Two major events happened in my life this month. First was my sons birthday. He turned 2 (yay) and my wife organized his first ever birthday party! I don’t think I ever had a birthday party before I turned like 10 or something, but hey – we are living in America now, right? )
The party was actually quite small but a lot of fun. We didn’t go overboard and invited only a small group of our close family and friends. My son loved giant air balloons more than anything else. Well, he also seemed to like the Piano and Spiderman that shoots some weird plastic things from his palms. He also got his own portable laptop or something that looks like the laptop… 2 years old guys!
That scares me sometimes… If I wanted some toy in my childhood, I had to trade it for something else I owned. Today I have so many different toys scattered around the house that it’s getting harder and harder to navigate without stepping on something.
In addition to that now, thanks to my wife, I also have a huge inflatable bouncer on my backyard! Don’t get me wrong, I love my son a lot and naturally want all the best for him, but I’m just not sure if all of those toys are really necessary. I think I’m just scared to see him turn into easily bored, lazy and arrogant kid… Time will tell I guess.
The second major event happened this past weekend. I was finally able to get the Home Equity Line of Credit. Why do I treat it as some major thing? Well, I tried to apply for it about two years ago, but it didn’t work out at the time because my house value wasn’t up to what I wanted (according to the bank’s appraisal), even though we spent (or should we call it invested or maybe just wasted?) A LOT of money and redid the whole house pretty much.
We purchased the house 4 years ago and I wasn’t really too handy at the time. I’m still not by the way. Naturally, I had to pay general contractor for my homeownership education. It wasn’t cheap. For example, now I’m aware that raising the ceiling by 15 inches throughout the house or moving outside wall a few feet to expand the living room are both terrible and very costly ideas… Eventually, I learned how to live with what we have… sort of…
Anyway, I needed the line of credit to reduce the cash savings (emergency backup option basically) and give me some leverage for investments and mortgage chunking (probably will explain in the future if you are interested), so I re-applied again this year it worked out. The housing marking is up again, so the new appraisal showed the numbers we needed. Great!
Hello crypto here I come!
Now that I have the line of credit behind my back, it was time to focus on distributing my accumulated savings into different investments categories.
What options do we have? Individual Stocks (high risk), Index funds like S&P 500 (medium risk), Real Estate (a fund or buying properties – medium risk), Commodities like gold, silver, metals (medium to high risk), Bonds (low risk, low return, but better than money sitting in the account), Savings account (a joke in US, the % so low it’s not even funny. Deposit in foreign country could be up to 8% backed by government, which is not bad), Business ventures (high risk, business loan or getting in as a partner) and finally there is this new thing everyone is talking about called Cryptocurrencies.
Did I miss some interesting investment strategy? Let me know if I did.
While my ultimate goal is to create a well balanced portfolio of the high, medium in low-risk investments, in this post I’d like to focus more on crypto-currencies (or cryptos or blockchain or however it’s called).
Let me give you a bit of a backstory here. I first heard about cryptocurrencies from my friend and co-worker at FastCompany about 2 years ago. He was buying bitcoins at something like $300 a piece and I was thinking he was crazy.
If you are not aware of the current bitcoin prices you can google it or go to a site like coinmarketcap.com and see for yourself. At the time of writing the price for one single bitcoin was around $5K… Who is crazy now, right?
About a year ago few more of my friends started buying and selling cryptocurrencies. I started hearing words like ethereum, ripple, litecoin…
“Sergey, Ethereum is the next big thing, you should get in! It provides smart contracts and you can do anything with those. Vitalik Buterin will make us all very rich!” – that’s what they were telling me.
Who the hell is Vitalik Buterin? Apparently, he is the Russian immigrant who lives in Canada, creator of Ethereum, a very smart programmer, a nerd and insanely reach dude (worth over $120M at the current ethereum price of $300 a piece)
I brushed away their words at the time, thinking this cryptocurrency stuff is probably another bubble, fad or scam.
Fast forward to about a month ago when I went to the FHAT marketing training that I purchased for 15K and guess what, there was a guy named Mark Moss who was successfully operating on the cryptocurrencies market.
Mark was also (still is) involved in this magical process called “crypto mining”, where you have a bunch of computers hooked up to the internet and all of those computers run a special software to process crypto transactions… The more transactions you process, the more money you can mine/get. It’s like a payment for your services to the world basically – you help process and acknowledge transactions and you get paid for your services.
Here is the fascinating post that I found about crypto mining just so you understand the scale of this thing.
Anyway, Mark came to the FHAT event to polish his new crypto training course. Mark already pre-sold a bunch of copies by the way! Let me tell you, this guy knows his stuff. We had a great conversation and still staying in touch after the event.
More importantly, I finally became really curious about this weird cryptocurrency (blockchain or however else it’s called) world. It was obvious there was something going, something very big and I had absolutely no idea. I desperately needed to catch up.
About a week ago I was visiting yahoo to check my spammy mailbox (yeah, I know, can’t get rid of it at the moment). There I spotted the ad saying something like “Computer Whiz Exposes 1.8 Million Crypto Script” with the face of James Altucher right next to it.
