8 Rules for Cryptocurrency Investing: Rule 2 – No Easy Way to Millions


Hiya, welcome to this tutorial on
cryptocurrency and blockchain technology. Today we’re going through Rule 2 of
the ‘8 Rules of Cryptocurrency Investing.’ Now Rule 2 is about the fact
that there is “no easy way to make millions” …which is, ah, a little bit sad(!),
but you have to remember that before you get involved in a lot of
cryptocurrency investing. Alright, so again, this is Rule 2, of eight rules of
cryptocurrency investing. The eight rules are going to be a playlist, or a series,
that I’m producing; we did Rule 1 last time, and now are up to rule number two
…and they’ll be our six more after this. Okay, so rule two, “There’s no easy way to
make millions.” Now since this is about possible investments and financial
decisions, I have to have this disclaimer. Please pause, have a read, it’s very
important. It’s important that you understand I’m not giving your personal
advice in this video. I’m meant to be providing factual information for
educational purposes, and I don’t know your personal circumstances and
financial goals …and in general, you shouldn’t make investment simply because
you see someone talk about it on the TV! There should be much more involved than
simply that. Okay Rule 2 ‘There’s no easy way to make millions.’ Now the crypto
markets have lots of promoters and advocates, making lots, and lots, of claims.
It’s been one of the biggest news stories of the past year. But sadly since
January 2018 there’s been a crash in the markets and, in reality, there’s been lots,
and lots …and lots, of losses! People have lost their shirts, some of the horror
stories have been really bad. So before you get involved in crypto
investing (and all the types of investing), it’s important to cover some of the
realities of this space, and what it involves. So today we’re going to talk
about ‘1: Don’t be a fool: don’t risk more than you’re prepared to lose, and be
realistic’ then we’ll move on to ‘Why realism in your investing won’t stop you
making possibly spectacular returns in crypto. So you can still
be realistic, but still have the good side as well.
Thirdly, we’ll discuss about how ‘Awareness of how young this investment
space is, and the risks and, uh, rewards this implies’, when the crypto market is
so new. And then finally, we’ll talk about ‘An alternative interpretation to the
generalized negative statement, about there being no easy way to make millions.’
Alright, first things we’re going to cover: Don’t be a fool,
don’t risk too much money, and be realistic. In short, don’t sell your house
to buy the ‘magic beans’, the crypto beans! And crypto is kind of like the magic
beans, ah, no one knows what they’re for …or not nobody, but a lot of people don’t
know what they’re for. They apparently have some sort of value, but a lot of
people can’t explain why they have value. And yeah, often there could be a strange
person telling you to buy it, um, similar to the guy that bought the—
sold(!) Jack his magic beans. Alright, so this idea is linked to the first rule.
Now in the first rule we talked about knowing your risk profile, and about
balancing your risk and reward strategy and using appropriate portfolio
allocation techniques. You shouldn’t risk more than you’re
prepared to lose, and you shouldn’t have all your eggs in one basket. You should
have a well diversified portfolio that could possible include some crypto, not a
hundred percent in one cryptocurrency, or something similar. Now you should
stay away from all leverage, unless you’re a professional exper- or expert,
and even then it might not be the best idea; there’s been many stories of
so-called professionals and global firms blowing themselves up by using, ah,
leverage that they couldn’t manage. And then, again as I said, rule/point four:
don’t risk more than you’re prepared to lose. This– this could all go badly. This
market is very new, and we have to be careful. And, yeah, there’s a– there’s
upside, but there is a lot of downside in this market.
Secondly, ‘If it seems too good to be true, then it probably is too good to be true.’
This is about not being a fool. Now don’t fall for the big claims and
promises. You see them on Facebook, you see them on YouTube, you see them in a
lot of our MeetUps and events. Everyone’s trying to promise you something, or
claiming you’ll, you know, something’s certain. And this is because there’s a current
lack of regulation that’s putting few limits on what some people can promise.
