“Confusing Speculation with Investment is always a mistake.” ~Benjamin Graham
I specialize in retirement and financial planning. I don’t claim to be an expert in Bitcoin or any other cryptocurrency. That positions me as someone who knows how to create plans that succeed and who isn’t enamored with the technology. Here are some points you should know and some questions to ask before you buy.
What Crypto is Not
Crypto is not an Investment
Investments have a proven track record of success and current data to support the idea that it will continue to be a success in the future.
Crypto is not a (yet) a Currency
Any currency that fluctuates that much is not a true currency. Are you going to spend something today if tomorrow it might buy you twice as much?
Problems with Crypto
Crypto is Popular on the Black Market
Drugs, weapons, sex slaves, and a host of other “goods and services” are being purchased with crypto due to its anonymity. Crypto will only encourage these activities and make them harder to stop.
Crypto is Created to Make Nerds Rich
I say “nerds” as a self-professed nerd. I make spreadsheets for fun. I’m a nerd. But some very smart computer nerds didn’t like that most of the wealth is concentrated with seniors. It takes a lifetime to establish wealth the traditional way. But why wait to accumulate a bunch of wealth in one currency when you can simply make up your own? All creators of cryptocurrency have become very wealthy very quickly.
Crypto’s Wealthy Advocates Aren’t a Good Reason to Buy
Just because Elon Musk, Jack Dorsey, and other rich celebrities advocate for it, doesn’t mean you should buy it. They all own it, and if they want their value to go up they need to get other people to own it. High demand on a limited supply means increasing price.
Crypto is Power Intensive
Mining for crypto uses more power than the entire State of New York. The accelerating power consumption of crypto has many people worried.
Crypto’s Increasing Supply May Create More Inflation
More cryptocurrencies come out each year. Proponents of crypto claim that one of its benefits is the curbing of inflation. A limited supply of it means the “government can’t keep printing it.” But this point is moot if some other nerd can just make up a new one. Either it will create more inflation, or people will lose interest in the currencies and their values will plummet.
Pros of Crypto
Crypto‘s Block-Chain Technology is Revolutionary
The Block-Chain technology behind crypto is amazing. As Carl Richards pointed out, while many of the Dot Com companies were total frauds, internet technology did change the world.
Crypto May Help Lift Emerging Countries out of Poverty
We have the luxury of having a stable currency. Many emerging countries don’t have stable governments or currencies. They are benefiting from a more accessible currency with cheaper transaction and conversion fees.
Should I Buy Crypto?
As will all speculative ventures, you should not buy crypto until you are doing everything else right. Before buying, you should:
- Have and be working a Financial Plan.
- Be consumer-debt free.
- Be on track for retirement with an Equity-based Investment Plan.
Crypto may be a huge opportunity. Or the one you choose may be a huge flop. Don’t bet your financial future on it. Do what works.
When the housing market crashed in 2008, I wasn’t in a position to buy a home. Rock bottom prices, and I wasn’t ready. I determined then that I would be ready for the next housing opportunity. And I was. I refinanced in 2020 for a 2.0% mortgage. And I’ll be ready for the next opportunity because I am working a Financial Plan and the plan enables me to be ready.
You may miss the opportunity for crypto because you don’t already have everything in order. Be ready for the next one. Get a financial plan. Work the plan. The harder you work, the luckier you get. The difference is you’ll sieze the next opportunity from a position of opportunity, not desparation or greed.
Get a Plan. We can help.
This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. RetireMentorship is not affiliated with any Registered Investment Advisor, Broker-Dealer, or other Financial Services Company.