Crypto Cripples Financial Future

Why the youth’s crypto craze is darkening their futures: An opinion by Archie Rankin

It has to start somewhere, the fantasy of figures, the promise of profit, rampaging blue chips. Often our obsession with financial markets begins in a singular moment, an epiphany – but for today’s youngsters that isn’t the case.

Their case? Cryptocurrencies. The encrypted data strings and their invigorating volatility has teenagers hooked on the trend that is taking markets, economies and central banks by storm. Recently, crypto markets have tumbled, proving to even the most bullish of bitcoiners that the hype cannot last forever. In fact, I don’t think youngsters should be fuelling the hype at all, and neither would the investing icons of yesterday.

Those with a traditional financial education (like me) were taught by the wizardry of Benjamin Graham, Warren Buffet, Charlie Munger, and John Bogle – all icons in their own right – and yet today’s financial fanatics are flouting every one of their commandments. Benjamin Graham cautioned against mere speculation, advocating for the religious scrutiny of an investment opportunity before making a move. John Bogle, the man behind the index fund, also argued the same, advocating that one should invest in ‘a basket’ that represents the entire market and wait. This conservatism underpinned buy-and-hold investing, and arguably was the focus for investors for a good fifty years.

Yet the 21st century has seen that changed. With the coming-of-age of cryptocurrencies, young investors are now pouring their money into assets that something as little as a tweet can have major knock-on effects. The crypto craze is fuelled by one thing and one thing only; speculation. There is no intrinsic value to speak of.

Of course, your fans of the decentralised currencies will argue that they are just like any currency, and are only worth something as long as people have trust in them. But until they are used in retail transactions and have some form of state backing, cryptocurrencies are unlikely to be a regular feature of your average pension fund, regardless of their popularity.

That is not to say that I do believe there is a future in the crypto space. The innovations we are seeing now surpass everything we have seen before, and opportunities are on the horizon. Yet before we ride off on the bull market into that horizon we must first give ourselves a good and proper schooling. Understanding the fundamentals of markets and the different approaches to investing are key to accomplishing your goals as an investor. As Morgan Housel says in his The Psychology of Money, managing your finances is more about behaviour than it is about skill or intelligence, and the same goes for today’s craze.

Perhaps its time we stop the younger generations from hopping on the bandwagon and start getting them to take a long-term view on their investments, and encourage them to heed the advice of the icons.

But of course, the world is changing, and another thing that The Psychology of Money teaches us is that everyone is different – and so they manage their money differently to us. So, by all means, go wild, try it out, break free from crypto chastity and taste the red and green apples of the markets – but would it hurt to put something away into growing the tree?

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References/Wider Reading

John Bogle’s The Little Book of Common Sense Investing

Benjamin Graham’s The Intelligent Investor

Morgan Housel’s The Psychology of Money