The Wild West of Cryptocurrencies
Back in 2013, there were only 66 crypto coins, and in May 2021, there are 9847 different cryptos that someone can invest into their portfolio.
Anyone off the street can create their own cryptocurrency, but the market is dominated by 20 coins, making up about 90% of the $2.06 trillion market cap.
The first cryptocurrency exchange didn’t come into existence until March 2010, and it was tough to purchase a coin back then. Now with apps like Robinhood and Coinbase, people can buy and sell their cryptocurrencies with more ease. Now financial institutions are looking to jump on board and offering their customers the ability to invest in crypto if they want.
How This Relates To Investing Into Computers in the 1980s
Between 1975 and 1985, 119 computer companies were created, and some of these companies went public. If you look at this list of companies, you will see that most of them are not around anymore.
- Applied Technology
- Atlantic Computers
- CMC
- Melco
- Microsoft
- Mycron
- Ohio Scientific
- Processor Technology
- Sea Sonic
- TeleVideo
- Viglen
- Acer Inc.
- Apple Inc.
- North Star Computers
- Polymorphic Systems
- Rainbow Computing
- Umtech
- VIEW Engineering
- Altos Computer Systems
- Distributed Processing Technology
- Oracle Corporation
- Solectron
- SunComm Technology
- Acorn Computers
- CMC Magnetics
- Emulex
- Inmos
- Micro Industries
- Micron Technology
- Western Design Center
- 3Com
- AMAX Information Technologies
- Convergent Technologies
- Core International
- Corvus Systems
- Dell EMC
- Ingram Micro
- Itautec
- Micro Center
- Micro Electronics, Inc
- Microcosm Ltd
- Rodime
- Seagate Technology
- Teradata
- Tri-Rivers Educational Computer Association
- Tulip Computers
- VLSI Technology
- Zenith Data Systems
- Apollo Computer
- Automatix
- ELSA Technology
- Iomega
- Leading Edge Hardware Products
- Microtek
- MiniScribe
- Osborne Computer Corporation
- Quantum Corporation
- Vectrix
- APC by Schneider Electric
- Computacenter
- Creative Technology
- General Computer Corporation
- Hayes Microcomputer Products
- Logitech
- LSI Corporations
- Pyramid Technology
- Silicon Graphics
- Spectravideo
- Advanced Gravis Computer Technology
- Amiga Corporation
- Compaq
- CompuAdd
- Comverse Technology
- Corona Data Systems
- Dragon Data
- Green Hills Software
- Happy Drives
- Jupiter Cantab
- Maxtor
- Maynard Electronics
- Sun Microsystems
- Chipcom
- Datalight
- DayStar Digital
- Decillionix
- Genisco Technology
- Parallel Computers, Inc.
- Parrot Corporation
- Sequent Computer Systems
- Targus
- Wacom
- Whitechapel Computer Works
- Xetec
- 2the Max
- 4D Inc
- 4D SAS
- Access IS
- Adder Technology
- ASML Holding
- Averatec
- Cisco Systems
- Compal Electronics
- Cydrome
- Dallas Semiconductor
- Dell
- Lenovo
- MIPS Technologies
- Multiflow
- Sangoma Technologies Corporations
- Vitesse Semiconductor
- ATI Technologies
- Conner Peripherals
- Gateway, Inc.
- NeXT
- Plextor
- PNY Technologies
- Supertek Computers
- TriQuint Semiconductor
In 2021, no one back from the 80s would have correctly predicted all the computer companies that would be successful and which ones would fail. This concept can be applied to other industries as well.
If someone were to invest $1000 in 100 computer companies, about 95% of these computers would have failed, and you wouldn’t get your money back from these investments.
Though, the $1000 investment made into Microsoft, Intel, Apple, Cisco, and Oracle on their first day of trading would have turned that $5000 into $7,807,052.46 on 5/13/2021, which is an 11.51% return.
If someone were confident and would have put the $100,000 into Microsoft on the first day of trading, it would have turned into $393,464,475.07 on 5/13/2021.
Putting $100,000 into the S&P 500 on 1/1/1980 would have generated $3,846,529.88, which is a 9.55% return as of 5/13/2021.
How To Use This Information
It can be tough to predict the future, and when you invest in a company, there are many things out of your control.
What would have happened to Microsoft if the anti-monopoly lawsuit was more serious? What would have happened to Apple if Steve Jobs got into a severe car accident and died in the mid-90s? Apple was close to bankruptcy before Steve Jobs came back as CEO the second time.
These events could have happened, and they would have probably caused a lot of damage to the performance of these companies, and they wouldn’t be as big as they are today or not be around.
When it comes to investing and limiting harmful issues like the gambler’s fallacy and the complexity bias, it’s best to have the proper decision-making process and strategy. Like diversifying in areas that you can’t control and focusing your efforts on the things you can control while understanding financial risk.
How To Apply This To Crypto
For an investor, they should know the financial risk they are accepting and the reward they will get if things go well to a certain degree. With so many cryptocurrencies out there, it’s hard to say which cryptocurrency will stay around or if it will be adopted thoroughly by the public.
Investing in crypto is a risky adventure. Since no government entity backs the top 20, a crypto coin or the whole cryptocurrency landscape can fall significantly due to the vicious cycle, where pessimism is the main sentiment of investors. Or things can continue the upward trend because investors are optimistic about the future of cryptocurrency and find it useful. Only time will tell us which direction cryptocurrencies went in.
One of the crucial things about being an investor instead of being a speculator is knowing how to manage your financial risk. An excellent way to manage risk is through diversification and not making cryptocurrency more than 5% of your portfolio. If a person decides to invest more than 5%, let’s hope they understand the deal before they accept it.
Keep The End In Mind
With investing and other activities in our lives, a bad strategy is to start thinking about what you need to do instead of why you need to do something. It is best to have your goals in mind and have a clear vision for how you want to live your life now and in the future.
These strategies will help us stay disciplined with our actions, not get distracted by the noise, and prevent us from thinking about how things are connected. It’s real easy to focus on things like performance and not worry about tax consequences. Which could eat up to 45% of your profits depending on when the security was bought and sold.
Once you have the end in mind that you want to have, figure out the best strategy and plan to help you reach your vision.
Then do what is useful to get that life. Overall, we get to make choices with our lives, and we need to be at peace with our choices with minimal regrets.
Nothing is guaranteed in life, but understanding history and strategies can help you tilt the odds in your favor.
*Before you make any changes with your financial plan, please do your own research or consult a professional like myself*
*This is not a recommendation, endorsement, offer to buy or sell a security, or is an investment report. This is general information*
