#StartTheDeLorean
While now I am just a dude on the couch with a laptop, I previously held Series 6, Series 63, and Life & Disability licenses in the state of California. I worked in the field of conventional retirement planning and financial advising for about 7 years, under a few different large broker-dealers. I started out in the boiler room, then I was promoted to manage that call center while I studied for my license exams. Eventually, I had all of the required licenses, and several years of experience in the call center and back office, so I began consulting clients as a limited securities sales agent.
Before you continue reading, join me on LBRY / Odysee and push play on the track I am listening to as I write this post. I was going to link you to the youtube video, but then I decided... screw youtube, more content and people need to find their way onto LBRY. So, I'll start with this one track that I listen to all the time and hopefully you guys can follow me over there as well. I'm not planning on producing video content any time soon, but I may in the future.
I used to be a "Financial Adviser"
I loved talking generally about concepts and options with clients on the phone, but I hated being a financial advisor. Most people know very little about the economy and investments, so it's difficult to give them options and ask them to make a decision. When you present "options", you get hesitation and decision paralysis. But when you present "a solution", you have a better chance of getting a commitment and making a sale. It's actually scary how much sales pressure it takes, not just to be successful starting out in a commission-only environment, but just in general to actually convert prospects into clients. At some level, it is necessary to "sell" your prospects on a product and I never felt comfortable pushing things on people. I wanted my prospective clients to know enough to make a decision they felt comfortable with when they were ready, but that's not how you become a "top producer" (commission earner). I left the industry feeling disappointed that I didn't have more success, but I think now that a "financial advisor" isn't what I truly wanted to be.
Diversification & Fiat
At that time, I understood diversification to mean something quite simple and linear like, "hold some small, medium, and large cap stocks across a range of market sectors." Basically, don't put all of your eggs in one basket. I actually don't agree with this investment philosophy, really at all anymore, but especially when it comes to the wealth accumulation phase (your twenties, thirties, and forties)... and most certainly not in the fiat world. I believe there is much more opportunity in cryptocurrency index funds (or tokens like Crypto20), than with conventional fiat mutual funds and index funds. However, I prefer concentrated positions in crypto investing as well... so I don't get very excited about crypto index funds either (even though I feel relatively certain they will outperform the S&P 500 & NASDAQ in the long term). Although, the rapid inflation of fiat currencies, especially since the printing of global COVID stimulus relief, will complicate the analysis of stock market versus crypto market investments. It will also inject a lot more capital into the crypto economy. Someone recently commented on a VoskCoin video, "Will DOGE go to the price of a dollar, or will a dollar go to the price of a DOGE?" I thought that was the most profound comment.
Fed Coins will be Deflationary. Diversify into Cryptocurrencies?
These days, even cryptocurrency index funds seem like a somewhat conservative investment strategy to me. What does that say about me though? I guess that I now have a very high risk tolerance profile, by my old conventional "retirement planning" standards. But I think it also reflects my belief that the overall cryptocurrency economy's market capitalization still has a lot of room to grow. Ultimately, the crypto economy will grow to absorb and merge with the (already mostly digital) fiat currencies of the world. Most are already beginning the transition. So, my bullish outlook for cryptocurrency index funds, in general, is based on a global economic trend of fiat currencies pouring into the crypto economy. Fiat currencies will be forced to tokenize in order to remain relevant. It would just be too defeating and destabilizing for the federal reserve to allow there to be more USD value stored in stable coins, like USDT, USDC, & DAI, than in actual fiat currency dollars. However, even as the world's cash & coin is converted to tokenized fiat "fed coins" on the blockchain, many will prefer to swap their fiat cryptocurrency "fed coin" tokens (with unlimited supply) for non-fiat cryptocurrencies (with a limited supply), like Ethereum & Bitcoin which both still have a ton of upside potential, even from where they currently stand near all time highs.
