Advice I’d Give My Mom on Cryptos!

Mar 05, 2021

My parents grew up without much.

Meeting in high school, they had ambitions to go to college together and get married.

But they couldn’t afford to pay for it themselves.

They had heard about a program where they could get a free college degree from Towson University in Maryland — if they committed to being schoolteachers for two years.

So, they did it.

And my mom wound up teaching for her whole career.

My father taught for many years in Baltimore City, experiencing some of the roughest incidents I’ve ever heard about, but also positively impacting a left-behind community.

They now live debt-free and are enjoying their retirement.

I tell you this because last week I received a heartfelt request from a Money Talks reader:

“My question to you is this: Can you [share some] guidance and instructions for learning about crypto currency to see if I can make money for retirement?
I saw you on the Oxford Club research program and [found] you to be honest and trustworthy — I am an old lady and would like for you to give me some direction just like you would give to your mother! Please?”
— R.H.

Wow! Thank you for the kind words, R.H.

I loved doing the event with Alex Green and Marc Lichtenfeld of the Oxford Club.

They’re great guys who care deeply about our joint subscribers. And they’re excellent analysts, too.

I can assure you, you’re not alone… The “ins and outs” of crypto assets — and the blockchain technology that powers them — can be really confusing, even for those of us who have worked in technology for years.

Fortunately, the crypto industry has come a long way in the last few years. You no longer need to be a crypto expert to safely invest in this new asset class, any more than you need to know exactly how the internet works to send an email to a friend.

There are still some important differences between cryptos and other assets. But if you’ve ever used an online broker to invest in stocks, there’s no reason you can’t learn to invest in cryptos, too.

So, over the next couple of weeks, I’m going to tell you exactly what I would tell my mom.

First, I’ll show you why I think every investor should consider owning some crypto assets today. And next week, I’ll show you some simple ways to get started.

After all, I believe heavily in blockchain technology. It solves so many issues I’ve seen persist over my years of building software.

And I believe you can leave a crypto legacy for your children and grandchildren.

It will be the future. But you have to do it right, because it’s scam central right now with whitepapers leading to cryptos with no backing of a real business.

Just like with anything else, I’ll first say this — there are good guys (cryptos) and bad guys (cryptos).

So, please do not get advice from the internet or from anyone who isn’t an expert. Do not follow hype into a crypto that you’ve never heard of or can’t explain why it’s a great investment.

Now, let me be clear… Even a basic explanation of cryptos would require far more space than I have in this column. We’re only going to cover the essentials you need to know to start investing safely.

But I do encourage you to make an effort to learn more about these technologies on your own. Crypto assets are here to stay in some form or another, so it would be well worth your time to become more familiar with how they work. I’ll even include some resources at the end to point you in the right direction.

I personally have been investing in cryptos for about four years now.

Alright, let’s get started…

The first thing you need to understand is why crypto assets are such a compelling opportunity.

To answer this question, I think it can be helpful to separate cryptos into two general groups: Bitcoin — the first cryptocurrency and largest crypto asset by market value — and everything else.

We’ll look at the case for Bitcoin first.

Setting aside all the technical details, the simplest and most compelling reason to own Bitcoin today is for its monetary properties.

You may have heard folks refer to Bitcoin as “digital gold.” When you consider it though this monetary lens, it’s easy to see why.

Many different things have been used as “money” throughout human history. This list includes seashells, beads, salt, cattle, and countless paper or “fiat” currencies, just to name a few.

But only gold has maintained its monetary value for thousands of years. This is not a coincidence.

Gold has maintained its value because it meets all the characteristics of good or “sound” money, as explained by Greek philosopher Aristotle nearly 2,500 years ago.

Sound money should be:

  • Durable — It must not decay, break down, corrode, or change through time or exposure to the elements.
  • Portability — It must be easy to transport and store.
  • Divisible — It must be easy to divide into smaller quantities.
  • Fungible — One unit must be identical and interchangeable with another.
  • Verifiable — It must be easy to recognize as authentic.
  • Scarce — It must be difficult to obtain or to produce in quantity.

No, gold isn’t perfect money. But it alone has stood the test of time because it meets these characteristics better than anything else humans have tried so far.

Bitcoin has only been around for a little over a decade, but it shares many of these characteristics, too. In fact, it meets some of them better than gold itself.

