Buy toothpaste tokens, not cutting edge quantum computing tokens: By this I mean that you should buy tokens with established technologies (toothpaste), not coins with emerging technologies (quantum computing). If I could give you one piece of advice for your investment future, I would take a page from Warren Buffett’s playbook and tattoo it on the inside of your eyelids; I’m paraphrasing here, but basically Warren Buffett likes to buy established businesses with strong competitive advantages and in great cash positions, this translates into cryptos that work off of established technologies with a history of sustainable development and a growing user base.
I advised the readers of Crypto Success to not invest in Ethereum (back when Ethereum was trading at around the 1–2 dollar mark), and to stay with a more established coin model, “coins as money” I said, much like Bitcoin used to be, or as Monero, Dash, Zcash and other major players today (emerging at the time) were positioning their technologies. Was I wrong?
No, I was not. Yes, I missed the Ethereum boat, but an ill considered decision is still an ill considered decision, even if it works out in the end. There were too many unknowns with Ethereum: Do people need smart contracts? Will they be secure? (turns out programming a secure Ethereum contract is quite difficult), Will the technology be able to scale? And more importantly around ICO time: Will they be able to build the damn thing?
Contrast this with investing in Dash: People need money. It was fork of Bitcoin so we knew the core code was as secure as it could get, the invention of masternodes suggested a way to scale long term, and finally there was a burgeoning community around Dash and fast software iteration when I bought my first few coins back in early 2014.
Yes, I missed the Ethereum boat, but I wasn’t wrong. Investing is (again paraphrasing Warren Buffett here) about avoiding the really big mistakes and losses rather than aiming for large jackpots. If you don’t take any huge hits, you will be alright in the long run. You have to realize that as an investor in a nascent market, time is on your side.
I missed the Ethereum boat, but I am a large investor in Tezos. Time will tell if this investment plays out, but it fits my investment criteria and futures trading suggests it will launch in a strong position. It’s a technology in a growing market, being actively developed, with a community forged in fire. Yes, it is a new code, but the existence of a working alpha net and the strong demand for its predecessor Ethereum suggest this will likely be a good investment.
Notice I said “actively developed” and “working alphanet”. This is what differentiates the investor from the speculator, investors look for safety, speculators look for quick returns. I have been having a hard time finding new investments over the past 18 months or so, because speculators are having such a good time with ICO’s, about half of which fail within 6–8 months. At least a handful of which are intended as jokes, but have still managed to raise tens of thousands of dollars. Most of these are “pie in the sky” projects or outright scams but that doesn’t prevent them from raising millions.
Was Ethereum a scam? No, of course not. But I couldn’t have been sure, back when I wrote crypto success in late 2015, that it would work out in the end. This is the most important lesson, you have to invest in as safe a way as possible. Chasing the magic of the next “Ethereum” blockbuster is not the way to go. Tezos is not “the next Ethereum,” you have to evaluate it as a standalone project on its own merits. Ethereum did pave the way for it though, and although I am not an Ethereum community member I do owe that community for expanding the investment universe available to me.
There are many rules to investing and many ways to lose your money, but one of the surest ways to fail is to constantly chase that one in one thousand technology break through, that next Bitcoin or Ethereum. You are perfectly capable of investing in coins that will bring you 1000x returns, but the odds are better if another coin has proven the technology first. 100x returns may not be as good as 1000x returns, but not losing your entire stake on a couple of failures is a good exchange for this particular downside.
Free copy of Pablo’s well reviewed book, focused on the principles of crypto investing: https://pablo-lema.squarespace.com/s/Crypto-Success-V2.pdf