HomeFeatured ArticlesThe Bob Ross Approach To Investing In Crypto

The Bob Ross Approach To Investing In Crypto

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It’s tough out there right now. Bitcoin (and crypto, for that matter) is in a real “s**t or get off the pot moment.” It’s currently trading below critical support after hovering above 40k for a good chunk of 2022.

When considering what to do next, charts make for a fine muse. You can argue that what we are seeing is reminiscent of July 2021.

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You could also say it’s quite reminiscent of November 2018.

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Truth is, whether your art is inspired by Hieronymus Bosch or Bob Ross, you’re probably just as likely to be correct. 

Regardless of how things shake out, it’s unwise to fret too much. As they say, it’s always best to invest with a long-term timeframe. The idea being you can overcome the volatile day-to-day that way. Just invest in safe and reputable companies. But how do you square being long-term crypto? After all, as they say, crypto doesn’t have the fundamentals the way equities do.

As far as fundamentals go, you can’t get more fundamental than a price-to-earnings ratio (p/e ratio). Good companies in a reasonable market are expected to trade at certain prices based on what their p/e ratio is. As for companies not yet profitable, you can hang your hat on what other similar companies have been able to accomplish, and make your long-term bet based off that. But therein lies the grift.

One has to take a leap of faith if you’re investing in Amazon over a decade ago. It seems like a foregone conclusion that they would become successful now, but at one point AOL sure looked like a snowball rolling down a hill. Moreover, even companies with actually legit non-Enron-like earnings have been trading way above their ratio since 2020. In sum, fundamentals in equities are as predictable as a dice roll — unless you’re Ken Griffin. 

Although crypto projects can’t give you a p/e ratio to tuck you in at night with, crypto has its own set of fundamentals — arguably even more predictable fundamentals. In their place, you can use network growth. In fact, Raoul Pal does, and he’s done pretty well for himself.

For whatever reason, the folks on Wall St. have yet to internalize how significant network growth is for crypto. Despite the fact that so many tech companies like Google or Meta rose to dominance because of their network effects, they don’t view crypto the same way. All because it’s not attached to potential earnings. But that just doesn’t stand to reason.

As we can see with the communities forming around so many crypto projects, those projects are building protocols with long-term utility. Think DeFi, NFTs, Play-To-Earn Gaming, etc. Same with crypto exchanges that are getting into staking and protocol governance.

When it comes to crypto in 2022, it’s not just about buying and selling anymore. Projects are building with a long-term view. What’s the consequence of said long-term view? Further investment from people incentivized to hold and keep holding. Unlike network growth in, say, social media, where it begats advertising revenue, in crypto, with tokenomics being the way they are, network growth turns into market cap growth.

So when considering why you should feel positive about crypto as a long-term investment, it might not be a bad idea to see the forest for the trees the way Bob Ross does.

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Recommended: Joe Biden Announces Crypto Executive Order; Bitcoin, Ethereum Rebound

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John Kaczur
Writer and editor, based out of Toronto. More excited about Web3's future than its present. Proud Koala foster co-parent.

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