much interest. So I just do this myself, and preach about when I think there might be an audience who cares.

For these reasons I recommend Cryptos as part of your portfolio, or as the 80's commercials used to say about sugary cereals: "Part of this Complete Breakfast."

And remember what your Mom said, be sure you have a complete breakfast boys and girls!

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I haven't formally introduced myself yet but will in the near future. I'm a regular guy fighting the good fight out their in the new energy technology corporate world, and an armchair style, self-directed Financial Manager of One. I've been a crypto junkie since I first heard about Bitcoin in May 2011. I'm a big fan of Steem and can't wait to contribute more and more to this growing community.