I entered the crypto space four years ago and looked at it as a way to speculate and make some easy money. I initially invested in XRP and in a few months time, I saw my investment 13X! I was giddy and pictured myself quitting my stressful job if the crypto market could maintain its through the year. Before I knew it the bull market ended and my gains were gone. I had torn feelings. I thought that maybe I should have invested more so that I could have seen greater gains that would have lead me to banking some of my gains. My second attempt in crypto was also unsuccessful. I had the idea to get in heavy before the halving. I overinvested and panic sold in the March 2020 crash. Around July 2020 as markets were stabilizing, I decided to get granular, research, and come up with a strategy and a mindset to give me the best chances of succeeding over the long-term.
My First Lesson
What I realized first is that the fiat monetary system is a mess. There is nothing backing the value of Dollars, Euros, Yuans, Pesos except for the perceived value that people hold in it. And since there is an unlimited supply of fiat (central bankers can print at will), the purchasing power will probably keep going down. One graph that really resonated with me is below and it shows the spending power for the US dollar since the Federal Reserve started in 1913.
I interpreted from this graph that if I had a time machine and could go back to 1913 and store $1000 underneath a mattress and then transport back to today, that $1000 would only buy me the equivalent of what $37 would have bought me in 1913. That’s over a 96% reduction of purchasing power over a century!
Why Stocks and Real Estate Aren’t Enough
A lot of people feel that stocks and real estate will protect them from the devaluation of the dollar. This may be true. Afterall, businesses can raise prices and gain value in an inflationary environment. Housing also has been a good hedge against dollar devaluation and locking in generational low interest rates. But the risk in stocks is that they can suddenly decline and businesses can shut down or be displaced from black swan events and technology changes. In 2002, Blockbuster stock was flying high and then it dipped 75% over the next three years never to regain its stature. In…