Crypto-Investing For Beginners, by Michael James
[Note: I was sent this e-book free of charge by the author. No review was required.]
I am not sure whether I find it difficult to believe or unfortunately all too likely that the author considers those who have read his short (19 page or so) white paper on investing in crypto-currencies to be more knowledgeable than 90% of all investors and traders. While I consider myself by no means entire ignorant or uninterested in crypto-currencies, I must admit I am rather skeptical about them . Right now, in looking at this paper, what I see the writer trying to capitalize is a fear of missing out. This is actually a fairly normal phenomenon in speculative ventures of this type. There are a certain amount of early adopters who are willing to invest in something risky and who are knowledgeable and involved from the beginning. Yet once these people are fully invested, in order for more money to be poured into the system people who are less knowledgeable must be brought in so that their money can sustain the hype that is already starting to build about the particular investment opportunity–and hype both drives and demands increased money.
In reading this white paper I was reminded about a former friend of mine I had when I was living in the Tampa area, and for whom I actually worked for a time in order to help him organize his chaotic paperwork. This gentleman was notable for several things but one of them was his unfailingly bad sense of timing when it came to speculative investments. In 2000 he was going all in on tech stocks just as the dotcom bust was about to happen. In 2007 he was looking to invest in real estate in Florida just before that went bust. He is the sort of person I would want to read this guide. If he was hyped up about digital currencies and thought that they were a can’t miss opportunity for wealth, I would stay as far away from the investments as possible, because wherever his money goes, a lot of it is going to be lost and I want no part of that. If it is true that there is a lot of money flowing into crypto-currencies strictly based on the returns that they got for early investors without the people investing being aware of what they are getting into, then we are already at the hype stage of a bubble.
Now, this does not mean that I think crypto-currencies are without any value at all. There may be important uses for blockchains and ways of facilitating agreements without expensive lawyers as some of the currencies discussed are involved in, and I think that automating and speeding up ACH transfers is something that could definitely be useful with this sort of technology. That said, a lot of people are going to lose a lot of money because they are involved in this as a can’t miss phenomenon. To be sure, the author is far more cautious, viewing this (rightly, I think) as a high-risk/high-reward proposition where one should put at most 5% of one’s investments to take advantage of the upside potential while limiting one’s downside exposure. This seems quite sensible to me. After the hype is gone, I think there will be a role for digital currencies and the technologies they represent as an alternative to conventional banking. Those who are involved in industries that conventional banks are moving away from (like gun-related companies) would do well to take advantage of the quality of their products as well as the need to circumvent traditional funding bottlenecks, and so I definitely see some long term potential in this sort of currency after the initial hype has faded. Who knows which of those alternative currencies will last, though?
 See, for example: