2017 saw bitcoin surge well over 1000% from less than $1000 to around $20,000 at it’s peak, then settle down to around $14,000 by the end of the year.
Many of our clients made hundreds of thousands or millions of dollars off the rise.
The speculation isn’t over with suggestions of $100,000 bitcoin coming, some saying $280,000 per bitcoin and others suggesting $1 million per bitcoin within 5 years.
On the other side are cries from almost every significant billionaire investor and many to “stay away from bitcoin”, “it’s a bubble”.
Perhaps legendary investor Jim Rogers had the most pragmatic view “I wish I was smart enough to have bought it”.
The truth is, bubble or not if you didn’t invest in 2017 in Bitcoin or a comparable crypto currency (Ethereum, Ripple, Litecoin, Bitcoin Cash, etc.) you missed out on some gains you will almost never find anywhere.
Now on discussion groups I’m seeing people asking about the best business to be in for 2018 and one of the common responses is “crypto currency”.
On the other hand you might be feeling like it’s too late so what’s the reality?
It’s Good to be Lucky but It’s Still Luck
Unfortunately, you’ve got a whole host of self proclaimed crypto currency experts who have cropped up based on their great gains in 2017….nevermind that most of them didn’t make much at all or perhaps even lost money in 2016, 2015, 2014 and could do the same in 2018.
First bubble to burst…MOST PEOPLE WHO MADE MONEY IN CRYPTO IN 2017 WERE LUCKY!
There’s nothing wrong with this but it’s worth considering the wisdom of legendary tech founder Bo Peabody who said “I was smart enough to know when I was getting lucky”.
Luck isn’t predictable it can make you fortunes one day and rob you of them the next so if you want predictable results, which is our mission here at Richucation then you need to realize when you’re getting lucky and learn to develop expertise in what you’re doing.
What to Learn From Crypto in 2017
If you want to be good and not just lucky, in other words to get consistent predictable results rather than not knowing from day to day if you’ll win or lose you need to start by realizing something…
NO ASSET CLASS is good or bad.
People say “investing in crypto” is good.
Investing in crypto in 2017 was almost universally good.
2017 showed the power of riding a bull market mania (btw you could have gotten something similar in weed stocks as well).
It’s not crypto that’s good,0p it’s a bull market mania that’s good.
Dotcoms were similar in the late 90s.
Housing was similar up to 2007.
Gold was similar 2010 to the 2012 peak.
Nvidia was similar this year.
A wise trader once said “don’t tell me what to buy tell me when to buy it”.
It’s not the asset that’s good in and of itself it’s the right asset at the right time, which is part of what makes investing hard.
The lesson you can learn from crypto in 2017 is if you can catch a bull market mania you really don’t have to do anything you just buy and sit and gain.
The same wouldn’t be true in a bear market crash.
What do all those earlier examples have in common? While they had their day of blowing up they also had their times of under performance.
If you learn to adapt and shift your strategy you can continue to do well through almost any market but if you’re blindly thinking “buy crypto” or “buy real estate” or “buy internet stocks” or whatever else then you might do great for a couple years and the time will come when you’ll almost surely get flattened or at least not benefit the same way you did during those great years.
The Truth About Crypto in 2018
If you’re expecting 2018 to be a repeat of 2017 in crypto you’re almost surely going to be disappointed.
This is due to simple economics as well as mass psychology.
Consider that Ripple soared 5000% in 2017 to over a $100 billion market cap.
For it to do so again it would need to be worth $5 trillion.
The problem with this is assets grow as more money comes in but the bigger they get the harder it is for them to grow at the same rate because you need more and more money to fuel this growth.
Think about it in terms of people.
Say you’ve got 100,000 people investing in something, a relatively small group. To go 10x you need to increase to 1 million people. Ok, still reasonable. But to go 10x again you need to go to 10x million about the population of NYC. To go 10x again you need to go to 100 million…more than the entire population of virtually any European nation. To go 10x again you need 1 billion people…about the population of China. And to go 10x again? Well there aren’t enough people in all the world for that.
Assets are a bit like this $100 million isn’t much money in financial markets.
$1 billion is a bunch more but still nothing crazy.
At this point crypto currency market caps have collectively peaked around $800 billion to $900 billion. That’s a lot of money. To put it in perspective the big US bailout package in 2008 was $700 billion and that was to bail out the entire banking sector when the whole housing market was suffering massively.