The Greedy Bitcoin Bull
If you are reading this blog, I assume you're already somewhat familiar with cryptocurrency and you may share my bullish outlook. However, if you're brand new to crypto, please do us both a favor and use my referral link to sign-up on Coinbase, buy $100 worth of Bitcoin (BTC), and we each receive a $10 BTC bonus credit from Coinbase. Now, let's talk about supply. There will never be more than 21 Million BTC in existence. Many have been lost and most have already been mined, so BTC is increasingly scarce. Even with all of the worldwide buzz about Bitcoin, the total Bitcoin market capitalization is still only ~$1 Trillion. So your $100 USD of Bitcoin still has a lot of upside potential, even at the current price of $57,681. Too many people get stuck thinking that they need to invest in at least 1 whole bitcoin. No, that's not how it works. We're transacting in fractional quantities and we want to accumulate as much BTC as we can, before $10-$20 Trillion USD more worth of fiat currencies flows into BTC and the price goes from $50k to $500k and then $1 Million. And that's just simple math. If the market cap of Bitcoin increases by $20 Trillion, the price will be in excess of $1 Million USD per 1 BTC. I know this to be true, but I also know that it may take 10 or 20 years to reach a $1 Million Bitcoin. I'm trying to do better than 20x growth in 10-20 years. I'm looking for 1000x growth in 3-5 years.
Decentralized Markets for Financial Sovereignty
I may be able to reach my goals faster with concentrated positions in small market cap alt coins (and some concentrated stock positions on Robinhood, at least until we have a bad ass decentralized synthetics exchange on the blockchain, like Injective, where we can trade all NYSE stock pegs, forex, commodities, and more). However, I'm also continuing to build my position in BTC. And, yes, I'm still using Robinhood to trade stocks for now. I'm pissed at them too, but are any of the other broker-dealers really any better? The whole system is broken. We're not going to fix it by just switching from one centralized broker to another. So, yeah, use my Robinhood referral link... get the free stock, sell it, and then never use their brokerage again. Maybe this is a better way to punish them, we could try to bleed their free stock program dry! Or, do what I'm doing, and continue to trade stocks on Robinhood temporarily (I just bought some PLTR over there) while we're building the tools to bring robust decentralized synthetic stock trading to the blockchain. Then I can sell my Robinhood PLTR and buy a synthetic PLTR on a decentralized blockchain exchange. So, I need concentrated positions in low and medium market cap coins (and possibly a select few concentrated positions in stocks) in order to increase the potential growth (and risk) of my portfolio. However, centralized markets are too easy to manipulate. True financial sovereignty comes from holding your own private keys (not using custodial crypto accounts) and trading on decentralized exchanges. Then the hedge funds will have to account for our after hours activities and join us on our decentralized exchanges where we will have transparency and we can monitor liquidity. We are presently supplanting the corrupt and/or inefficient centralized brokerages by supplying liquidity to decentralized exchanges
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The Market Cap of the Entire World's Fiat Currencies
Let's take a look at the global fiat market cap to better understand the enormous conversion of fiat that is going to take place over the next 10-20 years. I just discovered this site, FiatMarketCap and it's answering a lot of questions I've had for a while now. It's nice to have a reason to dig into this data a little deeper. At the top of the page, the total global "Fiat Market Cap" is represented as having a value of 2,034,878,624 BTC. Of course, we know that there aren't ever going to be 2 Billion BTC. The max supply of Bitcoin is only 21 Million coins. The "Fiat Market Cap" reflects the BTC value of all of the world's fiat currency. To determine the USD value of all the world's fiat currency, we multiply Bitcoin's price (currently $57,681) by 2,034,878,624 (the BTC value of all fiat) to get $117 Trillion USD (1.17e^14). This means that all of the fiat currency in existence is worth a total of $117 Trillion USD ($117,375,644,952,919 to be precise). Now the BTC Dominance of 0.92%, listed at the top of FiatMarketCap, makes more sense. Even with Bitcoin's market cap as high as it is ($1 Trillion), the value of all Bitcoin is only now approaching 1% of the value of all the world's fiat currencies. I think this will grow 10-20x in the coming decades.
The Market Cap of the Entire Cryptocurrency Economy
I want you to understand why people like me are certain that Bitcoin will inevitably reach a price in excess of $1 Million per BTC. It's not wild speculation alone driving this rhetoric anymore. Based on the fundamental reality of what is playing out before our eyes, it is an economic certainty (in my opinion) that Bitcoin will cross price points of $100k, $500k, and eventually $1 Mil USD. Let's head over to coinmarketcap to examine why I believe this to be the case. I'll direct your attention to the top of the page again. The Market Cap of the entire cryptocurrency economy is still only $1.8 Trillion ($1,824,413,652,766).
