Watching and buying crypto is interfering with my writing schedule. It’s all I think about. There hasn’t been an opportunity to make this kind of return since The California Gold Rush. That said, there is risk involved in everything in life.
I see investing in cryptocurrencies as the great equalizer. It provides equal access and opportunities to all participants, no matter your socio-economic background or education. Whether you have five dollars to spend or 50 million, you can invest in crypto by jumping on any of the many apps like Coinbase (the leading cryptocurrency trading platform), Robinhood, or even Paypal.
Crypto is now over 12 years old. It is here to stay.
There is a low barrier to entry, leveling the playing field. And because of the Internet, you can do all the research you want on crypto before you buy. Just be discerning about where you get your information. Always consider the souce. Someone who has never invested in the stock market — which is daunting for those who haven’t and don’t have the education or experience — can take $20 and put it on Dogecoin (CRYPTO: DOGE) which, as of April 20, was up an incredible 6,560% year-to-date. And its market cap has reached 50 billion making it bigger than Kraft and Ford.
It has returned in just a few months more than the S&P 500 has in at least 30 years.
Crypto eliminates disadvantages for some
When you invest in a traditional market, like the stock market, you have to work through a clearinghouse and broker. There are regulations, the middleman has the upper hand, which creates disadvantages for smaller investors who don’t have a ton of money to invest.
In the crypto world, the sheer amount of cryptocurrency markets grants those who have some money to invest liquidity, and find some true price value and early discovery.
Traditional markets carry risks and inefficiencies, while crypto markets are driven by open-source code, which grants equal access to everyone regardless of their portfolio size. Decentralized exchanges (DEX) make markets more level and efficient, making improvements in transaction speed, settlement speed, and reduced costs. Decentralized exchanges are a type of cryptocurrency exchange that allows for direct peer-to-peer cryptocurrency transactions to take place online. This can be done securely and without the need for an intermediary, like a brokerage firm.
This benefits the average investor.
The Power of Elon Musk
Dogecoin’s record increases due to eccentric Telsa CEO Elon Musk’s tweets confirming he is the ‘Dogefather’ is proof that you don’t need fundamentals to back an asset, just a famous investor with a good meme to work with. If anyone is the ‘Dogefather,’ he is. Each time he tweets about Dogecoin, it goes up.
But Doge is a joke…
Yes, Dogecoin started as a joke based on a 2013 meme of a Shiba Inu,
but sometimes jokes make money and stick around and lose joke status. The Pet Rock was created as a joke and made over 6 million dollars.
Also, come on? The coin has a dog on it. There is no other coin with that kind of branding in its favor. The Shiba Inu is the reason I threw money into Doge early on (the only coin I bought that I didn’t give much thought to. Caveat: the amount I put into Doge would not break me if it went to zero tomorrow).
The recent highs of Dogecoin have made first-time investors millionaires overnight. If you aren’t paying attention to those kinds of returns and these ‘meme’ stocks, you are missing the larger picture, the future of web 3.0 and the currency of the Internet. Doge has proven that not every asset is determined by fundamentals.
Cryptocurrency and money are just consensus beliefs that something has value. The space of crypto is secured by consensus across millions of people using massive computation power worldwide. We decide it has value, so it does. Just like fiat currency.
Cryptocurrency holders create memes to pump up the value of these assets. The price rises to attract more traders bringing in more institutional buyers and the average Joe wanting to turn his stimulus check into real money that can make a difference in his life. Groups of traders (meme traders) decide on a price and then pump up the crypto to meet the arbitrary price.
“If this sounds juvenile or stupid, that’s because it kind of is. But asset prices don’t need fundamental reasons to move, and it’s a mistake to underestimate the power of such herd behavior.” — The Motley Fool
It often works.
Then the price goes back down usually to a higher low. When meme traders attract new traders via meme, they send the prices up even more in a feedback loop. It keeps happening with Dogecoin. I don’t think we will see Dogecoin for .05 again, the price where I bought when I added some throwaway money to Robinhood with the attitude of, Ok, I’ll play and see what happens.
I have most of my money in other cryptos that I have strong faith in and have spent hours researching. My motto is always “buy and hold,” whether my money is in crypto or stocks.
Celebrity backers like Mark Cuban, Gene Simmons, and Snoop Dogg tweeting about Doge in meme fashion have also led to spikes in the value of Dogecoin.
Meme-based rallies — the power of the meme
You can recognize a meme because they often consist of a picture — normally derived from pop culture such as cartoons and viral videos.
Memes are often followed by a caption above the picture which references ‘relatable’ scenarios or even something related to any relevant social, political, and economic news, like crypto. Memes are most commonly transmitted via the Internet, especially on social media, and their aim is to entertain, which has sparked the term ‘meme’ culture. Memes were started by younger generations, but older generations also share meme content. My step-dad posts political memes often, much to my chagrin.
Memes are not going anywhere unless the Internet disappears tomorrow.
A lasting trend
Meme investing is going to be a lasting trend as long as traders walk away with huge gains. Memes are the cornerstone of internet culture and have been for quite some time. To ignore them when it comes to trading would be a mistake. Memes will lead to more prominent investing as more millennials start buying and selling crypto. Memes could result in a cultural shift in stock trading because the crypto market will, if it hasn’t already, spill over into the stock market, affecting prices there as well.
As I suggest whenever I write about investing, long-term, buy and hold investing is the lowest risk way to make money in the stock market, but you won’t make 100K overnight as is possible with some of these cryptos.
Let’s talk about risk
I’m a pretty calm investor. I don’t make rash decisions when it comes to crypto and buying stocks. Each person is different. Some might see my investing strategy as risky, I don’t. I see it as calculated risk. I do my homework except when I threw money into Doge as a ‘joke’.
The joke turned out to be profitable.
At the end of the day, we each have to assess our own risk and what we want from our financial situation. As with anything, you need to take a deep look into how you feel about money and how you would feel if you lost it.
My partner is a totally different investor with a different sensibility from me. He made 50K overnight on Dogecoin. But he was also a day trader for a few years, so he has experience. My first crypto love is ETH (Ethereum), I’ve been watching it for nearly two years and got in at a good time, but I’m in this crypto thing for the long haul, not for short-term gains. I’m also into any crypto that has to do with ETH or can help it along.
There are smart decisions you can make to control risk. But you can’t eliminate risk. You need to accept a certain level of risk if you want long-term returns from investing in crypto or the stock market. That is just the way it is. If you want to play — and make money — there is always a risk.
I know of several ways to manage risk in a traditional portfolio:
- Own more than 15 or more stocks for diversification.
- Hold for three to five years at least.
- Always have a cash cushion for emergencies.
- Allocate less to stocks as you near retirement.
However, if you do all these things, you still can’t eliminate risk. Because the biggest risks come from completely unexpected turns that few can predict.
Especially with crypto, it is highly volatile.
Some stay out of the market because they don’t want to take any risk, but even then, you have the risk of inflation eroding your purchasing power as the US Government prints more and more paper money out of thin air. Good investors manage risk when they can but also embrace risk they can’t eliminate. If investing our money in stocks and crypto didn’t involve risk, then the returns available through those two options wouldn’t be nearly as high.
“By being able to face your fear of risk and invest anyway, you’re doing what millions of people can’t bring themselves to do — and in the long run, you’ll reap ample rewards from doing so.” — The Motley Fool
I am not an investment advisor. All opinions are mine alone. There are risks involved in placing any investment in securities or cryptocurrencies. None of the information presented in this post is intended to form the basis for any offer or recommendation. It is for informational and entertainment purposes only.