Please click the link to listen to the eighth episode of my weekly crypto chat podcast. These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Comments and critique welcome.
Two Minute Crypto – The Patient Investor
Welcome to two-minute crypto – for today’s episode I’d like to explore the role that patience plays in successful crypto investing.
Warren Buffett famously said, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Now we are all aware that Mister Buffett has little love for crypto. Despite this, his investment thesis remains just as valid. As an investor, you need to be patient in order to reap the full rewards of your capital outlay. Be patient, so easily said, none would likely disagree and yet….and yet remaining serene through the highs and lows of crypto investing will test the resolve of most people. Unlike the generally stately, at times almost sedate procession of price discovery in the stock market or even leading Forex pairs – crypto is a lurching, at times, violent beast – it is the embodiment of volatility. Monday’s Bitcoin’s price action being just the latest example.
When I say I invest in crypto for the long-term – I mean a 7 to 10-year horizon. Sure, I exit many positions much earlier than that, but nonetheless, that is my standard expected time frame. This is no different to any share I buy. If I deem something an investment – then it is by definition: a multi-year position. In the frenetic world of crypto, a month can seem like a long time, a year an eternity but this is something of a mirage. Adoption over time that critical ingredient to value accumulation and retention; is likely years away. For some sectors such as cross-border medical records and large democratic political systems perhaps even longer.
Remaining, calm – holding on to your positions while at the same time remaining engaged in the cryptosphere, is a daily juggling act requiring a near constant reaffirmation of your investment goals. This stands in stark contrast to a typical blue-chip stock investment where months might well pass between one position reassessment and the next. Perhaps a fairer comparison would be investing in a mineral exploration company whose very existence is contingent on finding ‘gold in them there hills’. I’m sure many of you have invested in such projects but generally as outliers, high-risk elements within more balanced portfolios. Crypto, however, being so early to market, is basically an entire asset class of explorers searching for vast but hidden value.
Acknowledging the high-risk nature of blockchain projects doesn’t necessarily make them any easier to hold on to. In this context being a patient crypto investor demands far more Zen-like qualities than are typically required. Something I’ll discuss in next week’s podcast.
I’ll leave you with a quote from the 2nd Century Roman Emperor and Stoic Philosopher Marcus Aurelius:
You have power over your mind – not outside events. Realize this and you will find strength.
Thanks for listening.