The theme this week on the Retirement Quick Tips Podcast is: Sure Fire Bets That Fizzled Out

 

Today, I’m talking about my favorite sure-fire bet that fizzled out: Bitcoin. Now to be clear, I’m not celebrating that anyone has lost money on Bitcoin or FTX or any other crypto collapse. But crypto is so speculative and more akin to gambling than actual investing. I’ve dissuaded clients from investing in crypto since the beginning, despite wider access and increasing popularity of this investment in recent years. I secretly roll my eyes when people brag to me about how much money they’ve made in crypto. 

 

Even prior to the collapse of the value of crypto in 2022 and the curious unraveling of FTX that’s still playing out as a ponzi scheme at the moment, I was not a fan of crypto for several reasons - and reasons I’ve talked about previously on the podcast. 

 

1st - and probably most importantly, bitcoin and other cryptocurrencies are difficult to understand. Cryptocurrency is defined as: “a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority.” Even the definition is confusing! Then more research leads you down the rabbit hole of terms like blockchain, digital wallets, mining coins, and…time to move on. 

 

Warren Buffet’s famous investing advice is to only invest in what you can understand. This is very good advice, yet, I think only about 1% of crypto investors truly understand what they’re investing in. The rest were just jumping on the bandwagon, and now running for the exits. 

 

NYU Professor of Economics Nouriel Roubini cautioned investors at an industry conference (prior to the collapse). He said: “In the case of bitcoin or any other essentially cryptocoin asset, the basis for the fundamental value is not there, it’s vaporware; it’s not backed by anything…They’re not currencies, they’re not even assets, they’re highly volatile, they’re speculative and they’re subject to manipulation of one sort or another.”

 

Then I came across an article in the NY Post from November says that the flashy luxury cars bought by newly minted crypto millionaires have been flooding the used car market:

“An uptick in like-new models of sought-after luxury cars have hit resale sites such as AutoTrader in recent weeks, but they’re not fetching the premium prices they once did. The Mercedes Benz G-Wagon — the unofficial “new money” badge of the crypto rich — was once valued around $300,000 in the resale market but is now closer to $200,000, car experts say. Other luxury vehicles such as Lamborghini Urus and McLaren Spiders have also taken a hit.”

““It’s clear that in the last couple of months the decline in prices for exotic vehicles has accelerated and that correlates very, very well with the meltdown in the crypto markets where we know that some of the biggest customers of exotic vehicles were crypto millionaires,” CarDealershipGuy said.”

Ok, so the woes of former crypto millionaires having to unload their G Wagons they can no longer afford aside, what’s the lesson here: 

Well, I think it goes back to what Warren Buffet said: Don’t invest in anything you don’t understand. The vast majority of crypto investors were playing in a market that they didn’t understand and got burned badly because they didn’t want to miss out. Many will likely never recover, and certainly not in the case of FTX.

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.     

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