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Ryan: So you've looked at companies that are big companies, you've assessed much bigger marketcap type circumstances. Do you feel that that experience has helped you? Or are we in such, kind of the infancy, that as you discussed, it is nearly simply good sense. You simply have to sort of take a look at it and think rationally about what's going on, and pull the feeling out? You have to pull the emotion out, and there are no traditional metrics that you can take a look at.
Okay. What I can utilize that I gained from working on Wall Street throughout 3 years, is how to read individuals - So I think that's probably among my very powers, if you will. And if you've got an excellent BS detector, you should listen to it. Okay. You should definitely listen to it. If I'm taking a seat and I'm talking with someone, and they have actually got all the bonifides, but you know, there's just; it's not agreeing with me, there's something about them that's not sitting well with me.
There are numerous other offers out there to look at. Yeah, there's excessive chance. Yeah. And speaking of opportunity, you know, you type of mentioned at the beginning, Bitcoin and Ethereum, many individuals have actually become aware of these two, especially Bitcoin, since it looks like it's in the news all the time, something or the other.
Have they missed out on the boat on Bitcoin? Bitcoin is trading nearly upwards of $6,000 just recently; it's come up from state $3,000 not too long ago, it's rather volatile. Do they type of wait on a pullback, or do they simply say, "Okay, I'm going to buy some Ethereum, I'm going to buy some Bitcoin, see you in 10 years." You understand? Yeah that's a fantastic question.
You can literally use tiny stakes, and change them into life-altering quantities of money. So I believe the initial step is, get clear on, if I lost all this cash tomorrow, if I put it in Bitcoin, I wish to make certain that it's not going to have me pleading my moms and dads for hamburger cash, and sleeping on their couch.
And then on the very first 50% pullback that you see in Bitcoin, purchase the second half. Which way you're not going to get the perfect rate, but you're going to get an excellent rate. And then simply leave it alone. And to your question, is it too late to buy Bitcoin? Absolutely not.
Right now it has about simply under a $100 billion market cap, so it's a 10x from here. Implying that Bitcoin is about 10 times more volatile. And they believe that as it ends up being less and less volatile, it's going to be simpler to really rely on as a currency. Correct. Now, we remain in an age where news, whether you call it FUD, fear, uncertainty, doubt, really drives the rates of these cryptocurrencies up and down it seems like.
Even more, to a degree, than the stock exchange. Since there are bigger gains and bigger drops. Do you feel that the marketcap has to go approximately help manage that volatility? So that there's, it's expanded larger? Do you feel that the news has to turn favorable? What do you feel is going to help decrease that volatility, which in turn will lead to more widely accepted usage of a real currency? It's sort of like the chicken egg thing nearly, but there's got to be some point where it transitions ( And it shows that you really do understand the area asking that question. So generally the life cycle of brand-new ideas is that it's the speculators and the early adopters that initially come into it, before it enters into mass adoption, and then becomes what we would consider real innovation, right? Right.
It went from pennies to a hundred and modification, and then back to like, five dollars, and now it's overcome a half a trillion market cap. Yeah. So what you'll see is a similar circumstance with Bitcoin. Now we also saw Bitcoin go from pennies to $1,200, back down to $200.
It's now in its phrase of going into its mainstream stage. Now, in order for it to be a currency, you're right, the volatility has to lessen greatly. And it can't diminish considerably up until it gets truly above a trillion market cap. Okay. So the concern is, what takes it to a trillion market cap if it can't be used as a currency? And it will be speculation that gets it there.
And so, as institutional cash begins entering into the marketplace, which is what I expect will occur in 2018, and I'll inform you why I think that in a minute, that speculation will be self-reinforcing, and it will take Bitcoin to the point where volatility will come way, way, method down, and all of a sudden, it's now something you can utilize legally to pay incomes and buy things and actually utilize as a currency - It's more of a speculative car that is likewise a warehouse of value. Mm-hmm (affirmative). Therefore when you look at, you type of discussed position sizing and entering in and trying to find, I believe you pointed out a 50% pullback (undefined). You know, common stock investors might look at, okay if a stock pulls back, or the market draws back 10%, it's a correction.
