Hey Crypto. Where To Now?

None of us need to be reminded that the crypto markets are just a hot mess right now. While I would like to take my normal stance, similar to what I do when it comes to the stock market for example, and just say "it always comes back, and comes back higher," I cannot take that same stance with confidence when it comes to the crypto markets.

Sure, this is not to say that crypto has not had many, many ups and downs in the 12 years of its existence, and perhaps you can take that as some sort of indicator that things will probably come back and come back higher. But the reality is that it is simply not something that anyone can say with absolute confidence.

Of course, this does depend on who you talk to. You are going to have your "true believers" in any market, including crypto. That's a given. I have watched many an "investor" hang onto a stock that they were all-in on all the way to bankruptcy who still felt there was some hope somewhere in the losses.

The problem with crypto is the lack of data, and that's primarily the reason why I think it is extremely difficult, and even naive to an extent, to boldy predict something with regard to it.

Please do keep in mind that nothing I am saying here or going forward in this article is intended to disparage crypto. As I have mentioned many times, I only ever aim to be the guy on this site that takes a step back and offers a bit of perspective. And hopefully I do mostly accomplish that.

But lack of data is just a reality we all have to keep in mind as we face the dips and decide what to do next. It is easy to simply say buy the dip and be done with it. When it comes to crypto I just don't think it is quite that simple. And that's because of the lack of data.

And the fact that even from a historical standpoint, we again only have 12 years to look back on.

I know a lot of guys are making their best effort to explain away this most recent dip. And I do not discount any of them. I am young to crypto myself and it is always a very strong possibility that I am thinking wrong when it comes to bringing my perspective to the table.

All of this, I think, is important to at least analyze a little bit rather than to simply accept it as fact or certainty. Because again, without the data—real data—what it all boils down to, really, is simple speculation. And there is no denying that even my perspective is speculation as well.

I have heard some cite inflation. Others have cited banning of cryptocurrency in some countries. Yet others are citing people taking money out to pay for Christmas presents and that sort of thing. And still others are claiming some of it has to do with what the United States Fed is doing.

Part of the problem I have with a lot of these explanations is that all of them, aside from maybe the Christmas present one, seem to be arguments in favor of things happening that cryptocurrency is and was supposed to fix.

How can you, for example, in one breath say crypto is restoring the power to the people and taking the power away from centralized currency and all the power players operating within it to get away from all of that, and then in another breath say that all of those things are influencing it?

Think about this for a second. Crypto was supposed to rely on itself for its value and what it offered to the people. Not follow right along with it. But that's sort of what many have suggested in their explanation for the dip.

It means one of two things, and really only one of two things. Cryptocurrency is no different at all from regular currency or people simply have no other explanation and so they grab at this kind of an explanation having no other logical way to explain it.

Because again, and I think this point is worthy of stressing, there is no data.

I say this all the time that when you evaluate a stock there is a megaton of data one can look at to decide what a company is doing, and whether or not it has any value, and even to make a determination as to potential future value. We are talking about hundreds and hundreds of pages of data.

There are 10-K filings, 10-Q filings, prospectuses and 8-K filings. All of these tell you what the financial status and health of the company is. 8-K's are more about developments within the company important for investors to know. There are balance sheets, and proxy statements letting you know who and how much executives are paid. You can decipher product value through market share and certain research and development activities to improve products.

What do you get when it comes to cryptocurrency? Essentially a "white paper" about a page long and then charts. That's really it. Everything else about what a cryptocurrency is doing or what it might be worth is nothing more than a guess. Aside from that, publicly traded companies are regulated. Cryptocurrencies are not. There is no one at all who is checking the truthfulness of any of the statements being made, and no one to punish someone for being dishonest.

As the famous Satoshi has taught us, you don't even have to necessarily exist. No one knows who he is or if he even does exist? So, if something goes wrong, there is no one to ask questions to or hold accountable.

So, because crypto is only 12 years old, and no one is really checking in on it, and because no one is really in charge of it because it is "decentralized," and because there is no data to tell you much other than the white paper says and what people believe, and nothing to really evaluate or assess value based on anything tangible...

It is quite literally one giant crap shoot. And again, this is not to disparage crypto. Just to offer up things I think are important to keep things in perspective as we decide what the next best move should be.

Let's also keep another thing in perspective here. 96% of the world does not own crypto or use crypto. I think this is a very important thing to have in mind. It simply means that crypto has not even begun to barely scratch the surface on what its potential could be.

Again, keeping things in perspective this means only one of two things. Let me stress, only one of two things. Either crypto has a ton of room to grow, or it has a ton of room to simply die on the vine.

All this means is that I think the best next move is to simply proceed with caution. I don't think anyone can predict, with any certainty, what the future of crypto is, or even if it has any future at all.

This is to say, do not miss out on the opportunity that this dip may provide. But also do not go all-in in case this opportunity is not an opportunity at all, but a beginning to an end.

Part of my worry is, and continues to be, that there are too many people that have convinced themselves that crypto is it, the end of fiat, and the end of traditional assets. And because of that, the impact of being wrong is probably something that is going to be the worst economic crisis of any time in our history potentially.

I think this thinking is simply wrong.

Cryptocurrency will not and will never be able to replace traditional monetary systems. It just can't. The power will always be in the hands of people who can and will tell you what you can use or can't use to make a transaction. What crypto will do is to augment traditional currency. And this is something I think is very important to consider when you determine what coins have value and how they will maintain it or have more value at some point.

Think of it this way. How many forms of transaction currently exist? All perform the same function. But the methods of doing it are simply different. The end result of the transaction, however, is exactly the same.

We can barter. In other words, I can build a table and you can cook a meal. I build your table and you cook my dinner. We can trade. I own cows and you own pigs. I can trade you my cows for your pigs. We can partner. In other words, we can put our skills together to create something of greater value.

Or we can use any number of ways to trade our goods and services for some form of money. We can pay in cash, we can pay by credit card or debit card, we can pay from a loan, or we can use any number of other means to conduct our transaction. PayPal, Zelle, Google or Apple Pay—there are a ton of them. We can use physical checks, or money orders, wire transfers, ACH transactions, and the list goes on and on and on.

Crypto will only be one of the ways among many ways to transfer money back and forth.

All of this is to simply say that yes, cryptocurrency has value. So, having some of it in our possession is probably a good idea. Having more of it in our possession when the value has dipped, as it has now, is probably a good idea.

But is it going to fundamentally change what money is and who has control over it? I think the simple answer is no. Nothing at all changes except for adding a means of conducting a transaction.

And when we invest in crypto that is the consideration we need to have in mind. Crypto is not going to change the world in the same way so many products and innovations have. That is still something up to things outside of crypto. Crypto will not bring us the technology and the advancement and the innovation and the ground breaking things that will define our lives. It will simply provide a means to be able to get those things.

Just like cash, or a credit card, or a loan, or gold, or silver, or cows and pigs.

The aim and the objective should be as it has always been. To collect the most you can of your currency so that you can use it to obtain your needs and wants. But to also keep in mind the difference between a currency and things that really have value.

Things that produce something.

And so when you consider how to proceed regarding crypto, this is the consideration you need to have. What underlying value does accumulating it provide to obtaining things later on with real value? And does today's lower price present more value somewhere down the road?

In the end you are only accumulating more of the ability to obtain things of value that it can be traded for. So, this simply means YES. Do buy more crypto because it can go up in value itself and be worth more. But do not consider it your ONLY investment. Because the greatest "investments" will always be the things that money can be traded for. NOT the money itself.

Lead image courtesy of Pixabay, user Tumisu. Bitcoin Coin Hoodie - Free photo on Pixabay