This is how the meme goes:
At the time of writing this post, Bitcoin is up ~129% YTD. One Bitcoin is now US$101,256.70, which is a big deal in that it's a nice round milestone and it sounds like an impressive number to most people, including me. The result is that more people now want to buy Bitcoin, hence the above image. Now, this may turn out to be a good time to do this, or it may not be, I really have no idea. But as a crypto believer and long-term holder, I'm certainly happy to see this momentum.
At the same time, the current crypto market makes me want to buy less of it. Ethereum, which makes up the majority of my holdings, is also up this year. But I was dollar-cost-averaging more of it over the past few years when it was dropping and sentiment seemed to be against it. That, to me, felt like a better time.
My favorite investing framework is one that I have written about many times before on this blog and one that people far more successful than me like to talk about. It goes something like this: you want to be right about things that most people think are wrong. Said differently, you want to aim for non-consensus bets, and that's because it's pretty hard to find value when everyone else is chasing the same thing. Markets are competitive.
So as a general rule of thumb, if you can find opportunities that you believe wholeheartedly in, but that many people think are dumb, then directionally, you're probably getting warmer. Obviously, you can't believe in something and then be wrong about it. That's not productive. But if you start with something that many/most people are critical of and then work backwards, you might find something interesting.
I am reiterating all of this today because of our current market dynamics: crypto is way up, as you know, but many real estate markets are way down. For example, here in Toronto, few people are buying pre-construction homes, whereas a few years ago, they were lining up and banging down the doors of sales offices. We have moved from consensus to non-consensus.
This is making for a challenging development environment. But at the same time, I think it's a wonderful opportunity for people looking to buy/rent a home and for real estate companies willing to grind it out and be creative. Legacy deals will need to get worked out and competition is only going to lessen as groups leave the market to focus on other things, like buying Bitcoin above $100k.
More specifically, this is what I'm excited about right now as a developer:
It is significantly easier to buy wonderful real estate. There's far less competition, and so the opportunity is there to structure creative deals. This is especially valuable for smaller companies like ours.
You have to know what you're doing to be successful. The market isn't going to bail you out. You need to roll up your sleeves and execute on your strategy.
Creativity and new ideas are now being rewarded. A red hot market only strengthens our bias toward the status quo. Everything is working, so why change? Except now it's not. So what are we going to do?
Market cycles are a healthy phenomenon. And I think we'll start the next cycle in a better place. Housing will be more affordable and projects will be better tailored toward end users, among other changes. But in the interim, there is now this great opportunity to be right about things that most other people think are wrong. And that's because so much feels wrong. But that's okay. Because it's actually the exact precondition you want.
Disclaimer: Nothing in this post should be construed as investment advice. I am long Ethereum and Toronto housing, and I don't plan to change this, but you should do your own homework.
Cover photo by Saad Salim on Unsplash
Brandon Donnelly
Over 4.1k subscribers
The information asymmetry within the “crypto” market is unbelievable. Most retail participants are overly focused on getting rich quickly, so they invest in meme coins and vapourware in hopes those dreams become reality. Unfortunately the vast majority of winners there are devs, insiders, or VCs. Retail are simply the bait. Then you have a number of projects that tout themselves as legitimate but are either absolutely not, or simply have no eventual path towards a real world use case and network profitability. It’s all driven by speculation. What’s interesting is there are a few projects that are on track to eventually legitimize blockchain as an industry. The irony is that, rather than being a series of systems that replace banks, banks will simply adopt it in the back-end and most users won’t even be aware of it. Once this happens I can foresee crypto having a dot-com type moment. Most of these projects will fail and tank, the market matures, cycles become less volatile, but the winners will appreciate massively. I think this process has already begun but most haven’t caught on. The market itself hasn’t caught on. Within the next year or two it will be impossible not to notice. The worst part is, if you pick a winning horse, they’ll just call you lucky anyway.
For any long time bitcoiner, we see in every bull run people get excited when the market is hot, buy high and then panic sell when it crashes. Longtime hodlers ignore this and just hold through highs and lows. Anyone who has waited through a four-year cycle knows this works and has been handsomely rewarded. If you can buy in a bear market or dollar-cost average, then you're already winning. I like the parallel to RE and I think it's also true in any market. If you can buy in a bear market because you see things that others don't and your bet pays off, the arbitrage potential is tremendous. Good luck!
Sounds like you're going about it the right way!