Bitcoin Dominance & Outlook for Low-Cap Coins
Bitcoin dominance in the crypto market is presently 59%. This means that 59% of all dollars invested in cryptocurrency are invested in Bitcoin. I anticipate that it will remain between 50-70% as the entire global cryptocurrency market cap grows. Ethereum has 11.5% of the crypto market cap. That leaves 29.5% of the remaining cryptocurrency market capitalization split between the remaining 9,000 so-called "alt coins". The most useful tokens with the lowest supply and the highest market cap will command the highest price. So the value play in "alt coin" investing is to find those small and mid cap projects (between $3 Million and $500 Million market cap) which have a use-case showing potential for worldwide adoption. A lower total supply and lower market cap equates to greater upside price potential. The more value derived from using the product, the more likely it is to actually reach mass adoption.
That's Too Complex. I Need Simple.
If you prefer a more simplified and conservative approach to cryptocurrency investing, you may really enjoy the convenience and ease of the Coinseed App. You can link your fiat bank account or debit card to enable transaction round-ups to be automatically invested into your Coinseed portfolio. When you purchase something for $19.49 with your linked card, the $0.51 round-up to $20.00 gets automatically invested in your Coinseed account. You can configure a recurring monthly portfolio contribution or a single currency DCA as well. Coinseed has also introduced some staking options to earn additional passive income on your spare change investment.
This sort of thing makes sense to me and I've used the service for a few years with good experiences, though I have cashed out my Coinseed a few times, so I'm starting over now. You can customize your portfolio from a list of 25 cryptocurrencies. I'm using the option to split my round-ups between all 25 of them. I think Coinseed charges $1 per month for the service, but compare that to the hassle and fees incurred buying crypto on Coinbase, Kucoin, Bittrex, or Binance. This is possibly the best way to enter the market because you don't feel the pain of the deposit, you average the price impact of deposits even better than a monthly DCA strategy, and you're able to construct a custom portfolio with a few dozen cryptocurrencies to choose from. All of this with no technical knowledge or new skills required at all. Not bad. Plus, you get a $5 credit when you sign-up for Coinseed using my link.
For some people, a small monthly contribution to Coinseed or Coinbase is more than enough exposure to crypto. But if you want to transact in larger quantities, leverage the power of DeFi, and purchase low market capitalization tokens and coins before they get big enough to land on Coinseed or Coinbase, then you have to start taking some concentrated positions and in non-scam verified (but still lesser-known) blockchain projects with enthusiastic community engagement. At this stage, community sentiment is an excellent proxy for likelihood of success.
"Retirement Planning" vs Concentrated Positions for Life-Changing Growth
I now find it to be absolutely necessary to hold highly concentrated positions and to ride some rollercoasters (with so-called "diamond hands") in order to multiply my bottom line. That sort of talk is so frowned upon in the mutual funds and annuity sales world. It's laughable to consider it now. But it's absolutely true for younger investors starting out these days and, to an extent, it's true for all investors. Back in my "retirement planning" days (air quotes because I just had the epiphany that I was actually counselling 30 and 40 year-olds to invest as if they were already retired), a highly sophisticated conceptualization of diversification may have included holding some real estate and physical precious metals, but mainly, to construct a portfolio of assets including a mix of stocks and bonds, including corporate and government bonds, as well as index funds, mutual funds, ETFs, and perhaps a fixed or variable rate annuity.
Looking back, it feels like financial advisers are often in the business of diversifying people into un-guaranteed modest returns. Variable annuities with guaranteed minimum income benefit riders as a hybrid securities & insurance product served many of our clients very well during the 2008 stock market crash, so there really is a place for mostly every investment vehicle. However, in my current view, that type of retirement planning strategy is only useful when approaching or entering retirement years to ensure a floor level of guaranteed income. But for me during this accumulation phase, I'm more worried about diversifying my centralized exchange risk and wallet security risk. So, basically, I just want to have more Bitcoin, Ethereum, & Alts in more self-custody wallets. I don't want to have a huge heap of crypto on any one centralized exchange or in a single wallet.