Now where I am, in Australia, there are certain licenses and regulations, in
regards to financial investments, that restrict what people can say or promise
about those financial investments (or more accurately termed “financial
products”, in Australia). Now you can’t say certain things in Australia about
financial products, you can’t promise certain things, and
you’re um– you’re exposed to, ah, litigation or sanction if you break
those rules. Now cryptocurrency is kind of in this grey area where there’s not a
lot of regulation, and that leaves a lot of room for people to promise far more
than what they should be allowed to. I remember, I think it was late last year
or early 2018, there were Facebook ads basically guaranteeing that this invest–
this cryptocurrency investment, would triple, within like, two weeks of putting
your money in. Now that is just– that it’s just so out there, but the fact that they could
get away with it speaks about the fact that people make claims and aren’t a lot
of regulations in place to stop these claims being made. So you’ve got to be
wary. If it seems too good to be true, then it probably is. And if you get
involved in this space you’ll be surprised how regular you’re a target
for, like, just blatant scammers, blatant pump and dump schemes, and advisers who
don’t disclose their conflicts (whether a holding in a certain currency, or a
relationship). Yeah, I try to be tech savvy! I’m only new to the Telegram app …since
I started crypto investing. And I’m still so surprised that people really think that
they can just contact you, and hit you up and try to milk informational, or scams,
out of you. Or I’ve got calls on my, ah, on my
personal number offering to get involved in cryptocurrency investments which are
too good to be true, and probably just a scam. Now as someone who owns a company
I’ve received these types of calls in the past, but since I’ve got involved in
cryptocurrency investing these, ah, these approaches have been through the roof. So
you’ll be surprised! …Until there’s a real clamp down, or a shake out, of these
people in the market. Okay, yeah I just mentioned people are not disclosing
their holdings, so I’m well– I’m not really a cryptocurrency expert, I’m still
trying to get– trying to learn as much as possible, here are my disclosures. There
we go! So if you ever here me talking about these, you’ll know where I’m coming
from, alright? I do have skin in the
game. Alright, now this is the third point, ‘We have to be realistic.’ For
example, are you a better investor than Warren Buffett? Now Warren Buffett has
made an average of 21 percent per annum, for a number of decades. That isn’t 210%
per annum, or 21,000% per annum. People seem to be, in this space,
like– like really upset if they don’t double, or triple, their money in a couple
of days, or a couple of weeks. And it’s just, yeah, it’s staggeringly
frightening, that– if that’s the expectation of the people who the
participants in this market. Now 21% per annum, not 2100, not 21000 …ooh yeah, not 210 or 2100, but 21% has helped Warren Buffett make ninety billion dollars! So
that that’s not bad returns, after all. You don’t have to make double or
triple your money in a couple of days. A steady twenty one percent per annum,
starting early enough, and you’ll be– you can make a lot of money! Warren Buffett’s
made 90 billion and I don’t think anyone would turn that down. Now a mix of bonds
have averaged seven to eight percent per annum, the S&P averages about 12
percent per annum …and you don’t need to make a 100 or
200 percent a year. Like, why? Like you have to ask yourselves: if bonds make seven
or eight percent, and the S&P (which is a basket of stocks) makes about twelve
percent, why would other investments be at such outliers?
It’s, again, it’s just not realistic. It’s not realistic. Yeah I can’t.. ha, sorry
I’ll try to be happy about it, in that you can still make good solid safe
returns anywhere between five and twenty one percent per annum …um, in the case of
Warren Buffett. So you don’t have to double or triple your money. And if you
think you’re going to double triple your money, then you may be in for a rude shock.
This is about expectations management; the people get hurt the most in this
market, are the people that aren’t aware of what the possibilities are that could
occur. Who– who get shocked they didn’t double or triple their money, or get
shocked that an investment can lose half its value. If you go in there with your
eyes open, know what the realistic outcomes are or the probabilities of
those outcomes, then you’re in a much better place when the outcomes
eventually occur. Okay, just to stress a point, let’s have an example. “Can you make
amazing returns with a ‘boring’ investment that’s just over the long
term?” And here’s Exhibit A: Warren Buffett took over textile company Berkshire
Hathaway in 1965 for $19 a share, that’s ah, it’s now 2018, what’s the price of
Berkshire Hathaway? And what would $1,000 invested in Berkshire
Hathaway at $19 share then, be worth now? This is just a straight, dull, one-stock,
‘fuddy-duddy’ Warren Buffett investment. Let’s see– let’s see how we would, ah, how
we would go. Okay so he’s a stock chart of Berkshire Hathaway. Now this doesn’t
go back to 1965 at $19 a share, it only goes back to about the start of 1980
when I was already $625 a share! So you’ve already, ah, so you’ve already done 30x
times your investment by 1980 …if I have done my sums correctly! But yeah $19 to 625 by 1980, still an unbelievably good return if you hold on to it and– and
do something very, very, very dull and boring …and maybe not that exciting. But
look what happens as time passes between 1980 and 2018. It’s now $322,900. And that started at $19 and
it’s now three hundred and twenty two thousand, nine hundred! And that’s– that’s right, that chart really does show that realistic, stable, methodical
investments can really pay off. And so what would that a thousand dollars
invested actually be worth, today? Yes, there we go, $1000
invested in Berkshire Hathaway in 1965, would be worth just under seventeen
million dollars today. And I know 1965 to 2018 it’s a long time away, it’s a long
time to wait for a return like that. But, you know, if someone told me today,
“Axel, if you put $1,000 into this company and wait, you know, 60 years you can have
seventeen million dollars, do you want to do that?” Guaranteed, I take it in a second.
Any day of the week, I would take that choice. If I had to wait sixty five years
to make seventeen million dollars, absolutely, on a thousand dollars down(!) I
wouldn’t– I wouldn’t turn that down in a heartbeat.
And what’s the moral here: Don’t be greedy, irrational & impatient, and instead just
make sound investments and give them time. You should be investing for a
reason, not ‘spinning a wheel’ hoping that the money will double in a couple
of days. And here’s our second part: Why realism won’t stop you possibly
making spectacular returns. So I’ve been kind of negative so far; talking about
how things aren’t going to work out, and you’re being unrealistic, and like have a bit of
sense mate… But many still have made great returns from my ICOs, early
mining of cryptocurrencies and HODLing …and also the general crypto bull runs. So
we’ve got ICOs like Ethereum, ah, I think if I my research is correct, it
ICO’d for forty cents, and today’s price was approximately, ah, $220. So that’s about our 55,000% return. That, ha, you have one investment like
that in a lifetime, you’d be happy. Early mining or early HODLing: Zcash, ah
the price a few months after launch, um, so just the first miners were holding it, it
was priced approximately $40 now. Today’s price is about $120, and that’s a
300% return. So a 300% in two years, even after the 2018 crash, is very– like
yeah, yeah you’d be very, you should be very, very happy with that.
Zcash had a 2018 peak in January of approximately $775, so if you go out at
the right time, it would be much higher than even the
300% return. Now I did these slides about a week ago, so um maybe a little bit
longer, so if they’re not exact I apologize. And also, just the general crypto
currency bull runs: There’s been ones in late 2013, mid-2016, mid-2015 all the
way through to the new year of 2018, and there’s even been periods since the
crash in January of 2018 where you could have made serious returns just by, um, trading
from the lows to the highs. And this is– um these markets is where all boats have been lifted by the tide. And I can just go to an example here. And here we
have the CoinMarketCap ‘Total Market Capitalization’ and I’ll show you some of
these bull runs. So hears the– let’s go to, ah, late– late 2013. So
we’ll go to, ah, let’s try ‘2014’– to the 1st of February 2014, if I’ve done that correct(!). And here, you can see there’s a bottom of a market cap of, ah
what’s that, just under a trillion dollars, or no, just under a billion
dollars, I beg your pardon. So a billion dollars, and in half a year
it’s gone to 14 billion dollars. So that bull run there
(late 2013 and early 2014) basically could have made 14x your money. Let’s get back
out to where we were… Now when you talk about the bull run
from, ah where are we, let’s say 2015 to today. I don’t like— we’ll take it to
the peak of the market, so let’s say January 3rd. Now if you’d held for three– mind you this is three years! Three years, you have to hold a fall… from fifth–
from May of ’15, to January of ’18: here we have a market cap of 3.8 billion I think
it is, yes 3.8 billion, all the way up to 641 billion. Like that is just, an
astronomical, bull run there in terms of market cap. And although it was probably
the major coins there, but here in 2017 there would have been some ICOs in
there as well. But it’s just staggering returns just from simply holding for a
few years. And finally I did mention you can make decent returns since the
crash, so let’s take this back to January. So, January this year 2018 take it back
to the 15th (so we’re post a crash). And here we have, perhaps in April if you bought in
April, 257 (billion) market cap. And if you’d held it for one month, ah, you made about a
60 percent return up to 453 billion in market cap. That’s just one
example. Ah, hear in early February: 362 market cap, one month later you’re
looking at about a 20 percent return. And like these numbers are just, like, beyond
comprehension for most people who’ve been investing for a while.
They– you just don’t see returns like that. So th- there is still good news.
So while I’ll tell you to be a realistic and i poopoo things there are still a lot of opportunities and I don’t want to be all negative, okay? Alright. Just remember
that high returns often mean higher risk, or high effort and high skill. And just
to be realistic about your returns and not greedy. Cryptocurrency is becoming
more mainstream, so you may not see the type of wild volatility and returns as in
the past. Like we we’re looking at those charts just then, as it becomes more
mainstream the volatility might taper out and there may not be those returns;
I don’t know. Ha, that– that’s just often how some markets work as they
develop, and it’s important to have a longer and a realistic time horizon. For
example we’ve got the post Dot Com crash, and that was probably the last time that a
lot of investors got carried away about a new paradigm and a new technology that
was going to take over the world. If you invested late in, ah, the Dot Com bull run,
perhaps in early 2000, you would have have to have waited, I think, perhaps
eight or ten years to see the NASDAQ back at its previous high. And that’s again, if you’re looking at one or two weeks or two months, waiting eight
or ten years maybe may seem, um, longer than what you expect. But then again, if we
have decent returns, I’m more than happy to wait eight to ten years for the
returns that cryptocurrencies previously offered …but that’s just my personal
opinion. It’s just about being realistic and not necessarily needing it in the
next couple of weeks. Okay. Secondly, we’ve got to be aware about how
young this investment space is, and the risks and returns that this implies. Now
Bitcoin, which is the major cryptocurrency, only launched in 2009. And
there are risks when it’s this new. What’s that: nine years? So we don’t even know whether
today’s cryptocurrencies will fade away altogether, and just effectively go to
zero. Perhaps blockchain technology be–
becomes something completely different to now, and the cryptocurrencies on offer
today just– just aren’t worth at all what we
think they are. Like for instance, we may think we’re investing in Google, but
really we’re investing in Netscape. So we thought Netscape in the Dot Com boom was
like the big tech that was going to be amazing, but it was really Google and
their search engines that did something completely different to simple browser
technology. And as for e-commerce, the big– the big story in the dot-com boom was
Pets.com and how that was going to revolutionize and be the epitome of an
e-commerce future, but ten years later we realized that the future of Internet
commerce was companies like Facebook (that weren’t even envisaged during the
dot-com boom). And Facebook, and those sorts of firms are the ones that
capitalized and monetized the internet revolution. Secondly
cryptocurrency could become hampered by tech, and just die. We saw the bull run
last year; that the scalability and use of cryptocurrencies was was seriously
hampered. If doesn’t function as a currency or a medium exchange or a
useful asset then, possibly, people just move on. And there’s always those stories
about quantum computing, that quantum computing will be able to break the
security of blockchain and the hash algorithm, the SHA-256 hash algorithms.
So perhaps that occurs perhaps blockchains evolve and fork, and overcome that,
but we just don’t know. Simply no one can be certain in 2018, and at that this young,
early stage of the technology in the market. So there are risks. Now there are good
sides to the same argument, about it being such a new market. There are
possible high returns to be made from getting in early. Now up until Q2
of 2018 only about 25 million cryptocurrency wallets have been set up, and
often many people have more than one wallet. So that would only work out to be, if each person only had one wallet, about 0.5% of the global population. And
stock ownership is about 50% of the US population(!), and direct stock
ownership is about 36% in Australia. So, what does this mean
for the capacity of future demand for crypto? And, as kind of a comparison
here, only 2% of Americans owned stock before the famous 1929 crash. So in–
before the 1929 crash, 2% of Americans owned stock, today 50% do. And we’re about
to see where the markets have gone in that period. At at 2% of Americans
owning stock before the 1929 crash, it’s actually a closer representation of
how many people perhaps have a crypto wallet now. So let’s have a look what
happened between 1929 (when 2% of Americans owned stock) and what the Dow
Jones looks like now (when approximately 50% of the US population own stock). Okay,
let’s have a look …and here we are. So if you see down here: this is 1929. See that
little blip there? That– that’s 2% of Americans owning shares in the stock
market …and we know what a huge bull run that was. And now look where we are now,
where 50% of Americans and stock market holdings are considered, um, mainstream and
normal, and generally safe investments. We go from an Dow Jones index value of 206–
300 in 1929 at the peak, to 26500 in September 2018. You can do your own sums there to work out what sort of return that would be. But I’m trying to show you an
example: that there is upside if crypto does become mainstream, and these types
of investments become similar to something like stock. And what that means
by getting in this early stage, similar to the early stock investors, and the
returns possible if the future works out well for this– for the cryptocurrency markets. So yes, while there are risks to getting in a very young
investment space, there are possible returns. And it’s important to remember that most
new markets face difficulty. So stock ownership used to be thought as
radical and risky. I have read books where they talk about all the ‘normal
investors’ only holding bonds. People didn’t trust stock. They disliked the lack
of security, in a stock security. Investors didn’t like the priority the
stockholders had in company liquidations, and so forth.
