Charlie Munger does not like Bitcoin at all. Who really cares about his opinion anyway. A century-old investor has been left out from the current digital trend and complaint about it. The crypto market sentiment has been changed since last Friday’s sold-off. Institutional investors can influence the crypto market as a result of the fast adoption.
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Spot Price vs. Derivatives
There is a major investment in crypto derivatives rather than the spot price. Bitcoin future is one of the examples of derivatives products that heavily impact the price action on Bitcoin. Not to mention, it is the only ETF that the SEC has been granted to strategically restrict how Bitcoin may move on its future price. Other countries are also adopting spot price EFT that further increases the trading volume on each crypto asset.
Volatility of Crypto
Volatility is one of the crypto’s features. Investors love crypto assets because of their high volatility with high rewards rather than retail investors holding assets for long periods of time. Institutional investors have more tools to include crypto assets as their portfolios and improve their performance. Retail investors tend to hold crypto assets as speculative financial hedge instruments for uncertain futures. Different aspects of crypto assets may yield a very different result of investments.
Crypto Assets Are More Stable with Supports
The way institutional investors purchase crypto-assets can create a large support level for them to enter and exit the market because of their influential large amount of money to enter the market. While retail investors may blindly enter the market and exist without any protections.
Correction of 50% May Harder to See
Since April 2021, Bitcoin has had a major correction of more than 50% price down until it fully recovered in October. Such a bearish market may be harder to see in the coming years because institutional investors are in control of the direction of the crypto market.
Crypto Whales are Diminishing
No to mention that crypto whales are extinct. Instead, there are more institutional investors to replace crypto whales who are more conservative on asset management and profit-taking rather than based on FOMO and speculative information.
Future of Crypto Movement
The crypto will be still volatile but less in its correction range. 50% of corrections will be less likely than each 20% correction. As crypto enters into the mainstream, its valuation may continue rising at a steady pace.
In Conclusion
It is not good or bad for institutional adoption of crypto. It is only how you view such adoption as an opportunity for investors to continue investing assets and make a profit rather than gambling their money. Either way, it is a choice of lifestyle.
I am, of course, onboard with crypto. But I am also one of those guys, which I have mentioned many times, who has been in traditional markets for 30+ years, and being that I have such experience in this way, it gives me a different perspective and insight AS WELL AS a reason to be very cautious about crypto.
Because from my view it is an untested market with an untested asset. It's only been around 12 years, and while it IS a good idea to have some skin in the game, and while I do think crypto has a future, I am sometimes of the thought that we are thinking too quickly that it IS the future.
I don't think we can say that with a straight face just yet.
As for Charlie Munger, can we really argue with the sentiment of a guy who clearly knows a thing or two about money and how to make it and how financial things work and why? I mean, he's a multi-billionaire for a reason, right?
Technology is not his thing necessarily. Wasn't for a long time for Warren either. Either way, I share SOME of the sentiment that we simply don't know what the future of crypto really is, and to think we know for certain what that future is is a bit naive and frankly foolish.
IF we are talking about ditching traditional investment vehicles entirely and going all in on crypto.
I don't think anyone should have more than 5% of their total wealth invested in crypto personally. But that's just my opinion. Anyone can do whatever they feel comfortable with, so long as they are also fully aware of and ready to take on the level of risk that decision implies.
I think we erroneously assess how crypto will out value traditional investments. Because ultimately all it is, really, is a currency. It produces nothing, unlike a company for example. So, it gets its value in an entirely different way.
Looking at JUST the crypto market and the stock market one thing is true. While crypto MAY have the ability to one day replace fiat, it DOES NOT have the ability to replace the stock market, because the stock market is made up of the companies that make and sell the things that crypto will buy.
In THAT sense, the value of the stock market will always be superior to the crypto market because it is only a transactional tool. Likewise, the value of crypto will always be determined by the value of the goods and services provided by the companies. How much a dozen eggs cost will have nothing to do with how much 1 BTC is worth, but will have everything to do with traditional market forces. How much it costs to produce the eggs, transport them, package them, shelve them and so on and so forth, and how much the market is willing to bear for the eggs and how much the company wants to charge for them to maintain their profits and margins.
I could go on, but I don't want to become TOO big a windbag. lol