Yep, we see a bunch of scammy ads like this all over the internet, but James Altucher? I love his book Choose Yourself. I follow him on twitter and read his posts. How is he related to Crypto currencies? I had to find out, so I clicked on the ad and landed on another page, basically a bunch of text explaining crypto stuff and astronomical gains with graphs pointing up into the skies.
You know what I’m talking about 🙂
Anyhow, I had to silence my bullshit meter in that case, because I wanted to dig dip to understand the whole process and James involvement in the crypto market. Sure enough, on the bottom of the page, I found a button saying “Get it now” which I promptly clicked and landed on the order page.
What I saw there was quite interesting. Turned out James Altucher is running a paid financial newsletter (subscription based) and apparently, he has been doing it for a while. As for crypto stuff, he created a special info package by filming a small group of people who wanted to learn more about this new hot market.
The cryptocurrency madness was boiling in me for quite some time, so I had to buy this package (the subscription) to fill in my own gaps and get up to speed as quickly as possible.
Well, I’m glad I did.
Unfortunately, I can’t share everything that I learned, as it would take a small book and this post is already running long, but I’d like to share some important takeaways with you guys because you are my peeps, right? Exactly!
First things first – cryptocurrencies are not scam! Well, actually a lot of them are… But not all! There are a bunch of shady crypto coin types that have backdoors in them, that’s why you need to be very careful before you invest even a single dollar. You just have to remember, that cryptocurrency was created out of necessity, which is extremely important!
See, if you look at most successful businesses they are all solving some specific problems. That’s why there is demand. Yes, the price can fluctuate up and down, but if the offering/product solves some fundamental problem there is good chance it will stay and evolve.
What problems do cryptocurrencies solve?
Here are three most important ones that I’d like to point out.
1. Decentralization which takes control out of single hands (aka government) and creates transparency.
If you were born in the United States and lived here your whole life then you may not think of it as a big deal. I come from post Soviet Union country where we had to deal with multiple wild national currency swings in the short span of 10-15 years.
To give you an example, here is the short story of my grandfather. Most of his life he worked as the truck driver. Not those fancy Maximus Prime style trucks you are probably thinking of, but more like this one:
One the very next day after the retirement he decided to start his own business! Yep, true story. So he hired a mentor (Soviet Union times!) to teach him how to make fur hats and that’s what he did until he died.
I was a little boy back then, but still remember him paying me for doing little things around the yard. He allowed me and my brother to operate a shoe polishing stand next to the house. Later on, we started selling apples and cherry. It was a lot of fun to be able to earn and spend your own money.
At the age of 6 or 7 years old, my brother and I launched a gum reselling business. We would buy gums at the “kiosk” and would resell those by the local food store. The business was booming until the big boys chased us out… Fun wild times 🙂
Anyway, why am I telling you this? Oh yes. So my grandfather business was a success. He made a LOT of money at the time, but there was one problem. Since we were living during Soviet Union times, he couldn’t really buy anything fancy. In order to buy a car, for example, you had to be approved by the local government and wait in line for your turn (which could take years).
Naturally, he started saving his earnings in the bank. Such a smart guy, my grandfather! We were supposed to inherit a fortune until one day (I think in 1998) everything changed. Simply put, the government decided to devaluate the national currency and all my grandfather savings were wiped out pretty much overnight… I’m not talking about inflation here, more like going from being able to buy 3 new high-end cars with your savings to being able to buy 3 bottles of milk… In one day.
You can say or think that US dollar is a different story (and I hope it is), but having seen MASSIVE currency devaluations more than 3! times in my 33 years (and the recent one in Russia happened just a few years ago!) I don’t discount any possibilities.
What can we do to protect our hard earned money??! Great question, gents! Well, my answer is diversification, but since we are talking about cryptocurrencies lets see if those could somehow protect our savings.
Like I told you before, the main cryptocurrency benefit is decentralization. That means there is no single emission center which can just decide to print more money and drop the value of the currency on the market. All good on this front. Moving on.
2. Ensure limited supply
It should not be a surprise to you that the only reliable way to maintain the price of something valuable is to have a limited supply. We can look back in history and see why gold was recognized as the universal currency. It was extremely limited and because of that – valuable (still is by the way). There were other problems with gold coins of course, that eventually led to paper money creation. It was just too heavy to carry around, keep and protect in large quantities to name the few.
Oil is another example, maybe not as perfect and a bit controversial (because of recent price drops), but it will do for our purposes. The limited supply (or at least what they make us believe) and the value it provides creates a strong demand, which in turn helps to maintain the prices.
If we look at bitcoin, for example, there is a total of 21 million coins that could possible circulate on the market. That was specifically designed by the computer algorithm and if you are software engineer like me, you can go ahead read the code and re-check it yourself. The code is open to the public! Yes, just go to Github and read the code if you are curious!
The other benefit of the open source software is that it forms a vibrant community of very smart people, who collectively can raise and fix any issues. Now, when it comes to local currency we (ok, I) have no idea who makes the calls and why.
See the difference? What do you trust more, your local government or the code you can read and see? Hold on, according to the dollar bills in my wallet it’s better to trust the GOD! Seriously, open your wallet an look for yourself.
