Saturday, June 10

Interesting information provided by the ‘cryptos’

I will never understand how one can take an opinion about a financial asset personally, but given the sensitivity that investors in crypto assets usually show, I will clarify -before continuing writing- that I have nothing against it. And that I am hoping that they are properly supervised and regulated to have one more asset, which also in this case has the enormous appeal of not depending on central banks.

By the way, being regulated and supervised does not mean depending on central banks, but rather there are police guarding the market and that there are rules of the game similar to those of other assets.

But until we can work with the cryptos As with any other asset, for me its usefulness is being different: show me what would have to happen in the equity markets when you don’t have to be in them. And with this I do not mean that you have to leave the cryptos, I do not enter there, it is not my ‘negotiated’.

What I am saying is that they show a series of symptoms that in the bags have never led to anything good. They are a great reminder of what usually happens in the bags before it turns brown. And those kinds of reminders are worth a lot.

First of all, the massive entry of people who have never invested and that I never would if it weren’t for the allure of quick and easy money. The other day I did a rather innocent comment on twitter, explaining that there is a positive correlation between what the main North American index, the S&P 500, has done with what bitcoin has done, with the important nuance that the latter has had much greater volatility. logically I fell for the octopus, despite the fact that it is a fact and not an opinion.

I am hoping that crypto assets are properly supervised and regulated to count on them

But what really caught my attention is that, after the rigorous aggressive part, the author of the tweet became understanding -which is always appreciated- and explained to me in a somewhat sui generis way how the markets work. But what caught my attention the most is that, in the end, he told me not to worry, that “I’d get used to this investment thing.”

Don’t get me wrong, I don’t mean to be lacking in humility. If I have learned anything with age, it is to what extent it is good to be humble. Although I don’t always get it. What strikes me is that someone who obviously knows very little about the markets explained them to you in a tweet and tell you that “you will already be hardened in this investment thing” when you have been working on it for 30 years.

In general, the comments posted on Twitter by cryptocurrency investors They remind me of the “masters of the universe” of the 80s and 90s, that they were because they had gained 30% in an operation in full swing of the stock market and that they ceased to be so with the crash of 87 or the one of the dot com of the year 2000.

Another thing that makes me uneasy about an asset is that advertised on billboards and buses. And in this case really childish ads, like the one where a species of fox threatens a species of bear with taking away its position of profitability. Y all with a lot of gold, gold everywhere, usually in coins. The world’s oldest and ‘analog’ asset is used to encourage people to invest in a digital asset, which is a number on a chain. Weird.

It also makes me a little uneasy when I get a message on my mobile (Here, Data Protection Law!) with a photo of a super young and cute girl presenting herself as cryptocurrency company analyst, making himself available to me if I want to invest.

I am also concerned that they are advertised by well-known actors or that companies in the sector buy huge stadiums where to put your brand, as is the case in the US. Call me old, but those things have never brought anything good in the world of investment.

The ‘cryptos’ are a great reminder of what usually happens in the stock market before it gets brown

I don’t know if there will end up being a debacle in the world of cryptocurrencies or not, but I do think that all of the above provides very interesting information. The first is that the day we see all this related to equities exposure should be reduced to the same. Without hesitation. Also, I bet something that when that happens the prices will be really excessive. It usually coincides.

The second interesting piece of information is that surely cryptos they are taking a lot of speculative pressure off traditional equities, which is good for the latter. I can assure you that the type of purely speculative investor who came to the office in the old days when the stock markets had risen as much as they have risen these years I see more in the world now cripto than in equities.

I am convinced that in the future we will end up recommending some type of crypto asset to our clients. Probably as a defense formula against the excesses of central banks, similar to what gold has traditionally had.

And beware, I am not saying as a defense against changes in monetary policy, since it has just been shown that when the Fed tightens, cripto also suffer. Nor have they served as a defense against the rise in inflation. I am referring to the loss of confidence in central banks that do not stop issuing money.

I am also convinced that together with the metaverse development One or several cryptocurrencies will be developed as a generalized form of payment. But, at the moment, the greatest use that I am seeing for crypto assets is as a reminder that the 34% ‘pinch’ that bitcoin has recently suffered from highs can also occur in traditional equities, if the environment were to resemble the one that was in cryptocurrencies just before the crash.

***Victor Alvargonzález is an independent financial advisor and founding partner of Nextep Finance