Halfway through 2021, more than half of the biggest 100 banks (measured by AUM) invested in crypto or blockchain assets. Some of the most active financial institutions investing in crypto have been Citigroup, J.P. Morgan Chase, and BNP Paribas. Say what you want about these institutions—if they are bullish on crypto, so should you. After all, their livelihood largely depends on crypto failing (it’s a slightly different story for the likes of Barclays and Goldman Sachs—who are also heavily invested in crypto—as they generate the bulk of their revenues from advisory services).
Then again, large financial institutions have fucked up plenty in the past: They create massive moral hazards by taking on more risk than they should, knowing that (in most cases) governments will bail them out. Too-big-to-fail institutions can afford to be wrong about crypto, even if they lose zillions. You probably can’t. So, if you’re not comfortable with blindly following these big banks, you should try to understand the WHY behind crypto and blockchain.
The world is changing & no better alternative exists.
Protocols and tokens store value for the same reason as any traditional assets: utility; even when the utility is merely derived from an idea or a belief. Sure, you could buy Tesla stock for its cars’ utility… but let’s be honest, no one does. In 2021, Tesla sold slightly under one million units and ended the year with a market cap of roughly $1 trillion. That’s a market cap of $1 million per sold car. You might throw your hands in the air and argue that Tesla isn’t the norm by any measure, and I agree. But, hear me out. People purchase Tesla stock because (i) everyone else is, (ii) they believe that Elon is a modern-day Jesus, or (iii) they recognize that the world is changing and shifting towards a more sustainable future, which Tesla represents. Ultimately, people are buying an idea.
We should think of crypto and blockchain technology the same way. The world is changing, and technological innovation is happening at an unprecedented pace. Although the financial system has been slow to adapt, it won’t escape this change. If you believe that the financial system is immune to technological innovation, I’d have to assume that you’re illiterate at best and won’t be reading this article. Anyway, let me not insult your intelligence or waffle on too much about the hundreds of reasons why you should believe in crypto.
The point is: change is coming and no superior alternative to blockchain technology exists—if I’m wrong, please do tell. Even if a better alternative were currently being developed, imagine the time it would take for this alternative to become widely accepted (seeing how painful the process already is for crypto). All to say that, what’s the alternative? If you don’t believe in crypto for its unlimited possibilities and uses, you should believe in crypto because no other viable options exist. Whether you put your own capital at risk is a different story.
Keeping your cool and smiling through bear markets.
For those of us brave (read: smart) enough to invest in crypto to support the development of a healthy ecosystem, please relax. I understand that seeing red numbers and charts isn’t fun, but you seriously need to grow up. Let me help you understand how our brain works. Plenty of studies have found that humans suffer from significant negativity bias: The magnitude of your emotional response to a -10% loss is MUCH greater than to a +10% return. If you’re in crypto to chase juicy 80% returns, better be ready to accept -50% losses. Can’t/want to deal with this? There are plenty of traditional ETFs that will return a comfortable 10%, annually. Either way, understand that you are putting capital at risk, and even your cosy ETF will most likely go through peaks and valleys.
Anyway, my advice is to not invest in crypto because of the amazing returns it's generated in the past, but because (a) you believe in the idea and technology or (b) you understand there’s currently no viable alternative. Here are a few “rules” that save me from the unnecessary stress that can come with investing.
- Don’t short. Plenty of idiots boast on TikTok and Instagram about making fortunes from irresponsible and stupid shorts. Don’t be even stupider trying to copy these guys (if people on TikTok and Instagram inspire you, get out!). Shorting low-volatility assets is extremely risky; shorting crypto is suicidal.
- Invest, don’t trade. Buying low and selling high typically doesn’t work. Even if it does, you probably would need to obsessively check markets, read news, scour forums, etc. We tend to overlook that time is our most valuable asset; spend more time doing things you love. One of the most useful things that I’ve read since I first started investing is the old adage that says “time in the market, not timing the market.”
- Change your perspective. Instead of forming expectations based on all-time highs, focus on all-time lows. Switching up your perspective can help you better understand the positive long-term trajectory of your investment and make short-term volatility seem less meaningful.
- Don’t invest money you don’t have. Admittedly, this seems like a no-brainer, but you’d be surprised how many people YOLO away their life savings. I get it, letting your money rot away in a savings account sucks; ridiculously low-interest rates paired with inflation are not fun. This is exactly where one of those traditional ETFs that I mentioned earlier might come in handy. With a bit of research, you’ll be able to nicely diversify your savings at a low cost and access them anytime. Putting your entire savings in crypto is manic, don’t.
- Stop checking prices. Sit back, relax, and trust the process.
These steps certainly help me keep calm when things go to shit, and I hope a few of these points can help you too. Oh, and remember: some people really can’t help it, they just love drama. Stay away from that shit and surround yourself with people that know where we are headed in the long-term. Our mission here at Lithium is exactly that—building a community of people who are excited about sustainable long-term development and want to play a meaningful part in this journey.
Keep smiling and know, we’re on the right track.
Take care,
Team Lithium x Seb