There was a lack of access: well you couldn’t just on the internet, um, like today
and buy, getting involved in the stock market. You had to go to a specialist
broker. Often you had to be from a– sadly had to be from a certain ‘group’
of people that had access to stockbrokers, or a certain amount of money to
get involved in the market. And not everyone could get involved. And there was
a less regulation. Um, the SEC was only formed after the 1929 crash. Secondly,
there was the ’emerging market debt market’, and this used to be only a tiny
sliver of debt markets. Government securities from emerging markets were
seen as it illiquid and volatile, they had poor historical data access. You
didn’t know what was going on there, well, you couldn’t find out what was going on.
And there were also regulatory difficulties in emerging markets, and
across borders. And both of those markets have gone on to be very, very healthy
investment markets over time. But then again, there’s also the ‘tulip market
bubble.’ That had a small participant base, there was a lack of asset utility
(like you couldn’t really do much with a tulip), and there was a tonne of
irrational speculation. So you can see those reasons why those markets faced
difficulty, where ever– everything from lack of security, volatile markets, poor
historical data, lack of asset utility… It all kind of sounds familiar with the
cryptocurrency markets. But we just don’t know: is this going to be like the
stock market the changes, or it is going to be like the tulip market that, ah, dies a
bad death. Okay, now we’re up to our final section. The title of this video is
‘There’s no easy way to make millions’, but what if there was a different way to
look at that. What if you’re an investor and you said ‘But there is a challenging
way to make millions, over the medium to long term, by getting in early on the
next disruptive digital space and its integration with Industry 4.0’. Is
that still an attractive prospect for you? Because maybe cryptocurrency
investing might be for you, then. Or if you’re a trader, you may look at it like
instead of saying ‘There’s no easy way to make millions quickly’, you could say as a
trader, ‘Do the inefficient, volatile and developing markets of crypto offer
opportunities to gain a competitive advantage through asymmetric information,
by getting in early, and then all the masses of traders eventually jumping on
down the track’. So if you’re a trader, can you see an advantage in being one of the
first to the market, if the market does grow? Just remember at this point in
time, it’s like the Wild West of investing (in the cryptocurrency space).
So keep your wits about you, be sensible …until you get some experience,
or until the markets develop and there is reliable regulation, reliable
institutions, and reliable intermediaries to protect the retail investor. Okay,
let’s wrap up. What did we cover today? It’s about not being a fool, not risking
too much money, and being realistic. Be wary, be rational, be realistic. Don’t
risk more than you can afford to lose. It’s about why realism in your
cryptocurrency investments won’t stop you from possibly making spectacular
returns. And we talked about how ICOs, HODLing, and trading bull runs, can
sometimes still allow very healthy returns. We talked about having awareness
of how young this cryptocurrency space is, and the risks and returns that this
implies. And the Bitcoin only launched in 2009, and there’s been very little
public interest until the last few years …and there’s good points to that, and bad
points. And finally, we talked about alternative ways to look at the negative
statement about ‘There being no easy way to make millions quickly’, because it may
be possible to do it the hard way, over the medium to long term. Okay that’s it. I
hope it helped. Best of success! There are your congratulatory fireworks.
Thanks very much. If you’ve enjoyed the video, please Subscribe to the Channel.
Click on the button will soon appear. Um, get in touch. Um, feel free to comment
below if you agree or disagree, I’ll try to do my best to answer any questions.
And watch another one of my tutorials now or just give me a Thumbs Up …and yeah,
thank you very much for your time and have a great day!

One thought on “8 Rules for Cryptocurrency Investing: Rule 2 – No Easy Way to Millions”

  1. Hi all, I've created and added the next video tutorial on the '8 Rules of Cryptocurrency Investing', here. This is Rule 2 – There is No Easy Way to Make Millions …I hope you enjoy it, and get some value for your investing journey.
    Feel free to comment, and please don't forget to Subscribe to my Channel youtube.com/accofina or just visit accofina.com direct.

    Cheers guys, best of success!
    Axel

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