"Financial Advisors" Are Allergic To Concentrated Positions
One reason why you don't see many people benefit from taking more concentrated positions when they most need growth and can best tolerate risk, is that inexperienced individual investors who attempt to take concentrated positions often fail because they panic sell for a loss instead of buying the dip, or because they FOMO in with their whole wad right at the top of the market. I enter and exit the market slowly, but I take concentrated positions in low-cap cryptocurrencies (and some undervalued stocks on Robinhood) that I plan to hold until I finally become, "crypto rich". I'll be sure to let you guys know when that happens. A second reason why individual investors aren't often making huge profits in concentrated positions, is because they have financial advisors (who are terrified of losing their license or being sued) counselling the most conservative investments paying the highest broker commission rates.
The term, "financial advice", has now taken on an interesting connotation of liability. Everyone online talking about stocks and crypto feels compelled to cover their ass by saying, "nothing I say is financial advice". Then they generally give a ton more financial advice than a financial advisor is legally allowed to give. How long will it be before financial advisors even start with a disclaimer that nothing that they say is actually financial advise either? Even if someone was giving you, "financial advice", it's your choice whether or not to act upon it. It's your responsibility to verify their credentials, etc.
I only underscore this point because it further illustrates what I'm trying to convey about financial advisors and their inherent bias towards diversification and caution. They have to justify their recommendations to a broker-dealer to get their orders approved. Then they would have to deal with angry clients if they recommend a concentrated position in a risky stock (or, God-forbid, a small cap crypto token) and the client panic sells and loses a bunch of money. So the constant compelled speech is a verbal reinforcement that "actual financial advice" can only come from a "financial advisor"... who is actually often times a salesperson who can't even consider trying to sell you a fast horse.
Robinhood, Dogecoin (DOGE), and the Fiat-To-Crypto Pipeline
It feels to me like part of the significance of Robinhood being at the center of the GameStop (GME) debacle was the fact that Robinhood is a pioneer in bringing conventional stock brokerage and limited cryptocurrency trading together on the same platform. This made it possible to pump stocks to inflate their value and then rapidly swap for Dogecoin or Bitcoin. So the transfer of wealth from fiat to blockchain appears to be subject to massive acceleration when crypto and stocks are both listed on the same exchanges. It may actually be a much larger problem for the fed than most of us realized, to have stock assets inflated only to dump profits into cryptocurrencies which absorb the pumped up market cap from the stock surge.
It wasn't just GME & AMC. There were a dozen other meme stocks that were also limited or fully restricted by Robinhood and many other brokerages back in January and February. But they didn't just stop trading. They halted buys, but the sells were permitted. So they manipulated the market to have only downward price pressure while hedge funds happened to be scrambling for shorted shares. It doesn't feel right. Even if it wasn't malevolent (which I highly doubt), it's a clear indication that this system is fatally flawed. I'm excited about the decentralized alternatives that our community is developing.
Glad I'm no longer a "Financial Advisor"
On one hand, it can be good that we have some regulation in the fiat financial markets to protect individual investors from predatory brokers. I think it's better in the crypto world if we have some self-policing standards because we don't want to invite regulation where it is not needed. However, I feel that the "financial advising" industry has become too risk averse. Why are we constantly pretending as though "financial advisors" have some magic ball that we don't. And if we don't put out a disclaimer saying that, "we're not financial advisors", then we've potentially committed a crime or become legally responsible for someone else's financial losses. That's ridiculous. I've taken the financial advisor tests, they don't mean much of anything. Most "financial advisors" have no idea what the global fiat market cap is compared to the crypto market cap. They have no idea if it is even remotely possible for Bitcoin to reach $1 Million or why. It's simply a matter of researching Bitcoin's market cap and supply in relation to the market cap of the global fiat money supply. So, I'm glad I'm no longer a "Financial Advisor". If I were, I couldn't legally say, "There is a 100% chance that the price of Bitcoin will reach $1 Million by 2050."
Thanks for reading! As always, I look forward to responding to your comments below.
-NOVAX
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Centralized Services (Block To The Future Referral Links)
Coinbase (necessary evil for buying crypto with USD)
Kucoin (best of the centralized exchanges, also has USD buy option)
Bittrex (meh, okay... also has USD buy option)
Binance (used to love it, now, not so much)
BlockFi (so far so good, decent interest rates, not really an exchange though)
Robinhood (get the free stock for signing up and dump Robinhood when we have a good synthetics market on the blockchain)
Coinseed (awesome way to buy crypto with your debit card transaction round-ups)
