It’s easy to lose perspective when it comes to investing. We put it down to the ability to track prices every second of every day.

You can check prices on your computer. You can find them on 24-hour news channels. Even in your pocket, on your smartphone there are thousands of apps to track prices.

This access to immediate information is good and bad. The good is that it provides clear market information. And if you’re competent enough you can use the info to trade the market.

But it can be bad. If you’re not a trader, but an investor, you can get swept away with daily price movements.

Perhaps you’ve experienced this first hand before. We definitely have. Back before we even started our professional career we had a little portfolio of stocks.

And we would check out the prices most days. We would look to see if they were up, down or otherwise. And on a couple of occasions we saw some of our stocks drop, and drop…and drop.

We started to panic. We fell into the trap of getting sucked into the fear and we tapped out too soon. Our plan from the start was long-term investing. But we fell trap to the wild price swings that stocks can deliver.

And we see many investors that fall into the same trap. They lose their perspective. They lose focus. They forget their goals and strategy — and often for the worse.

We really see this in crypto markets. In fact we’ve been seeing this kind of investor psychology play out in crypto markets for the last eight years now.

It happened in 2013 and 2014. And it’s happening again from 2017 to 2018.

 

Wind back the clock

It was early 2013 and Cyprus was teetering on the edge of extinction. Their economy was in tatters and there was a run on their banks.

People were queuing up at ATMs to get cash out of their banks. Many ATMs ran out of cash completely.

And the banks had to put a freeze on withdrawals otherwise there simply wouldn’t be enough cash for everyone.

Think about that for a second.

For an example, imagine you rolled down to your local CBA or ANZ ATM. You put in the card. You punch in your pin. You ask for $200. And get $50.

Uh oh!

Now imagine you’ve got savings in the bank. Let’s say $50,000. You go in a branch to take it all out. You no longer believe the bank can stay alive.

But they can’t give you your $50,000. They can only give you $20,000. This isn’t just your problem. Every customer wants out now, but they can’t. They’ll only get a fraction of their actual cash.

This is the banking system we ‘trust’.

The reality is the conventional banking system can’t meet all its deposits. If everyone in Australia wanted hard cash all at the same time, the banking system couldn’t deliver.

And don’t think the government will save you either. They can’t stump it all up either. A total and systemic failure will deliver very little in terms of hard cash.

This is all because the current system works on a fractional basis. It’s called a fractional banking system. That means only a fraction of the money banks hold is backed by physical cash.

That’s why we can’t stand the argument against crypto that there’s ‘nothing backing it’. Look at the numbers in your banking app. Not all of that has backing either.

And in 2013 we saw what can happen when there’s a run on cash in a bank.

Cyprus and Greece were on the edge of destruction.

While the system broke down, bitcoin skyrocketed. Crypto skyrocketed. These were the perfect hedge against all out banking calamity.

This is exactly the situation crypto was meant for. This is why it even exists. It’s here to provide an alternative to the flawed and broken system we’re supposed to trust.

And now we’re seeing the beginning again of potential sovereign failure. For when a country dies…or almost dies economically, we see huge rise in crypto values.

 

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There’s one caveat — you can’t lose focus

However that doesn’t mean all crypto will ‘moon’ (as in, shoot to the moon). There’s a big difference between the days of 2013 and today. Namely there’s a seemingly infinite amount of crypto today.

Back in 2013 it was still only a handful of projects.

That means when a country dies today only certain crypto will moon.

We know that crypto reacts well to crisis. As mentioned, bitcoin started when the GFC hit. And it went bonkers when the Cypriot and Greek crisis hit.

And today it again has started to shift up a gear thanks to our Italian friends. According to The Telegraph:

‘Italy no longer has a lender of last resort standing behind its sovereign debt, and therefore has no backstop defence for its commercial banking system.’

If Italy’s economy falls into the abyss it will reverberate through Europe. This story is only just starting to warm up. But Italy could trigger another huge debt crisis. And it could happen this year.

If that happens our view is there’s only one investment you’d want exposure to.

Crypto.

If crisis hits again people will flee the traditional system. When people realise the current system isn’t as safe as they think they’ll want something else.

And crypto will be there, ready, waiting for them. People will realise you can exit the existing financial system and enter the crypto system.

Imagine being able to know that all the world’s banks could fail and your money will be fine.

No matter what government or central banks do, your crypto is untouchable to them.

When the system fails or crashes again they will have their alternative system. And for every Cyprus, Greece, Ireland, Venezuela, Zimbabwe, Italy, or United States of America, crypto only gets stronger.

Our view is it’s the best hedge against crisis in the world.

But it’s easy to lose focus.

You can watch the price swings in crypto religiously and it’ll only shift your focus. It will terrify even the most seasoned investors.

However if you put it all into perspective you can get through. If you remember the long game. If you focus on the goals, the revolution in play, you might even uninstall that price-tracking app.

One of the best things you can do with a long-term strategy in crypto is to stop thinking about it.

Switch off. Go off grid. Pretend like you don’t have any and never did. Just forget about it for a while.

It’ll make you a better investor, and probably give you a lot more time during the day. Getting caught up in crypto is just like stocks or other risky assets.

It can make you second-guess yourself. It can force you into mistakes. But with laser-like focus and the right approach to risk, our view is crypto will change your life.

 

Regards,

Sam Volkering