In the past, Bitcoin was the only viable option. The crypto universe was divided into two: Bitcoin and everything else. But everything else involved putting our money in practically fraudulent schemes. Now the perception is another. Bitcoin is still the most recognized cryptocurrency. However, for the most greedy retailers, Bitcoin is already something old and heavy. It is arguably the most boring crypto asset in this space. Today the big gains are elsewhere. Money comes out of Bitcoin to head for the trendiest items in hopes of hitting it home run. Dogecoin, Shibacoin, Solana, Axie Infinity, etc. What do we buy?
A couple of years ago, talking about a speculative market was practically blasphemous. Apparently, money was not the main objective of all this. It turns out that it was not a speculative market but a revolution. It was a currency reform that would end fiat money, private banks, and central banks. Withdrawing the power of the State and giving it to the people. We are talking about the old discourse of libertarians and the gold standard, but dressed in novelty, digital age, cryptography and millennial spirit. Same shirt, different color. Many spoke of the separation of the state and the economy to promote a kind of libertarian utopia. What happened to that?
Buying BTC was practically a plebiscite against the system. It wasn’t about the money. It was the ideology that supposedly motivated us. The world, it seemed, was very poorly managed and its eventual collapse was inevitable. In fact, fiat money is a fraud. On the one hand, the inflation that dilutes its value. And, on the other hand, its constant manipulation by the oppressive state. Therefore, it is a great danger to have fiat money. Bitcoin is special because of its limited supply, its citizen character, and its digital reality. By not needing intermediaries, this means that intermediaries such as banks and the government automatically leave the photo.
According to this ideology, during the next crisis, people would turn away from the dollar and take refuge in Bitcoin. After all, the limited supply of Bitcoin makes the currency a safe haven. We are talking about a currency like gold, but better (because it is digital and programmable). It is Bitcoin against everything. Now, there is a detail. It is Bitcoin, unique and unmatched, against everything. Its limited supply is very important. And Bitcoin must be used to buy things. In other words, Bitcoin must be used as a currency. The problem is that, for a citizen currency, it is very difficult to remain the only one in existence. After all, we are talking about simple computer code. Anyone can clone the code. And break away from the uniqueness so necessary for hard currency monetary reform. What happened? Now there are thousands of cryptocurrencies.
The traditional solution to impose a single currency in a given jurisdiction is the use of state force. In this case, for a project driven primarily by libertarians, this imposition must be voluntary. The problem is that people ignore it. Bitcoin maximalists have tried to impose their will with stubbornness, arrogance and rage, calling everything that is not Bitcoin a fraud. But obviously it hasn’t worked. People keep doing what they want.
The above is a vision of things. You could say that it is the official narrative or the formal narrative. But there is another vision. That is a not as popular view as the official one, but it has the peculiarity that it fits the facts perfectly. I mean the pragmatic view of Bitcoin. It is not the ideal Bitcoin. It is the real Bitcoin. Bitcoin as a speculative asset. That is, not liberatory reform but Wall Street on steroids. It is not about the bitcoiner as a militant of a pseudo-political cause but the bitcoiner as a venture investor who aims to grow financially quickly and aggressively. As simple as that.
In this line, what do we buy? Well, the answer is simple: We buy everything. If we see the opportunity, we buy. This implies the construction of an investment portfolio. It is perfectly adequate to have Bitcoin, altcoins, and NFTs in our portfolio. But not crazy. It is very important to weigh the risks and opportunities of each project. This is relevant when allocating an appropriate amount of capital to them. The rule says that riskier projects are placed with a lower percentage of capital, allocating the largest amount of capital to the safest assets.
In this case, Bitcoin would be the safest asset in the basket, followed by altcoins in the top 10, followed by altcoins not in the top 10, and then we could enter the universe of NFTs. The concept of risk is very complex. And they all have their own version. But, on this occasion, it could be said that risk is synonymous with high volatility, little liquidity, little information, novelty, immaturity (level of emotion and type of investor) of its market, and a project in a highly competitive sector. Bitcoin carries less risk than Ethereum. Ethereum carries less risk than Cardano. And Cardano carries less risk than Shiba Inu. For instance.
Generally speaking, the “safest” projects are more “stable.” In other words, less profitable. Riskier projects are potentially more profitable. But, if we lose, we can lose more. For this reason, it is wise not to invest a lot of money in risky projects. Thus, we take an asymmetric risk. At worst, we lose little. And, at best, we win well. This is one way to manage risk. A project can go to 0. But it can also be increased by 1000X. For example, if we put 1% of our capital in a project that goes to 0, we lose 1%. On the other hand, if we win at 1000X, with our 1%, we hit it home run without much risk. That’s what asymmetric risk is all about.
Why are you here? To fight the Federal Reserve on Twitter? Or to make money? To save the world? Or to grow financially? To trolling the networks? Or to put bread on the table? Are you a militant or are you an investor? Everyone knows their answers. The important thing is to be clear in life. Otherwise, the matter becomes very confusing. To be a good investor we need to be pragmatic. We need to have a cool head. Be objective. Ideologies are often harmful because the idealist usually sees what he wants to see. That is, you do not see reality. Also, too much time is wasted fighting with others for “reason” rather than spending that time looking for financial opportunities. Militant or investor?