[New post] How I Got Into Crypto And Why I Am So Bullish On It Long Term
Investing Beanstock posted: " To be very honest, I am becoming more and more bullish and convinced that crypto will be my flight ticket towards financial freedom in the next 10-20 years. There are tons of things you can do with crypto. They are not like stocks, where you do yo"
To be very honest, I am becoming more and more bullish and convinced that crypto will be my flight ticket towards financial freedom in the next 10-20 years.
There are tons of things you can do with crypto. They are not like stocks, where you do your research (fundamental/technical), come up with a bull and bear case, calculate the valuations using DCF or DDM or whatever traditional outdated model out there, and then you buy and hold and dollar-cost average your path to financial freedom. That's about it for most stocks investors.
With crypto, your choice for investing broadens tremendously. You can buy synthetic assets such as your favourite stocks like Tesla, Square, Alibaba and many more on Mirror Protocol and earn additional yield from it. You can literally place your hard-earned cash in a savings protocol like Anchor and get 20% APY (principal-guranteed) on your Stablecoin UST and then take a loan against it and long mirror-ed Tesla stocks and gain a yield while Tesla stock appreciates.
The possibility is endless. Non-dividend producing growth stocks can now be turned into yield-generating assets thanks to the power of blockchain technology, or in this case, the power of Terra blockchain and their suite of amazing protocols.
How I Got into Crypto
In 2017, while I was a JC newbie in investing trying to figure out a way to attain passive income while I was still busy starting for A Levels, I came across the Bitcoin craze, but did not bother too much about it since I was ill-informed about financial literacy, and still trying to understand H2 Economics in school (to truly understand Bitcoin or crypto, you need to have your basic fundamental economic concepts in check).
It was also the same year I read the book 'The Intelligent Investor' by Benjamin Grahamwhere I understood how to think like an investor, what to look out for when investing and the difference between an investor and a speculator, and of course the most important lesson of it all: Mr Market.
Started off on Singapore Stocks
At that point, I would say my level of understanding about the world of investing is a 3/10, and I am barely grasping the concept of why investing is important. So we all have to start somewhere, and eventually, when I turn 18 that year, I also went ahead and bought my first ETF through OCBC Securities and finally understood what a brokerage account is. There wasn't many Singaporean investors out there teaching about US stocks investing back then, so I went with the typical pathway of investing in Singapore stocks first.
And while all these are happening, I actually read about Bitcoin quite deeply in 2017 since it was the peak market cycle back then. I was intrigued at how the price of Bitcoin shot up to $20,000 from a low of less than $3000 (I can't remember), but I took notice of it, but did not invest since there was no easy way to access to Bitcoin back then.
2020: A Turning Point
Fast forward to 2020, we saw another run up of the crypto market with the resurgence of the price of Bitcoin. It has been roughly 3 years since I first dipped my toes into the world of investing, and I saw the beatdown price of Bitcoin during the Covid-19 crash to be a huge opportunity to accumulate. At this point in time, I have already converted all my SG stocks holdings into US stocks due to better growth potential and opportunity cost.
It was also at the juncture where I met a friend in hall who was a crypto native/enthusiast and has been investing into crypto for a few years now. He told me about the different use cases of crypto, and introduced me to the concept of yield farming, and how there are insane yields in DeFi.
After he introduced me to all these amazing developments, I immediately fell down a rabbit hole of no return and became more and more convinced that crypto is not only here to stay, but to eventually be the apex asset class in terms of risk-reward, this was around August 2020.
So yes, you can say I officially joined crypto only in the second half of 2020, and it has only been about 1 year since I first started investing into crypto properly.
Gamestop Saga, and the importance of decentralisation
Between December 2020 and January 2021, we saw the rising popularity of meme stocks, the most prominent one being Gamestop thanks to reddit army r/wallstreetbets. So I am sure most readers know about this, but what happened essentially was, the hedge funds were trying to short the worst companies on the stock market, and wallstreebets decided to rebel against them and buy up tons of Gamestop options and shares in a bid to drive up the price and trigger a short squeeze.