In cryptocurrency, I remember not too long back, Ethereum, I feel like it went from $300 to 10 cents or something in a day. That's right. However then, next thing you understand, it was back towards $400, and then it's drawn back. So the volatility varieties are rather different. Do you sort of think that, 'cause what I'm trying to get at here is, there are people who try and time the market.
And what I'm attempting to determine is, are you more just put something in, if there's a pullback, put some more in. Yep. If it pulls back even further, look at your position sizes. If it makes good sense, possibly buy once again. However do not get too caught up in the plus green balance in your account, or the minus red balance, you know? Because- Yep, 100%.
Yep, 100. That is the way to go, due to the fact that we could have one announcement tomorrow, and Bitcoin's $25,000, and after that you would have missed it, right? Mm-hmm (affirmative). So get in, get your feet damp. Get going with something that's not going to squash you if you're down 50 or 60% - Do not go put $200,000 in, and you're down 60% tomorrow, and you're prepared to jump off a building. Don't do that, that's just not smart. Be reasonable, get your feet damp with this innovation. Know that you're not going to get a best print, right? Put your ego aside, throw it out the room, it's got no organization here.
You will see a 50% pullback in Bitcoin eventually. Now we may go to $15,000 first, before that next 50% pullback. But you will see one. So put your half position on, await the first 50% pullback, put your other position on, and strap in for the trip, 'cause it's going to be remarkable.
Yeah. Which leads me to emotion. I trade options myself, also, and for me, stock trading and specifically option trading, fits my personality profile. I'm very unemotional; I'm disciplined, I look for the best, and then go into the better. I'm very strategic about it. However the average individual as we understand, is reactive, when it concerns investing, they wish to purchase Amazon when it's now trading over $1,000, and they want to offer it when it's at $800, and purchase it back when it's at $1,200.
And I look at the very same obstacle with cryptocurrency, other than I see it on a more extreme level, because it has an even larger FOMO mentality. Where individuals have this fear of losing out, they believe, I could have purchased Bitcoin at pennies, and if I would have purchased $100, I 'd have $70 million or whatever, you see these articles all the time.
That was most likely not great." And I had done that several times in these much lower numbers. But at that time these were profits, right? These were real profits. And who knew that it 'd be $5,000, $6,000, $20,000, whatever. So there is even a few of this internal FOMO of like, what's the next one? Oh, I have actually got to find it.
And outside of position sizing, how do you encourage the folks that you inform about cryptocurrencies to protect themselves from this FOMO, emotional spiral that can take place? Yeah, so once again, a great deal of the time, every other week I put out a video, and I talk a lot about rationality, being reasonable.
On our journey to producing wealth, it's not the federal government or someone else or our parents who are holding us back, right? It's all up in here. Because money does not care what color you are, it does not matter what school you went to; it does not care if you check out well, or if you are great looking, or if you are awful.
So we bring all of our own drama to a development of wealth. So a few of the important things that I do to help us safeguard ourselves from that is diversity, to be modest enough to state, "Look, I could suggest a concept that might go to absolutely no." Therefore we require to be diversified, and the other thing that we do is we utilize something called uniform position sizing.
So I'll provide you a prime example. I recommended an extremely, extremely small cryptocurrency earlier this year at 13 cents. And I said, "Look, if you're a small gamer, probably put $200 to $400, perhaps $500 max in it. And if you're a bigger gamer, you can put $1000 into it." And so that particular coin went to as high as $50.
Yeah, yeah. Right? So, I'm not going to state that every single idea I take a look at does that. There are some ideas that haven't exercised. However when you have a portfolio of concepts, and you use consistent position sizing, a couple of things take place. One, you're going to get lucky, best? You're going to have a couple of trades that are just remarkable.
Even if you have 10 ideas with $500 each in, $5,000, for many people, they lose $5,000, if whatever went to no, yeah, it's gon na suck. It's not pleasant. But it's not going to put you in the poorhouse, right? You're not going to be sitting outside of Grand Central Station with your hat in your hand pleading for burger money.
Because of the charm here Ryan, you understand I get passionate about this, you have actually got to forgive me, however the charm here is we're so early. Mm-hmm (affirmative). We're so early, that we don't have to be that brilliant, ideal? We need to be bright adequate to have a core portfolio of fantastic names, to have rational position sizing, and after that be brilliant enough to do absolutely nothing however wait.