Given all of the risks outlines in previous posts, why do I still want to buy crypto? There are two broad categories of benefits, likely benefits and unlikely benefits.
Likely benefits
Opportunity
Crypto is scary, confusing, and intimidating and I think this is is keeping the price artificially low. One of the reasons the stock market has gone gangbusters over the past 50 years is that it’s become incrementally easier for regular people to invest. I believe the same will happen with crypto markets and as more people invest these types of assets will go up in value. I know it sounds silly to say you're an early adopter of crypto in 2022 but it is still far from being mainstream. As it becomes demystified and investment opportunities are democratized many more people will be able to enter the marketplace.*
Hedge against inflation
This is the first time in my life that I’ve experienced significant inflation and it is unsettling. I’ve identified exactly two investments which are decoupled from the US dollar losing value:
Real estate
Cryptocurrency
If you’re concerned about inflation and already own a home you might want to consider crypto as another inflation hedge.
Unlikely benefits
Hedge against the collapse of the US dollar
I have full faith in the US government and I think the collapse of the US dollar is infinitesimally unlikely but a lot of very weird things have happened over the past two years. If the dollar collapses you’ll be a little better off having some crypto.
Hedge against government action
With banking being mostly digitized it has become very easy for governments to freeze the assets of anyone it chooses. I don't expect an insane dictator to take over our country and freeze the assets of political opponents and/or dissidents but recent history has shown that Western democracies are willing to do this to its own citizens.
Being able to bug out financially
If for some reason you ever need to leave the country in a hurry and your bank accounts are inaccessible, having some crypto in reserve would be helpful.
* Please do not put any money into crypto that you cannot afford to lose– this is still a very risky, extremely volatile investment.
Open Questions
(none added from this post)
"We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'" -- Warren Buffett
>> this is still a very risky, extremely volatile investment.
Cryptocurrency was not designed to be an investment. It was designed to support commerce. Perverse dynamics have served to make bitcoin appear to be a scarce commodity (like gold). I don't believe that will last. We will soon have cryptos that serve the original purpose well and the exchange rates for cryptos will normalize.