I am not asking you to take my investment advice. Do not invest more than you can afford to lose. I am not responsible for your gains and losses. No two investment balances should be alike because no two people have the exact same financial profile, personal goals, and risk profile.

I don't even want to write this post, but I've had so many folks privately ask me for advice, I'm going to go ahead and lay out my perspectives and opinions here. If you have the slightest doubt about my judgment, credibility, or skill, then please offer constructive criticism in the comments or move along.

Value Investing in Cryptocurrency

Warren Buffett's value investment strategy seems antithetical to the wild west of cryptocurrency investment. Warren thinks it's all a big bubble that's in for a crash, but he also says at the exact same time that he doesn't understand how it all works. He's correct on both counts, actually. If you go in as an ignorant and nervous speculator, you're probably going to lose everything. However, if you understand the market and rely on sound research and analysis, you're liable to be an early adopter in a rapidly growing sector of the global economy.

Seth Klarman's "Margin of Safety" is a rare book that's impossible to get your hands on, but it's an excellent introduction to the value investment philosophy, debunking the gambling mentality and decoupling investment from psychological pitfalls and numerology nonsense. You can easily find the PDF on pirate bay, and I don't even think a world class Jewish penny pincher like Klarman will notice or care (use a VPN!). The book says nothing about crypto and everything about crypto, because the only fundamental difference between the stock market and the crypto market is that the gatekeepers don't exist.

There are no (((Goldman Sachs))) insiders who have access to where the real money's being made, but there also aren't any of the basic SEC protections from the nightmare swarm of scam artists in the crypto realm.

Stop Staring at the Charts

There are people who are gifted mathematical wizards. They have direct API access to the exchanges. They have millions worth of reserves to manipulate the graphs. They have sophisticated computer programs with thousands of lines of code configured to detect trends and profit from them, accounting for a wide variety of subtleties in the market and exchange rates. They're skilled programmers, financial gurus, and they're probably sipping from a Mountain Dew on a modafinil binge while staring at one of those five-monitor command center setups.

God bless you and keep on rocking if you're that guy. Most readers are not that guy, and are actually marks for that guy. If you're trying to be one step ahead of that guy, you're probably going to have a bad time. The only way to beat him is to not play his game. He watches the rumors, the spikes and dips, and he knows the investor's gambler psychology. If you tune all that nonsense out, perform solid analysis, and buy what looks undervalued without even looking at the chart motion, you'll actually outsmart that guy.

I rebalance maybe one per month, and always on account of some new development or technology trend. The entire market took a nosedive the last couple days and I don't even give a single damn. We can expect a young and dynamic market to have a lot of instability at this stage, and you must learn to calm down about both paper losses and paper gains, as well. You haven't actually gained or lost any wealth at all until you exit the market.

The Cryptocurrency Habitat

Forget what all the different coins and tokens are doing right now. Think about what they'll actually end up doing. At one point, there was a "bitcoin maximalist" argument that all of the innovation in the altcoins would eventually get gobbled up by bitcoin, which would solve its structural problems and dominate the entire market. This hasn't happened, as leadership and structural issues in the bitcoin community have shrunk its share of the community down to about 30% and dropping as it fails to solve its problems. A habitat is emerging with distinct niches being competed for by various coins and tokens.

The Bullshit "Gold Niche"

Bitcoin is a "store of value." Fair enough. Right now, it's behaving as such within the crypto community and the exchanges still lean on it as the "gold standard" by which all other coins are traded and judged. Bitcoin is actively burning through that reputation with ridiculous delays, godawful transaction fees, destabilizing forks like "Bitcoin Cash," and clumsy stapled-on solutions like Lightning Network.

The reason the gold niche is doomed is because new technologies are coming on board with IOTA and other players that completely eliminate transaction fees and allow for nearly limitless "micro-transactions." Bitcoin was an important proof-of-concept, but it's structurally incapable of competing with a new generation of much more lean coins that leave the mining farms and 200GB blockchain downloads entirely out of the equation.

The Bullshit "Wall Street" Niche

Beware of Ripple, Tron, and other coins which claim that they're going to be the ones anointed by the financial institutions or major corporate players. Only NEO can credibly claim this, and only in China. The rest of them are bullshitting and waffling around the fact that their coins are congenitally incapable of meeting the standards that Wall Street expects from a financial instrument. That's good, because they need to have reversibility, identity validation, and other qualities which make them dangerous investments at this stage of the game. Ripple and the other pretenders may be able to get a photo of themselves shaking hands with some CEO who is "exploring the technology," but Wall Street and the sovereign governments aren't just going to clumsily go all in with this or that coin at this point.

NEO is different, and I'll get into that later.

The Micro-Transaction Niche

A lot of practical application of cryptocurrency technology lies in the potential to allow for very very small transactions. The first generation of crypto doesn't permit this. If you try to buy a candy bar with bitcoin, you'll have to pay for a steak dinner in fees. IOTA resolves this with an algorithm called "the tangle" which discards the blockchain altogether in favor of a much more lean configuration that's good for micro-transactions. This is a credible niche that's going to have legitimate transaction volume. Since "small and simple" doesn't lend itself well to more sophisticated technologies like Ethereum, the micro-transaction niche will likely avoid getting consumed by Ethereum in the long-term.

