A call to action for all “Crypto Kids”
Bill Guida — Head of Research, Bull Flag Group
As we begin to move forward into what appears to be the next “Bull Market” I would like to take this time to discuss an uncomfortable truth for many of the so called “Crypto Kids”. We need to discuss financial responsibility…but first I think its appropriate to address what a “Crypto Kid” is.
In it’s most pure form a Crypto Kid (otherwise know as a Blockchain bro) is simply a person between the ages of 17–35 who happened to be in the right place, at the right time, back in 2017 and quickly made a lot of money. I’m not down playing the amount of time or effort it took for many of these people to master the crypto craft by any means. With that being said many simply did get lucky.
In January of 2018 the crypto market topped off and projects like Ethereum grew to astronomical highs from $13 to $1400. With these types of gains, people undoubtedly made a lot of money. One of the popular memes and cultural statements which grew from the 2017 bull run was the “Lambo”.
I remember the talk of the crowd was how “Stupid” it was to buy a Lambo with your earnings — and in general I agree. However, looking back it might not have been such a terrible idea. Let’s discuss.
Let’s say the average crypto bro purchased a used 2016 Lamborghini Huracan for around $200,000. First, taxes would need to be paid on the sale of the Crypto into Fiat. However, for this example lets assume no taxes were paid on the conversion.
220,000 on a 2016 Lambo Huracan (lowest possible version, coupe, in Yellow)
The current KBB value of that Lambo is now $196,432 in 2019.
The total value lost on the vehicle now is $23,568 — lets round that out to $25,000
So the total % loss on the Lambo is 11.36 %.
Lets also take into consideration insurance, and additional wear and tear and add another $5000.
That brings the total investment loss to 13.64%
That’s not so bad when compared to the epic losses that the “Hodlers” felt in 2018 when ETH fell from $1400 to $88 which is a shocking 93% drop in value. Maybe it wasn’t such a stupid idea to pick up that Lambo…
So what is the point of this comparison?
I think one of the things we need to discuss is financial responsibility in Cryptocurrency. This sounds very hypocritical coming from someone who has 60% of his net worth in crypto, yet I think its important to be grounded.
I have put together a list of reasonable and responsible suggestions for those who are newly rich off of this most recent crypto run, but also for the ones who will get shockingly wealthy between the years 2020–2022.
- If you have any Student Loan debt erase it. — I cannot tell you how good it feels to have zero student loan debt. As someone who was brainwashed into thinking degrees were necessary for a successful life I went on to get a BA and an MA — with interest this set me back $90,000.
1/29/2018 was a wonderful day — the balance was paid off since. Student loan debt will destroy your future and hold you back financially and mentally. Get rid of it.
2) Get professional tax help. Far too often I heard people talking about how stupid it was to get your taxes done professionally. Put simply if you are investing or have an LLC — you need to have an accountant and tax professional handle your stuff. Keep track of everything and always hold 15% of gains on long investments, and 35% on short term gains. Just do it, the IRS has the ability to go back 7 years and audit your “Sick Crypto Gainz” don’t be a chump. If you don’t want to pay taxes, move to Puerto Rico — the process is around $5500 and you can go to raves with Brock.
3) If you are in Cryptocurrency full time- figure out a career path. I think we all have had experiences at conferences where we ask ourselves “How does this dude eat?”. If you are in Crypto and want to continue to be without burning your stack up jet setting around the world to take selfies — figure out a long term game plan, where you can make some fiat.
4) Buy some cash producing assets — Whether it is an Amazon Affiliate website, a Shopify business or a rental property. You should diversify. Its easy to get caught up in the hype and “Hodl”, that’s cool, but you know what’s really cool? Realizing that the Crypto boom will eventually mellow down and you want to be able to spread your risk across multiple asset classes.
5) Set up an emergency fund — This should include 4–6 months of living expenses. Most Americans are in debt, and financially irresponsible. Don’t be like them, get your financial house in order, then you can afford to make riskier moves in the crypto world without having to live under a bridge until the next Halving.
I hope you enjoyed these tips — I look forward to being an active participant in this next wave of digital assets.
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