Well, it’s up to you who to trust essentially…
The point is – all good cryptocurrencies (there are a lot of different types of coins on the market at the moment) should be open source and have limited supply baked in by design. They also need to solve real problems, which bring us to the last point.
3. Goes above and beyond simple currency
I already mentioned Vitalik Buterin, the creator of Ethereum (one of the pretty popular crypto coin). What is so special about Ethereum and why is it different from bitcoin? Why can’t we just pick one coin an go with that?
Hold your horses. I’ll try to explain.
See, the bitcoin creates a way to make secure transactions which are stored on the “blockchain” (think of it like a distributed database backed by lots of computers). That’s great, but bitcoin also has some limitation. It’s slow, as it needs to make sure that the specific number of computers around the world successfully accepted the transaction (wrote the record / updated the blockchain) and it not totally private (you don’t see the names, but you see the transactions amounts on the blockchain which is not always ideal).
Those are some of the reasons why WE NEED different types of coins.
They solve different problems.
Ethereium, for example, brings the concept of smart contracts. The idea here is that you can write a series of “conditions” that need to be met in order for the transaction to complete successfully. It opens up an infinite number of use cases.
Smart contracts could help copyright owners to receive a royalty every time the content is used. They could help crowdfunding platforms to collect money and automatically distribute payments without intermediaries. They can automate compliance with rules that require destroying records at a future date, automate mortgage contracts etc… It’s quite possible that in the future smart contracts will replace lawyers (sorry).
But this is just the Etherium. There are coins that provide distributed encrypted storage, which will give hard times to Google Drive, Dropbox and the likes. Other coins designed to provide very strong privacy for highly anonymous transactions. Some are tackling transaction speed.
It should be much more clear at this point why we see more than one type of coin on the market. Think of it like a handyman toolbox, where every tool is designed for specific use case.
Yep, since I’m not really a handyman and don’t have a proper toolbox, I had to use my son’s. Hope you don’t mind 🙂
Don’t forget the important point – cryptocurrencies is just the additional class of risky assets that you should consider adding to your portfolio. Whether you thinking about long-term investments or speculation (buy/sell), I would not recommend going all in on crypto, despite all the crazy success stories we hear every day.
Someone smart once said – “Don’t invest what you can’t afford to lose”. Perfectly applies here. That reminded me an episode from South Park:
The whole purpose of my pretty long post is to raise some awareness and to show you the potential of cryptocurrencies market. We have a pretty unique chance to participate in a HUGE shift, maybe the biggest one for the next hundred years. It’s essential that you get up to speed and get all possible information ASAP so you don’t miss the boat. Don’t tell me I didn’t warn you later.
The Crypto BOOM is happening, whether you like it or not!
We’ve been through multiple BOOMS in the past century and they do have a few similarities. Every BOOM typically goes through 3 main stages.
1. First stage – enthusiasts only. That’s the stage of biggest risks and biggest rewards. For example, a guy named Koch who bought 5,000 bitcoins in 2009 for $27, now worth $886,000. I think you should get the idea.
We already past this stage for cryptocurrencies.
2. Second stage – that’s when big institutional investors come in. The more money flows into crypto market, the more it affects (raises) the price.
Every day now we hear big names like Goldman Sachs, Mark Cuban, Tim Draper and others who decide to join the crypto movement. Just imagine what happens to the prices when pension funds money will start flowing in as well…
I think the crypto boom is currently at this second stage. Yes, there are some wild swings that can throw you off balance and cause you to panic, but if you survive through (hint: hold your investments) there is a great chance of reward. Remember, in the end, it boils down to fulfilling the need and the world NEEDS better currency!
There are rumors circulating around that Amazon may soon start taking bitcoin as a payment method. Can you imagine how huge that would be for the crypto world? The time is now, telling you.
3. Third stage – that’s where the big money is usually made. That’s when the public comes in. I bet if you ask your friends today about cryptocurrencies, only a few of them will be able to tell you anything of value. Most have no idea. Let me tell you more, I myself had no idea until very recently!
But eventually, craze will hit the masses and the price will go through the roof. Just try to focus on the important point here – the fundamental shifts like that do not happen very often. They just don’t. That’s why you need to educate yourself as soon as possible.
Anyway, the post is approaching 4K words and I have to stop.
Imperfect action beats perfect inaction every time – Harry S. Truman
Let’s do it this way – if you want to know more about the crypto world. No, that’s wrong – YOU HAVE TO LEARN MORE ABOUT CRYPTO WORLD NOW AND I MEAN NOW!!! Here is the special hidden subscription form only for my true fans. For those brave hearts who read the whole thing:
Just drop your email in there and we will be in touch. The subscription IS FREE (for now), but it probably won’t be for long. I’ll be collecting and sending the information as I go through the process myself. I’ll do my best to present it from the total beginner point of view.
If you want to expedite your crypto journey – here is the link to the Mark’s webinar registration page. Like I mentioned before, I met Mark at the FHAT training, where each participant paid 15K just to be there. He is involved in the crypto world for quite some time now and operates a few crypto mining farms.
The only thing we can’t get back is time…