I recently attended a local Crypto Currency meet-up where those interested in learning or investing in cryptocurrencies could discuss what they are investing in, how to invest, and network. It was held a local start-up incubator in downtown Fort Myers and it was absolutely packed. There were easily over 50 people crammed into a very small space to listen to the crypto junkies discuss. (Full transparency – I believe in the transformative nature of blockchain and that ultimately it will completely change the technology landscape, but near term, I am more conservative.)
Taking a step back, if you are not familiar with cryptocurrencies like Bitcoin or Etherium they are based on a new technology called blockchain. Blockchain is a new type of technology that allows for new applications to be built on top of it whereby users are in control rather than one centralized entity. Picture a table with one single leg in the middle vs. a table that has 20 of those same size legs. The table with 20 legs will be more stable as they are spread across the underside of the table and create a more stable base. Without getting into the technical aspects, blockchain is a disruptive technology that will alter the way we interact with each other on the internet as it empowers users who are a part of the blockchain.
One of the uses of the technology and what most people associate blockchain with are cryptocurrencies. They are not controlled by a central authority like normal currencies (1 legged table) and all the users (20 legged table) verify each transaction which is recorded, verified, and cannot be erased. This allows you to trade with anonymous users around the world without having to utilize a 3rd party like a bank to be the middleman and curate the transaction. The idea being transaction costs will be greatly reduced and the speed of transactions can happen instantaneously rather than waiting days for your bank to settle the funds. There is a lot of value to be had in cryptocurrencies and blockchain technology which is why there is a growing demand for Bitcoin and other cryptocurrencies.
Back to the meet-up, I attended… Roughly 3/4s of the room were already invested in cryptocurrencies and the rest were interested in investing. The meeting began with some discussion and Youtube videos explaining blockchain and the use cases that exist. It was interesting to see how bullish everyone in the room was on cryptocurrencies. The facilitators clearly explained the technology and gave a good baseline for the discussion. They showed all these different use cases for blockchain technology and which industries they will disrupt. The majority of the meeting was discussing the top 10 cryptocurrencies by market cap and why each one (besides one!) was a good currency to invest in. I want to pause there for a second… I’ve never heard of financial advisors ever recommend investing in 90% of the top 10 companies by market cap. They base their investment (at least in theory) on some sort of fundamentals or future growth.
What was missing was any skepticism in the room about where we are in the cycle. The facilitators were selling one on one coaching advice for those interested in it. They were heavily invested in all of the currencies they suggested and there were no skeptics in the room. Warren Buffett is famous for saying to be fearful when everyone is greedy and be greedy when everyone is fearful. Right now I am fearful. Coming away from that session there was only one coin I considered investing in because I could clearly see the differentiator. The others had slightly different use cases, but the majority of their use cases were the same. What scared me is the discussion was not about the validity of the uses for the coins just the latest news article and how much it had increased.
I found the meet-up valuable to give me a better idea of where we are in the cycle. I saw early adopters who were continuing to ride the wave and then also newbie investors and retirees trying to get into the action. I’m cautious near-term and bullish long-term but have no idea which crypto will emerge as the real winner. I also realize I am not smart enough to figure it out at the moment which leads me to be hesitant to invest.