May went sidewise. Somewhat boring in fact.
Today we want to discuss cryptocurrencies. At best an “investment” fad. As the story goes the little boy said to the emperor “the emperor has no clothes on.” Of course, the emperor was convinced that he was magnificently dressed and everybody else was too intimidated to tell him otherwise. Well, crypto has NO INVESTMENT VALUE. They are naked speculation.
When it comes to investment, there are many types of assets that you could choose to invest it. Some of those asset types have more merit than other types. People invest in things like stocks and bonds because as asset classes that have withstood the test of time. We have several centuries worth of validation. In recent years, new assets classes have emerged such as cryptocurrencies and NFTs. These assets have no intrinsic value and have no track record of success. However, people continue to invest in them. The reason is either that they believe that they will eventually be worth something, or that eventually they will be able to offload that worthless asset for a lot of money to a fool.
2022 has been a terrible year for cryptocurrencies. Their values have cratered and without any real value underlying them there is no logical reason for the prices to go back up. Now of course, we can’t predict the future. The world can sometimes be an illogical place, but we don’t think betting on irrationality is financially lucrative in the long run. Ultimately the value of a currency is the ability to spend it. Cryptocurrencies, regardless of the name, cannot be spent the way that a currency needs to be able to. Currently, they are intrinsically worthless. That theoretically might change in the future, but we find that extraordinarily unlikely.
NFTs in a way are even less valuable than cryptocurrencies. A NFT (non-fungible token) is purely a collector’s item. It doesn’t have aspirations of worth like cryptocurrencies do. NFTS are simply a line of code that represents a physical item. Think of them as beanie babies 2.0. A more evolved way of wasting your money for the modern age.
Currently, we at Dollinger Management cannot recommend any degree of investment into cryptocurrencies or NFTs. In addition to their inherent worthlessness, they have no track record of success. A track record is essential for any type of responsible investment. Without one, it’s pure speculation. Speculation, while exciting, is not an intelligent way to improve your bank account.
We appreciate your business and trust.
Dan and Eli
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Questions for the comments
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