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Alex Cho

Why Investment Pros Hate Crypto and Why You Should Ignore Them

Ignore the old vanguard of investment pros, especially Warren Buffett and Jamie Dimon when pertaining to cryptocurrency.

I’m not going to throw around some crazy conspiracy theories here, or anything to demean the character of these well-known figures on Wall Street.

Truthfully, crypto assets are a bit too disruptive as a form of investment or currency when compared to conventional fiat assets. It also goes without saying that Warren Buffett is usually late to the party when pertaining to any tech-themed investments.

Crypto assets operate differently, as they don’t produce cashflow, but rather a use model that drives the value higher due to adoption. The value creation, or value transmission differs drastically from more conventional assets, which is why it’s so difficult for established investment pros to get behind the category.

After all, most of the investment whales of the past have made vast fortunes from following a formula of buying stocks at a discount. But, in the case of crypto assets, it’s a matter of adoption and usage that drives the value of the underlying coin higher. So, there’s an element of foresight, and subjectivity that’s not tied to the conventional operating metrics of a business that makes crypto too unique, for most cashflow oriented investors.

Most investment pros are trained to avoid market euphoria. In most cases in our brief financial history from the 1900s, the introduction of new asset classes, or new categories usually led to a boom and bust cycle that wasn’t tied to innovation, but rather the creation of new legal contracts for the purposes of executing financial transactions.

Over the course of the 1900s, we’ve seen the invention of various investment vehicles, such as derivative contracts, and mortgage derivatives along with a host of other financial assets that led to quick money plus eventual bust scenario that wiped the fortunes of various institutions, or closure.

So, for some of the older investors, there’s an element of skepticism to anything that’s A) new and B) has increased in value substantially.

In the case of crypto, there’s a greater understanding of risk, and fewer methods to leveraging a portfolio. Furthermore, the market sets the price rather quickly, which diminishes the likelihood of epic bubble formations. Instead, we witness annual price swings that quickly corrects valuation, before re-establishing an equilibrium at a much higher price level. This trend has been persistent, so when the market is left in a sandbox situation where its free to price an asset how it wants, we end up with crypto assets.

Surely, the argument against crypto is that it could be a speculative bubble, but if that’s the case, why has each price correction felt like it almost validates the skeptic’s theory on mania, only to revert to higher price levels within years or even some cases, months? If it’s a financial bubble, why have there been so many bubbles?

What’s ruined the theory of skeptics is only partial confirmation of the theory, only to be followed with a new inflow of capital, that’s more perfectly priced into the value of assets, due to the freedom in which capital moves in the blockchain space.

So, for new entrants into the space. Watch out, the same group of skeptics who are generally good at predicting price moves, will call each successive rally another bubble forming, but with each passing year, we tend to navigate past these moments where pessimists won’t fully validate their theory.

Each year, the sky seems to be falling as crashes tend to be a frequent occurrence. But again, this may be a byproduct from absolute freedom of capital movement, more so than anything else. In other markets where pricing is more restricted, and maneuvered by fewer/bigger players, you’ll see a sort of predictive market behavior that’s more orderly and less chaotic (this is due to centralization and book management across central clearing houses). Up until, the orderly movement of capital turns to unpredictable chaos, because the underlying fundamentals, or what’s baked into the assumptions of these big players changes so drastically that the market goes into full panic.

So, if restrictive capital leads to less volatility followed by extreme volatility. The “free-er” form of capital leads to persistent volatility, or constant volatility. The freedom of movement, paired with decentralization leads to more randomness in outcomes, and a far broader range in price scenarios.

Hence, I view crypto assets as a sort of counter-cyclical category unto itself that neither validates or denies the view of the optimist or pessimist. You will see both extremes of these emotions + rationale priced into the value of crypto assets each year, talk about bipolar market disorder, right?

If you want to learn more via video courses with my help, and the help of crypto millionaires, bitcoin foundation founders, and various other crypto pioneers who are at the forefront of news, information, and methodologies you’ve got to join the Bitcoin Crypto Mastermind program.

We also provide live events, one-on-one consulting, and private communities where knowledgeable experts, and experienced traders interact with each other, share ideas, and keep a level of inclusion that can be found nowhere else.

The program will remain open for a select period, so enroll as soon as possible.

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