For example, gold is one of the most durable natural materials in the world. But as a digital asset that exists on a decentralized global network, Bitcoin is not subject to physical durability concerns at all. And while it doesn’t have gold’s long-term track record, it has also proven incredibly resilient to all attempts to control or “hack” the network so far.

Bitcoin is clearly more portable than gold. You can potentially carry thousands, millions, and even billions of dollars anywhere in the world on a tiny USB device, a slip of paper, or even in your mind (if you manage to memorize your private account numbers). Try doing that with a large amount of gold.

Bitcoin is also divisible to eight decimals points (0.00000001) — a unit known as a “Satoshi” after the name of Bitcoin’s pseudonymous creator — which simply can’t be done with gold.

Bitcoin is generally fungible. One Bitcoin is interchangeable with any other, just as a one-ounce gold bullion coin is generally interchangeable with any other.

Thanks to its underlying blockchain technology — which is essentially a big, decentralized, public spreadsheet — every Bitcoin can be verified as authentic more easily and quickly than even the most popular gold coins.

And finally, like gold, Bitcoin is scarce.

As you probably know, gold’s scarcity is a result of its relative rarity within the Earth’s crust, and the significant time and energy required to mine it.

Bitcoin’s scarcity is built into its computer code. Only 21 million Bitcoin can ever be “mined,” and the rate of new creation is pre-programmed to gradually slow to zero over time.

In short, despite criticisms that Bitcoin isn’t “real” and is “backed by nothing,” it’s arguably one of the soundest forms of money the world has ever seen.

But to really understand the potential upside of Bitcoin, we also need to look at the three traditional uses of money.

Historically, money has first and foremost been used as a “store of value” … A way to hold and protect wealth over time and space. Naturally, the more people use a particular money as a store of value, the higher its purchasing power rises.

Eventually, if a money becomes widely owned as a store of value, its market price will reach a high plateau. At this point it is stable enough to become a “medium of exchange” that is used in financial transactions.

Finally, if a money is widely used as a medium of exchange for long enough, it can eventually become a “unit of account” in which goods are actually priced.

Again, it’s still early. But if Bitcoin maintains its “soundness” — and there’s currently no reason to believe it won’t — its role as “digital gold” is likely to grow. At a minimum, I expect it could eventually challenge (or even surpass) gold as the preferred “store of value” for the global economy.

Based on gold’s current estimated market value of roughly $10 trillion, this would value Bitcoin at roughly $250,000 to $500,000 per coin. That’s five to ten times higher than its current market value.

But what if Bitcoin were to eventually challenge fiat currencies as a global medium of exchange or even a unit of account? That would imply a long-term Bitcoin price of $1 million to $10 million or more.

Of course, this is far from certain. But it’s not impossible. Which is why I think everyone should own a little Bitcoin today.

The case for other crypto assets is a little more complicated.

First, there are a TON of them. According to crypto-tracking site CoinMarketCap, there are currently more than 8,500 different cryptos. The vast majority of these are “forks” (spinoffs of Bitcoin or other existing cryptos), scams, frauds, jokes, or projects that otherwise have little actual value and a low probability of success.

Second, even many of those with real potential are still relatively speculative today. Few have proven, active use cases at this time.

And finally, the potential use cases span a huge range of markets and objectives, making comparative analysis difficult.

For example, there are a handful of other true cryptocurrencies seeking to improve on some aspect of Bitcoin or another, such as privacy, transaction speed, etc…

There are cryptos seeking to cut out the fees and middlemen of industries like banking, finance, real estate, and law…

There are cryptos seeking to empower musicians, artists, writers, and other creatives to maintain control of their work…

And there are cryptos seeking to democratize social media and the internet, just to name a few.

This situation reminds me a lot of the dot-com boom in the 1990s.

Like then, we’re seeing a huge number of early-stage, super-speculative companies with the potential to upend massive industries and revolutionize the economy.

And, like then, I suspect the vast majority will end up in the “dust bin” of history, while a small handful will survive to become the tech leaders of tomorrow.

All this means “other cryptos” may not be right for conservative investors. And if you’re going to invest in them, you’ll want to manage your risk a little differently than you might in Bitcoin alone.

Next week, I’ll show you exactly what I mean… what you need to know before buying your first crypto… and how you can get started in just a few simple steps.