Warning About Cryptocurrencies [Opinion – Guest Post]

If coders and miners disagree these days a new altcoin gets digged and then a new decentralized chain by then who knows if it’s bad coins moving through mass transaction in any chain. Many individuals, who bought cryptocurrencies in 2017, have done so for the worst reasons.

A cryptocurrency project does not produce cash flow; therefore, it doesn’t earn a profit, nor does it pay out a dividend in return. All cryptocurrency projects and blockchain-based coins/tokens are, at this point, a speculation on future growth.

In the stock market, businesses, which do not generate steady revenue and pay a dividend to shareholders, are the worst-performing stocks.

Many cryptocurrency investors have never owned a publicly-traded company, but as you can see, from 1986 up until the time the RBC study above ended, dividend growers compounded at a rate of 12% annually.

To give you an idea, every $10,000 invested in 1986 was worth $190,000 by 2012.

You see, stocks, coins, and tokens all represent your equity stake in a business.

For example, if I own even one share of McDonald’s, a portion of the business belongs to me.

As a minority owner, I get to participate in the wealth generated by the business.

One of the ways, which shareholders do this is fundamental to all enterprises – it’s called a profit distribution.

You can potentially be a owner with liqudeted assets and a major player because of Smart money research and development

As you can see, $10,000 invested in the S&P 500, which tracks 500 of the largest companies listed on the NASDAQ and the NYSE (New York Stock Exchange), has been a consistent wealth generator.

Look at the monumental difference dividends have made to patient investors, though.

When a business you own shares of, for example, Colgate-Palmolive, pays a quarterly dividend, you can use that cash injection to buy more shares of the company.

Essentially, you’re using the profit distribution to grow your position.

This is called reinvestment, and from 1960 to 2016, every $10,000 turned into $2.1M for investors who followed this system, as opposed to only $385K for those who spent their dividends on lifestyle expenses or otherwise.

The gap is magnified the more it is practiced. Time is the friend of a productive habit.

Neither Bitcoin, nor any other cryptocurrency or blockchain project currently pays a steady dividend, which is why they can plummet or rally like a roller-coaster.

It is impossible to truly pinpoint intrinsic value without earnings. It doesn’t surprise me, then, to see a scenario like Q1 of 2018.

The total market cap went down from around $612B to $261B.

Ripple’s price dropped 78%.

Bitcoin Cash (BCH) lost about 73%.

Now, with that said, it’s important to understand that dividend investing is the surest investment strategy for a 30-40 year plan. It is not, and will never be, a 5-7 year plan like cryptocurrency wealth has been thus far.