The short squeeze happened, and we saw the stock surge more than 50% for a few days and even weeks. The whole saga blew up and eventually, regulators stepped in and Robinhood even halted the trading of the stock by preventing investors from buying Gamestop.
I found it extremely ironic that a broker like Robinhood had such audacity to prevent users from purchasing certain securities in a bid to 'protect users from unusual volatility' while calling themselves Robin, which is to make the poor rich by taking for the poor.
Sounds like total cronyism to me. With that, I realise that in the stock market, there is an unfair advantage between the hedge funds and normal retail investors. The power balance is tilted to the rich and powerful.
The entire stock market is just skewed to benefit the already rich and powerful, and the stock market is never truly a free market if the central bank constantly injects tons of liquidity through money printing and the ability of brokerages to halt the buying of certain stocks. That is not freedom at all.
Crypto is a time-tested free market
If you look at 2008's Global Financial Crisis, AKA the sub-prime mortgage crisis, what did we see?
Banks caused the 2008 crisis
Banks were offering complicated financial products that packaged multiple different leveraged, unsustainable mortgage bonds with high yields together, had them rated AAA, and sold them to clients while behind the clients back, they bought derivatives of those packages to short those bonds because they knew it was a trashy product. Full Wall Street hypocrisy at play.
The entire market got flooded with those products and because banks are earning unprecedented amount of money, they just kept on repeating this process and eventually, the bubble had to burst, and we saw multiple investment banks announcing bankruptcy, the most famous one being Lehman Brothers.
And the banks got away scot free
In the end, banks such as Goldman Sachs, JP Morgan, Morgan Stanley, Citi, Deutche Bank and many more who were responsible for causing the sub-prime bubble, were bailed out by the government while millions worldwide became bankrupt because of the bank's mistakes.
Stock Market was Spoon-Fed by Central Banks since 2008
After 2008's big time screw up by the banks, US central banks started to unleash a massive money printing program called Quantitative Easing (QE), which is just a fancy word for printing infinite money. Since 2008, the entire stock market is being propped up by the QE measures, almost like a morphine addict that needs it constantly in order to live.
Each time QE measures were rumoured to be tightening or the central banks announcing measures to curb the money printing, the market reacted with fear each and every time. In 2021, the Fed once again announced that inflation is transitory, and they might experience prolonged periods of high inflation and might be conducting rate hikes and tightening measures to reduce QE.
Everything has been a snowball effect since 2008 when the Fed decided to do unlimited money printing, and the high inflation we see today is merely a side effect of such absurd monetary policies.
In short, the stock market has constantly been carried (liquidity wise) by the money printing, as we can see correlations between the amount of new money entering into circulation coinciding with the S&P 500 hitting new all time highs.
Each QE shows how much more money supply expanded. End result is more inflation = Cash devaluation
The stock market has been manipulated by money printing since 2008, and Covid basically pushed the Fed to print even more because the effects will be catastrophic for the stock market if they did not unleash unlimited QE last year in 2020.
No Help Was Given to Crypto
On the other hand, when we look at the crypto markets, there was not once where the governments worldwide stepped in to bail crypto projects out of bear markets. There were boom and bust cycles, each led by Bitcoin because it is the reserve currency in the entire crypto ecosystem.
There were huge drawdowns of up to -80% or more in the crypto market since 2009 when Bitcoin was born, and each time crypto survived and hit new all time high and higher lows, without the need for government intervention.
Besides, crypto is not welcomed by governments at all because they are unable to regulate them and get tax revenues out of it. So it is often that crackdown happens especially in authoritarian states such as China.
The resilience of the crypto market is a proof that this asset class is here to stay, and just like the 9-headed hydra, every time a head gets cut off (eg. blocked by the government), another 2 head grows out in its place and the entire space becomes even stronger.
This is also the manifestations of the Lindy Effect which I talked about a couple of times, since the longer the new technology survives, the longer it will survive and be around.
Unlimited Possibilities in Crypto
In the stock market, you can do a few things, such as:
Buying or selling a stock/ETF
Trade derivatives such as Options/Futures contracts
Leverage and borrow on margin to boost gains on your Options/Futures
Short the market using derivatives
Yup. That's pretty much about it. There is not too many things you can do to make money from the stock market. Buy and Hold might be your best bet, any other strategy might work against you, unless you know how to employ delta-neutral strategies to hedge against market risk.
