Brendan Bernstein is a founding member of Tetras Capital Partners, LLC, an investment manager focused on investing in cryptocurrencies and blockchain assets.
Cryptocurrency investors are blind to the most important factor of any investment – valuation.
Merely uttering the word “blockchain” has been a hypnotic weapon, sending investors into a trance where they clamor to buy at any price.
Tea cup from Get Out: The process of sending blockchain investors into hypnosis.
Raiblocks investors in “the sunken place.”
This isn’t the first time growth investors have gone wild. Technological innovation typically turns investors into emotional basket cases. Today, a blockchain protocol with any facade of technical aptitude is valued at eight figures.
Throw out a $10-term like “DAG” or ‘interoperability” and you’ll get nine figures.
And these low eight- or nine-figure valuations are turning into 10-figure valuations. Wash, rinse, repeat…. The blockchain voodoo is working.
Blockchain investors using jobu to increase protocol valuation.
Well, for people who view tokens as a casino chip instead of an asset who’s value will ultimately converge to fundamental value….
Spoiler alert: this won’t end well.
Crypto assets are “different”…
Hiding behind the pseudo-science of white papers and platitudes like “decentralized technology bringing a new era,” many investors believe crypto assets are “different.” If transactions increase, the protocol will go up in value…
History tells us it can’t be that simple.
The “Nifty Fifty” of the 1960s, a group of 50 stocks that represented some of the fastest-growing companies on the planet, bought regardless of price, epitomizes a case of growth investing gone wild. The goal of the approach was to identify companies with the most optimistic outlooks in earnings growth. The stocks that highlighted “America’s great stocks” lists were Xerox, Kodak, Motorola and Texas-Instruments.
These stocks were meant to be bought and held, not sold. As a result, investors disregarded valuation. The prevailing mentality was that “even if the asset is expensive today it will grow into its price.”
“Hold!” they said. The resulting P/E