Total US tax revenue is around $6.5 trillion that pays for the entire operations of the entire country for over 300 million people in one of the wealthiest countries on the planet.
Bottom line, although theoretically possible for Bitcoin to go another 10x and years into the future it might do so it’s highly unlikely bordering on impossible for it to do so again in 2018.
This is similarly true of all the major crypto currencies (Ethereum, Litecoin, Ripple, Bitcoin Cash, etc.)
Does this mean smaller alt-coins can’t soar by 1000% in 2018? Not at all, after all it’s comparatively easy to go from $300 million to $3 billion.
There’s two things working against you in 2018 though:
There’s a lot of alt-coins out there so spotting the winners in the sea of noise is increasingly difficult.
Crypto currencies are highly corelated meaning they tend to move together. There’s a good chance because of the dramatic rise relative to adoption 2018 will see a major decline (we’ve already seen a pullback of about 40% in many crypto currencies from their peak in late December). If this happens the smaller coins even if they are good ones, which most aren’t, are likely to go down with them during at least the short term.
Bottom line making similar amounts of money in crypto in 2018 is likely to be much harder than it was in 2017. Luck isn’t likely to carry you so far and there’s a reasonable chance many people without an understanding who flooded in or have been inspired to flood in due to the 2017 rise will see losses.
Chasing returns is a classic investing mistake. What has happened in the past is not a reliable indicator of what will happen in the future. In fact what happened in the recent past is usually a negative indicator of what will happen in the future due to mean reversion.
Funds that outperformed for 3 years tend to under perform in the next 3 years. Fund managers who outperformed in the past 3 years tend to under perform in the next 3 years and vice versa.
This makes sense when you consider most people tend to operate based on a specific strategy, which they execute well and when the environment changes and that strategy is no longer effective their results falter.
The key to consistent success is an adaptive strategy and no particular asset is in itself adaptive so you need to be willing to move between assets and strategies to remain consistent.
Getting Rich Predictably
You can get rich because you’re good or because you’re lucky. Last year was an easy year to be lucky in crypto.
This luck might continue into 2018 but it’s comparatively unlikely (luck never lasts forever) and it could be the opposite, bad luck could hit.
If you want to get rich predictably what do you need?
You need an edge.
My advice to people asking me about crypto this past year has consistently been the same.
“It’s an extremely volatile unpredictable market that could work for or against you. It could double or it could decline it’s impossible to say so the question is ‘what is your edge?’ If you’ve got an edge then work it if not get one or stay out.”
This advice comes in part from experiences of seeing people lose 100% of their investments at the wrong stage in the market or on bad investments and a bias towards protecting against the downside not simply pursuing the upside.
You can read some of our articles on decreasing risk while increasing return here:
You want to earn a higher income? Being able to offer something of unique or rare value will help you do this.
Want to work with the people you want? Having a unique edge will give you the ability to pick and choose.
Want to make a lot of money in your business? Having an edge in costs (learn more in Getting Deals) or an edge in marketing (learn more in Profitable Marketing) will make all the difference.
Apple, Google, and Facebook aren’t big doing the same as everyone else there’s something unique, different, and better about them that makes them highly profitable.
Crypto is just a vehicle. It’s useful because it’s fairly accessible, with a large market and a lot of volatility so if you can profit from that volatility you can do well. It can also crush you if you’re not careful.
But you could just as easily use real estate, or private businesses, etc. to find ways to profit. It helps if you’re in a crazy bull mania but it’s not necessary.
People make the same dumb mistake over and over again. They focus on the vehicle rather than HOW the vehicle is used.
How many people have gone broke in real estate? Take a look at 2008 when the market turned against people and millions lost everything.
How many people go broke every year in stocks? Look at 2001 when the dotcoms busted. Look at how devastated the country was in the Great Depression after the 1929 stock market crash.
70% of businesses fail within the first 10 years and most of those that last barely get by.
Yet some people get rich in each of these things not because the vehicle is different but because HOW they do it is different.
5 Ways Our Clients Are Making Money in Crypto in 2018
There are two types of risk in investing:
Value risk – having something where maybe you’ve got the right price but the underlying value decreases.