In crypto, you can do a plethora of things, such as:
Buying and selling different crypto tokens
Trade crypto derivatives such as Futures or Perpetual Contracts
Leverage and borrow on margin to boost gains on your derivatives contracts
Short the market using derivatives
Pledging crypto collaterals and getting a loan from a lending protocol like Aave without KYC or approval letters
Harvest yields through yield farming protocols like Curve, Balancer, Autofarm, Yearn Finance
Staking your crypto (like fixed deposits) and getting a yield as reward for securing the network
Trade synthetic stocks like mirrored-Apple shares and earning a yield through capital appreciation and becoming a liquidity provider
Becoming a liquidity provider and a market maker by staking your tokens into liquidity pools and earning yield and fees for facilitating the exchange (You become the exchange/broker)
Trade and flip NFTs (Non-Fungible Tokens) and increase your crypto allocation due to market inefficiency of the NFT market
Buying NFTs like Axies and earning yield from them by playing or outsourcing it to scholars to earn yield through their time and effort.
Buying and holding NFTs as a speculative play in hopes that the scarcity will result in sky high valuations (CryptoPunks/BAYC)
Earning passive income through a centralised platform such as Hodlnaut, Celsius or Nexo
Many more undiscovered use cases
I might have missed out more use cases to the utility of crypto, but the point here is, there are tons of things you can do to explore or invest and there are more opportunities than ever to make tons of money from crypto when compared to the stock market.
In the stock market, if you buy and hold Apple shares for example, you are just hoping that Apple do well over time and you earn from the capital gains when you sell the shares at a higher price a few years down the road.
If you buy a mApple share on Mirror protocol instead, not only are you enjoying the same price appreciation potential and the same amount of volatility as your Apple shares in your broker account, you are also earning a yield from being a Long position or a Short position, and also if you choose to become a liquidity provider for mApple and UST (Terra USD), you can also earn transaction fees every time some one else swaps their UST for mApple and vice versa.
The Rule of 72 decides the time taken based on your return potential
Besides, earning 30%, 50% or 80% time-weighted returns from the stock market over time is great. But it usually takes years for the returns to play out.
You will be able to attain financial freedom eventually, but it may be well in your 50s or 60s when it happens because of the rule of 72.
If your annualised return is 10%, your portfolio will take 7.2 years to double. If your annualised return is 30%. your portfolio will take 2.4 years to double. See the catch yet? The key here is to take the shortest amount of time taken to double your capital, and if you are starting out with a $10,000 capital, you essentially need to double your capital 7 times and you become a millionaire. You can just do the math yourself.
To me, stocks or crypto are just tools that help us to attain our financial goals. There is no point throwing shade at crypto if you only buy stocks or saying you hate Bitcoin or Ethereum because what good does it do? If you hate crypto, simply just don't own it, and move on.
You Need Conviction
Conviction takes time and effort to build, and just like how Rome is not build in a day, a life-changing portfolio also takes the same amount of effort, time and conviction to attain.
Besides, I am also slowly discovering the powerful intersection between NFT and DeFi, and the market is still largely inefficient; meaning that the buyers are mis-pricing the buying price while selling are mis-pricing the selling price. All these translates to huge profit margins if you know where to find them.
In the world of NFTs, it is all about deal hunting and going where the community is. But it is pretty much very early and whatever we are seeing now are newly formulated economics at play and all these are beautiful real-world economic experiments. Something you will never experience in a lecture in University.
Conclusion
Am I bullish on the stock market? Well, yes, but the amount of things you can do and amount of alpha left is like finding a needle in a haystack. To truly beat the stock market, you need to know more about the company than others, do more homework than others, and build your own conviction.
In the crypto world, because there are a lack of talents, lack of real crypto research analysts that exists today because most don't even know what DeFi is and what Ethereum actually does, so we are still extremely early and if you understand what smart contracts or what the above are, you are already part of the 0.01% of the world's individuals that are future-proof and ready for the future.