The Privacy Niche

When crypto first came about, its first practical application was for illegal shit. You can gamble with it. You can buy black tar heroin with it. You can hide it from your wife. Whatever the case may be. The problem is that Bitcoin and Ethereum are both intrinsically very public. They have "blockchain explorers" that allow you to track where every payment has gone. And with Coinbase and other major platforms for wealth going in and out being friendly with the government and eager to win the government's favor, figuring out who has what is a straightforward digital forensics exercise.

Enter Monero, Dash, and PIVX, all of which basically scramble and anonymize transactions so that digital forensics are basically impossible. While Dash and PIVX are technically superior and have a lot of investment support, an actual analysis of the black markets shows that Monero is the favorite with the greatest legitimate transaction volume. While bitcoin has shit the bed, Ethereum is working to gobble up this niche. If it successfully adopts privacy enhancements, which it plans to do, this niche may wither away.

The Smart Contract Niche

Ethereum is the only coin with a thriving smart contract development community. NEO and some others feature smart contract technology, but Ethereum's the most mature both in terms of codebase and volume. While smart contracts haven't found as much practical application within the first year or so as some hoped, it takes time for revolutionary technology to find practical applications. I anticipate many practical applications coming online in the coming months.

Not only does ETH have the firm head start in this niche, but its development team is very stable and mature, investing millions in improving and extending the technology. While it's unlikely to corner the micro-transaction market, it's likely to scale and integrate privacy enhancements that will make it the primary cryptocurrency market within the coming years. The economies of scale which were supposed to afford bitcoin the unstoppable advantage will drift toward ETH as more and more things that people do with crypto migrate to it.

The thing about smart contracts that folks need to keep in mind is that with some achievable improvements in scaling and programmability, many of the technologies promised by the dozens of other coins out there will be implemented as a smart contract instead. Do not believe the hype about corporate partnerships with Ethereum. It's still a completely unregulated and unregulatable platform. But if China moves fast with NEO, extending Ethereum may be the West's only hope to remain in the game at all.

The File Transfer Niche

Another niche to watch for, which FileCoin is the most prominent example of, is the potential for conjoining the bittorrent swarm algorithm with the I2P network with a blockchain to incentivize the storage and transmission of files. This can and will revolutionize the Internet's entire infrastructure when the technology matures. It sounds complicated, but basically we'll be able to move from an Internet controlled by a handful of telecom conglomerates to a truly decentralized network without all the organizational and corporate gatekeepers and profit takers who currently control it. Once again, Ethereum might gobble this up. Maybe not.

Politics

Crypto is already making a lot of geopolitical actors and operators nervous, and how these technologies interact with governments, corporations, and institutions will matter much more in the years to come. It's in the final months of its "exciting technology" phase, and governments and institutions are going to start making moves to protect their assets and interests from disruption.

The ChiComs are way ahead of everybody else in the game on this front, and will likely remain so. A centralized and disciplined inner party of reptilian technocrats is simply going to be more agile and forward-thinking than the donkey shows of rotating asshats who run the Western governments or the clueless corporate oligarchs who run them. The development of NEO is part and parcel of an elaborate chess game where China will brutally crack down on every single cryptocurrency that can't meet its regulatory standards: Everything but NEO.

NEO is designed from the floor up to be the radioactive cockroach that survives China's coming regulatory putsch. It's being designed in collaboration with and with the support of China's government and institutional financial community. That's huge. In a doomsday scenario where cryptocurrency actually begins to threaten the conventional financial community, China is positioning itself to embrace, extend, and exterminate crypto as we know it; harnessing the deflationary speculative potential of the technology and redirecting it into conventional regulated finance.

As such, the West's options are limited. Ripple pretends to be this technology for the West, but isn't even remotely capable of filling the role it claims to be auditioning for. The most likely outcome is for the West, threatened by rising NEO, to back off of "killing" the cryptocurrency market. They might make a go for it, but will fail to actually pull it off and will just end up creating that much more space for NEO's rise. Their best bet will be to staple some identity and regulatory smart contracts and tokens atop Ethereum to emulate NEO.

My Portfolio

I'm something of an Ethereum maximalist who's bullish on NEO and interested in IOTA but bearish on just about everything else. My portfolio is currently about 75% ETH, 10% NEO, 10% IOTA, and 5% Monero. I'm completely cashed out of BTC and I actually see ETH eclipsing BTC as the crypto with the highest market cap within months. A combination of useful smart contract technologies, scaling improvements, and privacy enhancements which are very much in the works will show that ETH is growing and moving forward while BTC simply doesn't have the leadership or consensus about its future direction to overcome the challenges awaiting it.

Most of my research is in carefully watching the smart contracts and tokens coming online within Ethereum's ecosystem for investment opportunities. Discussing which contracts and tokens I believe are promising is beyond the scope of this post. And most of my ETH is just sitting in the wallet at the moment.

Conclusion

This may be confusing to some readers, who've heard me crowing about "bitcoin" for several years. Bitcoin had become the normie buzzword to describe cryptocurrency. And up until 2017, there were still credible pathways for Bitcoin Maximalism to prevail. Those doors are closing, and the market's moving forward.

Crypto-investment should be necessarily on balance with paying off debt, buying land, having some silver, and stocking up a few months of basic family survival rations. But the investment class as a whole is more conservative and necessary than it appears. One industry after another is getting sucked into technology's trend of massively decentralizing systems and processes, and removing the gatekeepers and their sinecures. Whether it's the 80's Jewish pornography distributor, the 90's Jewish music label director, or the contemporary Jewish financial executive, that middleman position is increasingly threatened in today's world, and it's smart to bet against them.