In trading and investing, experience can be both a blessing and a curse.
There are fund managers and investors that have been involved in the markets for longer than 50 consecutive years.
During this time span they have experienced and studied a multitude of market conditions including bubbles, pump and dump exploits and market manipulation.
These experienced players have built for themselves strategies that have brought them into highly profitable investments and trades – whilst at the same time they have also made gigantic mistakes that have seen them lose billions of dollars for themselves and clients.
All of this has created a particular market view for these highly experienced individuals.
They had front row seats during the collapse of dotcom stocks…the depression of the Oil market… the collapse of the banking system in 2008 and many other ancient happenings that are frequently referenced today.
This has led to extreme amounts of caution working its way into the psyche of these individuals.
These experienced players are now undergoing the effects of post-traumatic stress.
A side effect of this is an unhealthy unwillingness to indulge in high risk behaviour.
This is debilitating when it comes to approaching the market in such way as to provide the largest possible returns for clients since risk is the foundational key to investing and trading.
Time and again the elders of the financial markets spew negative sentiment regarding Bitcoin and crypto currencies in general.
Institutions such as Bank of America refer to bitcoin as being the largest bubble in human history.
Some of these elders have even gone as far as stating that they are staying away from crypto currencies completely, and are advising their clients to do the same.
It is a punter’s dream, I give them credit for that, but it is something that I will absolutely stay away from, have stayed away from it, didn’t understand it to begin with, don’t understand it now.”Dennis Gartman, CNBC
On the surface, this appears to be sound advice – especially if you’re a pension fund, sovereign wealth fund, a charity or another organisation of similar nature.
However there is no excuse for a hedge fund, investment fund or any other organisation that deals in asset management not to be involved with the crypto currency markets.
In short, there hasn’t been a bubble of this magnitude for decades. This is a once in a generation opportunity to accumulate vast amounts of capital.
Asset managers who lend even the slightest portion of credence to the PTSD induced cries of caution from market elders will be punished.
In short, you will be sacrificing providing yourself and clients with a level of gains that potentially won’t occur again until the next century.
This is an opportunity that must be seized, in full.
But to play devil’s advocate there is some truth to the cautionary warnings delivered to us by the experienced market participants who have been playing this game for half a century – or longer.
Individuals such as Warren Buffett prophesise dark days ahead.
With his extensive insight into market trends and consumer behaviour, Buffet is adamant that Bitcoin is an asset that shouldn’t be touched by investors.
Going further, he claims that Bitcoin isn’t an investment at all – just a mere tool to fuel and facilitate speculation, and we agree somewhat.
This is truth in its purest form. Warren Buffett is correct. His thesis is precise and accurate.
However – this does not negate the fact that bitcoin is currently on its run upwards.
It doesn’t negate the fact that crypto currencies are yet to have caused the kind of systemic imbalance necessary to force the occurrence of that which is inevitable: the bursting of the bubble.
The bitcoin bubble isn’t yet inflated enough for it to burst.
Therefore the ability, currently, of crypto currencies to produce revenue cannot be ignored – especially not by serious asset managers that are tasked with the duty of filing their client’s wallets with positive returns.
Wealth Creation, or Wealth Protection
There are two types of investment strategy; wealth protection and wealth accumulation.
The accumulation of wealth requires the successful exploitation of high risk opportunities – whilst the preservation of wealth forces a strategy that is more skewed toward lower risk behaviour.
These are two strategies that cannot be employed simultaneously.
Individuals such as Michael Bloomberg, Carl Icahn, Warren Buffett and others have already accumulated vast portions of the world’s wealth – in fact, they are some the world’s most wealthy individuals.
With this being so – you must understand full and well that the aforementioned individuals are engaged in wealth preservation strategy.
These are individuals who would turn down an opportunity to generate $100 Million if it means that they can protect $5 Billion worth of their current assets via allocating funds into “safe” positions
This is a low risk play that is designed to benefit from long term continued growth.
On the other hand we have an individual such as Mike Novogratz.
Novogratz does not play at the same financial heights as a Michael Bloomberg, Buffet or Carl Icahn.
This is an individual who is employing a strategy of wealth accumulation.
As such his strategy is one that is based on the exploitation of higher risk opportunities that have potential to create instead of to preserve wealth.
In fact most of the asset managers who have yet to cross $10 Billion worth of assets under management are engaged in this same high risk, wealth creation strategy.
As a result their outlook on crypto currencies is much different.
I am as bullish as he I’ve ever been. I have already seen bitcoin come through two bear markets, followed by full recoveries. As far as I’m concerned bitcoin has won the race to be digital gold.Barry Silbert, DGT
Understanding your Investment Objectives
You need to be fully certain and aware of what your investment objectives are before you engage with the crypto currency markets.
You need to have an understanding that the managers that are advising you on investment strategy may have intentions and ideologies that are different from your own.
In short, as a millennial – or an individual who has only recently began investing, you will not gain vast wealth by allocating funds to Berkshire Hathaway.
You will not become wealthy if you send funds to Ray Dalio’s firm for them to manage on your behalf.
The most you can expect from the above mentioned firms and individuals is to gain small accumulated gains over a span of multiple decades, with an extremely low potential to undergo any major losses. In short, your wealth will be adequately preserved.
However, if your intent is to create and accumulate wealth – the above individuals have very little to offer.
You must make use of a higher risk approach, and form an overall understanding of price movement within the bitcoin market.