According to the New York Post, a recent study found that the average American will spend over $70,000 on takeout during their lifetime. On average this works out to be $1,200 each year by Americans and a similar study showed Brits spend £2,700 on takeout every year. Imagine what would happen if a fraction of this money was invested into Cryptocurrencies? The rewards you could reap by sacrificing a cheeky Nandos for one month; the financial freedom, the guilt-free splurges.
“Babe, what do you fancy tonight?”
In the time it takes for you to agree, order and wait for the Uber delivery, you could download an investment app on your phone, register and order a double helping of crypto with cheese and supersize your financial future.
Obviously, the order won’t arrive in 15 mins or less but the upside will last longer. All investments carry a risk but limiting your spend (or exposure if you want to get fancy) to a night out with your mates or Friday night’s takeaway won’t break the bank. Think of it like the Grand National Sweep Stakes; small and fun.
As my friends over at L’Oreal would say, time for the science (well maths)
Imagine investing $1000 into crypto in 2015, that little beauty would be worth $134,093 today.
Similarly, had we invested $1000 every year in crypto for the last 6 years, that would now be worth $278,407.
The average UK Pension Pot is approximately £50,000, with men saving £73,600 and women saving an average of £24,900. An exchange of fast food to crypto over the last few years would well exceed what the average person in the UK has in their pension after 40 years of hard work.
There are 25,000 bitcoin millionaires with over 300 bitcoin wallets holding more than $100m in Bitcoin. Before you think these Crypto millionaires all look like Leonardo DiCaprio in ‘The Wolf of Wall Street’ or Warren Buffet they’re not. Take Erik Finman who was 12 years old when he invested $1000 into Crypto in 2011. That investment is believed to have made him $4.8million, not quite Ryan’s World money but it’s fair to say the kid did well.
To put it into perspective if Erik had invested the $1,000 in a high-interest account paying 10% of the return then over the last 10 years, his account may have been in the region of $2,707. Realistically, Erik may have found an account offering 3%, which would have resulted in a balance of $1,349.
The Marmite Effect
Like most things in the media, the coverage of Cryptos is very divisive, it can be hard for any newbie to not be overwhelmed or put off. They either love it or hate it. Let’s dive into the reasons for and against.
The positives for Crypto are obvious. Financial gain and potential freedom depending on the amount invested. However as we are still in the early stages of adoption it means cryptocurrencies lack the robustness and security we would normally take for granted by banks and governments. That being said these institutions are starting to recognise them but the concerns are
- “Cryptos are highly volatile…” This means that the price can go and down sharply and is something that people aren’t used to seeing or comfortable with. As price changes, people react and exit the trades with their profits or losses. This in turn generates further volatility. It’s like a Black Friday sales on toilet roll as you hear about another lockdown.
- “They have too many cybersecurity issues…” Depending on how you buy and store the cryptocurrency, it may be possible for cybercriminals to steal your digital currency. Where there is value, there is theft. Protecting your cash or assets is nothing new. In the same way, it wouldn’t be a good idea to leave your wallet on show in an unlocked car, you should also take the same measure to lock and store your digital wallet away from scammers and fraudsters.
- Governments can introduce regulations that can impact your interest or willingness to buy Crypto in the future. The US officially recognise Bitcoin as an ‘financial asset’ this means every time you buy/sell or send/receive it you could be subjected to tax (capital gains). Similar to gold, there are a finite supply and increasing demand which will inevitably result in increasing value.
- “You are going to get burnt!” It is a common sight on all trading platforms to warn you about the risk of losing money. Whilst trading and investing are sometimes used interchangeably, trading focuses on ‘the buying and selling over short time frames’ whereas investing involves ‘the buying and holding securities for longer-term’. Trading can be a difficult skill to master; understanding what to buy, when to buy it and how to buy not to mention the Vulcan-like control of your emotions and behaviours. Trading, like gambling, holds the promise of great financial rewards, but those rewards come with great risk, something many investors tend to downplay. Investing has historically had a far better chance of success, which is why pensions and retirement planning is widely more adopted. I suggest treating Crypto more as an investment than a trade.
- It’s a running joke in my household that if we could go back in time we’d buy bitcoin. Every year we see the prices of Crypto rise and people say the prices seem too high. Tesla CEO, Elon Musk this week said that bitcoin prices “seem high”. When an asset increases in price drastically it is human to take time to get used to the higher prices, think about the price of coffee before Starbucks and now I don’t seem to get much change from a £5 after ordering my wife’s caramel macchiato. Who wouldn’t want to have bought into Telsa, Amazon or Google when these prices were in the hundreds or lower. With Crypto who knows where the price will go next?
Purchasing crypto as part of a wider set of assets is similar to having the occasional takeaway and Starbucks… Very likely to be a good boost to morale and something you can enjoy.
Moderation is key.
If you are new to investing you definitely should not be refinancing your property or going all-in with your kids’ college funds. Moderation is key. We don’t know what is around the corner, anything could happen. Some people start the year with dry January, why not try something similar in March and use those savings to dip your toe in the water. Investing smaller amounts for longer periods may also help you deal with large price movements, after all this was money that was going to be spent on non-essential items anyway.
At what point does the risk of not investing in Crypto become greater than investing in crypto? To quote my 7-year-old son, “It’s worth a try!”.
Conclusion:
- Take a look at your spends, if you have the cash to spare on a take out, Starbucks or the latest gadgets then try give investing a go. When investing, consider buying some crypto.
- There is no need to supersize your crypto order on day one. A lighter option is perfectly fine.
#crypto#moderation
Thanks
- Shout out to Niki Shu for providing feedback and for creating the illustrations
- Mihail Dungarov for providing feedback and suggestions on the article. His articles on AI, NLP & Search are an interesting read.
Disclaimer
- This is not investment advice. The author is not a financial expert. Just highly opinionated.
- The author has investments in Crypto as part of a balanced approach to investing and trading