A Decentralised Future
You can earn yields from growth stocks in crypto form, something that is not possible in the traditional world, or even becoming the exchange itself. You get to earn 20% yields on your savings account through Anchor Protocol, or participate in yield farming and compounding your tokens on Autofarm for example.
You can also buy NFT monsters like Axies with your ETH and use them to earn a yield by playing the game, or outsource that manpower over to scholars while you just manage them and shake leg while earning passive income.
The metaverse is only at the beginning stages. The exponential age will be a period of extreme growth and innovation, and my long term bet is going to be on the crypto and blockchain space, with increasing conviction over the Ethereum ecosystem every single day.
How do you think the future will play out? Leave your comments down below!
If you think all these are still too complicated, you can consider joining my telegram group where I share articles, investment opportunities and more research based content on an almost daily basis. You can also ask questions, and take part in polls to see how others think as well!
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For those who are already into Crypto
Want to learn how you can earn high yielding interest rates on your idle crypto assets in a secure, safe and easy manner?
Earn Yields on Those Crypto With These Platforms
You can read up more on my post hereto learn more about Celsius and Nexo which give you interest on your crypto assets
Or read up more on Hodlnauthere which is a Singapore-based crypto lending platform with market beating interest rates
What is Bitcoin? Answers here
Or do your due diligence on Bitcoin in my post here where I debunk some of the myths regarding Bitcoin.
What is Ethereum? Simple Guide Here
I did a bite-sized article on Ethereum for you to get a crash-course on what the buzz word is all about here.
Gemini Exchange (My Favourite Crypto Exchange)
Also my crypto exchange of choice Gemini here if you are looking to buy your first crypto!
Too Many Crypto Platforms? Here's a Crypto One-Stop Solution
If you think there are too many crypto platforms out there, here is a simple solution for you. An all-in-one app for you to earn yield, trade, invest or borrow crypto with high security and assurance. Check out my Matrixport review
What is Decentralised Finance (DeFi)?
Or do you want to learn more about DeFi in a simple to understand manner? Click hereto learn more
How to Value Crypto Assets?
Learn more about how you can put a "fair value" on crypto such as Bitcoin, Ethereum and more here
Crypto Referral Links (Click and Sign Up)
Gemini Exchange: Deposits and buy US$100 or more crypto on Gemini and you will earn US$10 in BTC.
Coinhako Exchange: You can create an account by clicking the link and then enter promo code: COINGECKO when doing a buy/sell and enjoy 20% trading fees discount!
Binance Exchange: Create a Binance.com account here and trade the widest range of crypto pairings!
Hodlnaut: Earn US$20 in BTC/ETH/USDT/USDC/DAI for free with your first transfer of US$1000 or more in the corresponding crypto asset of your choice!
Celsius Network: Earn US$40 in BTC for free with your first transfer of US$400 or more in any crypto asset and wait for 1 month!
Matrixport: Get a $1288 free coupon trial to try their product and earn $20 in USDC when you sign up successfully and become a qualified client!
Nexo: Earn US$10 in BTC for free when you transfer US$100 or more in any crypto asset of your choice!
The Power of Low Fees (My US Broker!)
One huge advantage I have as an investor is paying very minute fees which can really eat into returns in the long run because I am using Firstrade to buy US Stocks which has absolutely $0 fees and extremely fast wire transfers for deposits and lightning fast trade executions.
Ever since I switch to Firstrade last year as my main investment vehicle, I saved up on a ton of fees and hence able to achieve way better returns than before. I saved up more than 5 times the fee paid in 2018, 2019and 2020 this year due to the switch and I am really happy thus far.
Of my entire investments in 2020, fees only take up 0.1% of my entire portfolio! (2018+2019+2020 combined across all brokers)
Alright that's it! For now, think long term, tune out the noise and avoid the temptation of gambling meme stocks, think of the companies that will do well in the long run simply find bargains/dollar cost into your positions. If you need some inspiration for companies to research, you can check out my post on 5 stocks to buy if the market crasheshere.
Disclaimer:
The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.
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