Timing risk – you buy or sell at the wrong time causing you to have to wait too long or when the price goes against you
If you’re insistent on pursuing crypto (and it’s not an especially good vehicle on average because it has a lot of timing risk whereas some other vehicles have a lot less timing risk) here are some ways our clients are gaining an edge in 2018:
Selective ICOs – ICOs or early stage alt-coins sometimes represent opportunities if they are promoted right, if there is the liquidity to exit and if the entry price is low enough. ICOs do not mean automatic wealth quite the opposite but in the right cases they can be very profitable.
Supernodes – essentially it’s possible to receive dividends on certain types of crypto and earn money facilitating the block chain transaction networks. If you know what you’re doing this is a potentially solid way to profit consistently.
Smart trading – trading involves buying lows and selling highs profiting from the volatility as you switch money in and out. Alternatively shorting downs, etc. This game works in any liquid financial instrument but is much easier in some. The advantage with crypto is high volatility and a 24/7 market. It’s also a fairly new market, which means there’s a lot of trading inefficiencies that have long since closed up in major markets like major stock markets, commodities exchanges and forex. On the other hand timing is one of the hardest things to do and the spreads in crypto can be prohibitive. It gets even worse if your time to enter and exit is limited by KYC, slow transaction speeds, switching between correlated crypto currencies to get in and out, etc. Throw in liquidity problems and thin order books on some of the exchanges and you’ve complicated it massively. If you’ve got technical trading skills though crypto can be a great place to profit.
Mining – we’re helping a client right now with a $1.2 million mining deal. Mining is not a no brainer money maker. It’s become much more competitive over the years especially in Bitcoin where you need to know the technology and your costs. It is also dependent on the price of the coins so you’ve got risk of crashes though also potential upside if you hold on to them. There’s increasing supply problems accessing the best chips and cards for mining. The biggest advantage if you can gain one though is the price of electricity. If you can gain an edge here there’s a definite opportunity.
Brokering – whether people are buying or selling if you’re in the middle of brokering transactions you can make money. I’ve seen people charging up to 8% to broker transactions for others who want to buy or sell so if you can get volume this is perfectly viable. Notice this is more of a business than crypto in general but given the high demands and given the massive friction getting in and out of the market it represents an opportunity. I’ve especially noticed for some large purchases of my own as well as those of clients when you’re dealing with multiple currencies, large size transactions or exotic transactions such as between precious metals and crypto there’s definitely gaps to make a mark.
Bonus – Offering their own ICO – once again offering an ICO isn’t an automatic ticket to riches and I’ve previously mentioned how I consider most of the ICO market a scam where I believe a lot of people are going to lose a lot of money before it ends (there’s also a risk of upcoming regulation from the SEC and others). This being said there’s an insane amount of money pouring into ICOs these days and if done well it represents a viable way for a lot of people to make a lot of money. This is much more complex than simply buying an ICO, you need a team, you need to promote, you need something behind it all, etc. But if you’re willing to start a business around it and really drive the technology it’s a big opportunity at least while the window lasts and we’ve got a number of clients doing them.
None of these things are places where you simply put in money and get rich.
There’s an old expression “that which is easy doesn’t last and that which lasts isn’t easy”.
Money in crypto has been easy this past year and that tells you it won’t last.
Just as with any other wave the casuals will surely come through in a while saying “it doesn’t work”, etc. And it’s true it doesn’t work if you don’t work it.
The lesson is gain mastery. Identify an edge. Build a great team. Scale up your success.
The fundamentals of becoming rich in crypto are the same as in anything else:
Identify a profitable opportunity with high upside
Work it to actually be profitable
Scale it up
To be profitable you need to get great value for your money (Get Deals) and have a system of getting a lot of eager buyers (Profitable Marketing).
To scale up you need to be productive, optimize speed by focusing on the next step of the right sequence, avoid the constraints & levelers, and apply accelerators (Grow Impact).
To make all of this work you need mastery so pour yourself into knowing your field and your business (Value Mastery).
You need to work productively with the right people (Leverage Team).
And you need to own the results of what you’re building, ideally building assets and growing those assets (Multiply Ownership).
This is as true in crypto as in anything else.
Contact us to discuss more in crypto or any other business maybe we can help or collaborate ourselves or through our network.
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https://richucation.com/wp-content/uploads/2018/01/bitcoin2.jpg5441600Michael B Rosmerhttps://richucation.com/wp-content/uploads/2016/01/richucation-1.pngMichael B Rosmer2018-01-24 03:24:442018-03-08 05:14:32Can You Still Get Rich In Bitcoin?
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