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With cryptocurrency, it becomes really, really difficult to give a valuation – much of its value lies within our own interpretation. Cryptocurrency was its own market that was difficult to value because it was ultimately a currency, so it had to test various levels and demand for sustainability. Just like ANY investment out there, even with real estate, I believe we naturally have the tendency to overestimate how high something will go, and how long it’ll fundamentally take to get there.
In reality, if cryptocurrency is to ever be successful and mass adopted, it can’t have that much volatility in price that quickly. So for everyone out there who really wants cryptocurrency to work, it cannot be largely speculated – and mass adoption won’t really take place until we’ve hit an equilibrium between utility and present worth.
I actually found it interesting that railways, radio, and the internet all went through exuberant bubbles before becoming mainstream. Frankly, I think a bubble can actually be a good thing – it gets people openly researching, investing, and finding interest in something they’d ordinarily otherwise look over. And sure, a lot of capital was also lost, but the capital that was spent ended up forming some great opportunities and technologies that we can use moving forward. And anytime you make an investment, it’s important to distinguish the difference between buying on fundamentals vs speculation. From my perspective, the entire reason cryptocurrencies have gone down is ONLY because the hype and media attention has died down. And the media attention has gone down because prices have gone down. It’s no longer exciting news to report on anymore, and those who have lost are often discouraged from re-investing.
But one point I’d like to throw out there is that with this latest craze, many people unknowingly threw in money that they couldn’t afford to lose, largely based on watching what other people are doing and wanting and believing in those same returns. The problem starts when someone jumps into something without fully understanding the implications of their actions, purely based off watching someone else, who may or may not be looking out for your best interest. This leads to the human psychology to naturally discredit information that doesn’t align with their own beliefs or self benefit, otherwise known as a “Confirmation Bias.” It’s our minds amazing ability to go to great lengths to rationalize only the information we want to believe, and tune out anything that opposes or challenges those view points. And it’s very, very easy to want to believe in striking it rich in crypto.
It’s also really easy to actively seek out the information and groups which align with our own thoughts, further perpetuating this effect. This type of tunnel vision isn’t uncommon, and I’d venture to say that no one is really above this. We’re ALL guilty of this to some extent and it’s important to be aware of it. I’m certainly no exception to this, don’t get me wrong. And as we go deeper down the rabbit hole, this is why it’s so important, with anything, to be aware of our subconscious thoughts and try to be aware when we’re closing ourself off to other viewpoints and perspectives. If there’s ever a time you feel like something is easy, risk free, and the rewards are incredible..it’s not.
And finally, when it comes to investing in general, take a step back. If you find yourself getting too emotional about an investment, you may have found you don’t have the tolerance you thought you did, you invested more than you were comfortable with, or you don’t believe you did enough research into what you were buying to feel confident about it long term.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness@gmail.com
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