We can say that fundamentals and techniques drive action over actions.
And we can debate which metric is the most important to focus on.
But in reality, the markets reflect the emotions of investors and their current visions of the future.
Markets are fueled by people. And people are irrational and prone to bouts of discouragement and mania.
This is why I am an avid follower of behavioral economics and the investor emotion cycle.
We know that when the euphoria is at its peak, the markets – or an individual investment – are in their most dangerous position.
But misidentifying the euphoria can cause investors to miss out on real money-making opportunities.
The mother of speculative bubbles
From 1634 to 1637, fortune hunters in Holland found themselves trapped in the most infamous speculative bubble of all time: tulip mania.
And for nearly 400 years, it served as a warning to investors.
Throughout history, tulips have become fashionable for wealthy Dutch merchants. But some bulbs produced unpredictable and “broken” color patterns. And they have become in great demand.
People started collecting tulip bulbs and speculating on them. Then the stock traders joined in. All of a sudden the prices skyrocketed, finally breaking out of laughable amounts. A single light bulb would sell for more than a workman’s annual income or even a house.
But, of course, like all speculative bubbles, this one has burst.
Since then, every time an asset takes off, the lessons and warnings of “tulip mania” are stirred.
But sometimes it’s used as an argument in a scenario that doesn’t necessarily apply.
Cryptocurrency – especially Bitcoin – is one such example.
The next Facebook
Bitcoin is the best performing asset class of the past decade.
Let me repeat that … the last decade.
And it outperformed the Dow Jones Industrial Average, Gold, Nasdaq Composite, S&P 500 Index and You’re here (Nasdaq: TSLA), which makes it quite a visual.
There are now over 100,000 accounts that hold over $ 1 million in Bitcoin. And there are at least a dozen cryptocurrency billionaires.
But despite its race and the wealth it generated, Bitcoin is continually being compared to the tulipomania of the 1600s.
Even Bloomberg has gone so far as to call Bitcoin “the refusal to die tulip mania.”
But I think it couldn’t be further from the truth.
Now when cryptocurrencies first appeared, there were plenty of reasons to be skeptical. “Blockchain”, “hash rate” and “half reward” were foreign terms. Then there was the idea that a non-fiat digital currency would replace our paper dollars. It seemed absurd to many, like forcing Gen Z to watch a Looney Tunes cartoon.
And it still feels like that.
But over the past few years, the cryptocurrency landscape has changed dramatically. This is not tulip bulb speculation.
There are times of euphoria and mania – every market and every asset has them. But at this point, cryptocurrencies should be recognized as established assets.
I would even go further and assert that cryptocurrencies are not will be mainstream… because they already are.
We now know all about crypto, even if you never wanted to be. And the biggest cryptos are tracked alongside the Dow, Nasdaq, and S&P 500 on financial news programs and sites.
Not to mention that several companies, such as Etsy (Nasdaq: ETSY), Home depot (NYSE: HD), Microsoft (Nasdaq: MSFT), Overstock (Nasdaq: OSTK), Pay Pal (Nasdaq: PYPL), Starbucks (Nasdaq: SBUX) and Whole Foods, accept Bitcoin as a payment method.
Square (NYSE: SQ) patented a crypto payment network several years ago.
Amazon (Nasdaq: AMZN) and Walmart (NYSE: WMT) – the world’s two largest retailers – are looking for experts to lead cryptocurrency products. It’s a signal that they might start accepting Bitcoin before long.
But as inventor and marketing personality Ron Popeil might say: “Wait… there’s more! “
Apple (Nasdaq: AAPL), JPMorgan Chase (NYSE: JPM) and many other Fortune 500 companies are hiring for crypto positions.
I think every investor should have some exposure to crypto, whether through tokens, exchange traded funds, or small cap stocks.
The rise of cryptocurrencies is not like the tulip mania of the 1630s. It is a mistake.
This moment in crypto history is similar to the rise of social media platforms in the late 1990s and early 2000s. The reaction from opponents is very similar. But today, these sites are an integral part of our lives and our businesses.
The most established cryptos – Bitcoin, Ethereum, Ripple, and Cardano – are separating themselves from the rest of the pack: never-weres, jokes and hoaxes. And in 10 years, they could be as ubiquitous as Facebook (Nasdaq: FB), Instagram, Twitter (NYSE: TWTR) and Snap Inc. (NYSE: SNAP).
This is an advantage that any investor would be foolish not to want.
Here are the high returns,