Three Critical Investment Rules Abandoned by the New Generation of Cryptocurrency Investors (and Gold and Silver Remain Solid Despite Recent Weakness)

There are three critical investment rules that most investors under the age of thirty have completely abandoned due to the massive amounts of cryptocurrency profits earned by millennials in recent years that followed the 2018 price debacle that struck bitcoin and other cryptocurrencies. They are as follows:

  • There is no such thing as a “get rich quick” scheme and if someone tries to lure you into a scheme that promises quick riches it is a scam.
  • Patience is one of the hallmarks of a smart investor; and
  • Understanding risk is critical to all investment strategies.

However, just because these three critical investment rules have been largely abandoned by millennials does not mean that they still do not apply. From the end of 2018 to present day, the enormous price volatility of bitcoin has killed the “no such thing as a get rich quick” scheme narrative as many have become rich very quickly during this time. So for the first time in history in the investment world, there has been an opportunity to become rich quickly. However, in selling the cryptocurrency “get rich quick” dream, two critical hallmarks of wise investing have been swept aside and are almost never discussed anymore.

Patience is a hallmark of a smart investor, the second of the three critical investment rules, which includes not panic selling out of assets that still have great unrealized upside during periods of downward manipulated prices and buying when the majority are selling when great value at massively discounted prices exists, is no longer an investing virtue among the under 30-crowd because value is no longer valued. Again, the under-30 crowd has replaced value with get rich quick dreams in their investment portfolios. I have observed anecdotally among 100% of the under 30 crowd, dozens of times, a complete and total disdain for patience, whereas patience was once one of the most highly valued virtues among investors. Due to the highly publicized messages of the largest whales in the bitcoin community, who have been selling absurdly false narratives that there is no risk in investing in bitcoin as long as you hodl for years and that everyone will become a millionaire as long as you hodl, these kind of messages perpetually promoted by large btc whales selling their books has completely destroyed the “patience is a virtue” pillar of investing.

At first glance, this may sound oxymoronic and in contradiction to the get rich quick message of the cryptocurrency community as hodl means hold forever and never sell, it really is not as I will explain. With numerous very public and widespread disseminated predictions of btc still reaching $250,000 to $300,000 and even $500,000 by the end of this year from current prices of $45,000. Alex Malinsky, CEO of Celsius Network reiterated his stance that BTC could reach $500,000 “very, very quickly” at the end of 2020. To me, “very, very quickly” is within one year. In 25 March of this past year, BTC whale Michael Saylor stated, “In my life I’ve never seen something that was such a screaming signal” and then predicted BTC would reach $5,000,000 per bitcoin, though he did not provide a timeline for his prediction.

Just a couple of weeks later, I literally told my skwealthacademy patrons, with BTC hovering at $58,000, that if I were a btc owner, “I would sell” because my analysis revealed a high risk of a price decline at this price. Since I only received one message from a patron informing me that he was thinking of selling all his BTC at $60k to rebuy after it fell a lot in price (if I were right of course), and understanding that most everyone’s opinion was still beholden to the btc whales pushing a year end price of $300,000 in which buying at $60,000 would be a bargain, I reiterated my stated sell opinion of btc a week later on 21 April in a podcast I released only to my patrons, titled, “The Most Important BTC podcast Ever”, but this time conveying a message of high risk that BTC prices held at a $60,000 price point, in the hopes that a high risk message would make its way home with greater frequency than just a stated “sell” opinion. From that point forward, I did not issue a buy opinion to my patrons until BTC fell below $30,000 shortly thereafter.  Of course, no one has a crystal ball, so the next time I issue a high-risk, sell opinion to my patrons does not mean that btc prices will be cut in half again. However, when I do so, I do know that there will be high risk embedded into btc prices at that time, whether another large decline materializes or not.

In fact, many of the under-30s that invest in cryptocurrencies now, since they were not buying from 2009 to 2012, seem to have forgotten that during these periods, there were long stretches when btc prices remained relatively flat (compared to prices in recent years) that required a lot of patience to remain invested in bitcoin, as the chart below shows.

bitcoin price history, the early years

In regard to the hodlers that are really not hodlers, this category likely applies to the more than 22 million owners of less than 1 btc (at the start of this year), many of whom were undoubtedly attracted by the prospect of getting rich quickly based upon the onslaught of published articles that were selling $300,000 year end prices, and are likely not to hodl but to sell upon “getting rich quickly” if this scenario were to materialize. And regarding articles in which you may have read recently that categorize hodlers versus traders, ensure that you check the definition of hodl, as some have transformed hodl as a term that means “hold forever” into any btc investor that holds btc for a period of five months, which is a short-term holding period that is closer to identification as a trader than it is to  a long-term holder. Such a short-term holding period would not even qualify as a long-term hold for physical gold and silver stackers. There is a lot of chicanery happening in the crypto publication community in attempts to formulate false delusions, so ensure that you don’t just read headlines, but that you read entire articles to understand how terms are being defined.

So this is the problem with failing to understand risk, the third of the the three critical investment rules, and perhaps the most important of them all.  I have yet to read one article from btc whales that has warned about significant downside price risk prior to such events happening, when clearly massive downside risk existed (as was the case when btc reached $60,000 earlier this year). I have yet to read one article from banking analysts that do not predict much higher btc prices in a very short period of time and that warn of potential lower prices. This narrative, perpetually biased towards only one side of the equation, with no consideration for any other outcome, has created a perception, along with some btc whales calling bitcoin a risk-free asset, that an investment in bitcoin has zero risk. Of course, anyone that labels any type of investment as “risk-free” is a charlatan not to be trusted because in the investment world, there is no such thing as a risk free investment. But still, the perception of bitcoin and ether as risk free assets exists.

And when you are a lone voice speaking about high risk when everyone else in the community is telling you to mortgage your house to buy more bitcoin, it is very difficult to listen to a single voice warning of high risk of significant price downside.  In addition, I have already warned my patrons of one high-risk scenario with cryptocurrency prices in which it will be impossible to pinpoint the date of this scenario coming to fruition if indeed it does. But it is still a risk, since it is a serious risk to future cryptocurrency prices, of which all people should be aware. It still astounds me today, of how many people can be highly invested in cryptocurrencies, and due to the prevailing dominant narrative in crypto communities, be completely oblivious to risk and believe that they are essentially sitting in risk-free investments.

Should bitcoin approach its yearly high of $65,000 again, or even exceed this mark before the end of the year, I am sure that I will be the only voice, at this point, should the metrics I follow inform me of a high-risk environment, that will be willing to speak of the reality of such an environment while all other voices will be lauding it as the launch off point to $300k to $500k prices.

Finally, though many seem to be tiring of gold and silver’s synthetic range-bound prices (remember physical prices are much higher) this year, recall my discussion of patience as a virtue at times such assets are working through a low-risk, high-reward period. If you look at the charts below, you will note a prior historical two-year period in which silver was bound between $10 and $20 in the futures markets, a period similar to our current one in which a lot of silver stackers gave up on silver and sold their entire stacks right before silver skyrocketed to $50 over a condensed period of the next six-months. Likewise with gold, as you can see from the below chart, gold’s price was range bound and capped at $1,000 for nearly two years, convincing many to sell their gold stacks, right before it exploded higher to $2,000 over the next 18 months. Thus, the current period of consolidation in gold and silver prices prior to a sharp move higher in prices is not unusual nor should a patient approach be abandoned due to an extended price consolidation period. The three critical investment rules still definitely apply to gold and silver investing. Though many believe, due to condensed periods of soaring crypto prices, that these three critical investment rules are now dead, they are still very much alive in all other arenas of investing outside of cryptos, and should not be likewise abandoned just because they have been abandoned to a large degree among the new generation of crypto investors.

successful gold and silver investing requires patience

Though I speak mainly of precious metal and cryptocurrency assets in public forums, I actually discuss many other assets in my skwealthacademy patron platform (benefactor level membership). For example, in early May 2021, I discussed my favorite uranium stock on this platform, which has risen in share price by 34.44% in just a few months. As well, two months ago, I discussed two fintech stocks with my patrons, one of which rose in share price by 37.07% within a month of my buy signal, and is still up 23.4%. To sign up to my free newsletter, click here. To learn about the upcoming launch of my Academy, click here, and to donate to my Academy launch, click here. You may also follow me here for more free content.

J. Kim

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