So Your Family Wants to Buy Crypto Over Thanksgiving? Here’s What to Say…

As a seasoned investor with battle-scarred fingers from navigating countless bull and bear markets, let me share some wisdom that I hope will help you steer clear of potential pitfalls when it comes to cryptocurrencies.

If you’re the go-to person for all things crypto in your family, prepare yourself to be the main topic at the dinner table – whether you’re ready for it or not. Here are some tips on how to handle these discussions without spoiling the meal or losing your cool.

Start With: “Why Now?”

To start discussing blockchain basics, it’s important to first understand their motivation. Is it due to recent market fluctuations or perhaps because their friend Steve seems to be earning “passive income”? This will help you gauge their intentions and provide an opportunity to set realistic expectations from the get-go. As Chris Burniske mentioned, “emotions drive these trends.” It’s likely that your cousin Karen isn’t interested in Bitcoin itself, but rather the excitement of being among the first to discover something big. Unfortunately, she might be disappointed to learn that this isn’t the case.

The Calm Before the Shill

Here’s a possible way to rephrase it: “Cryptocurrencies can be unpredictable and risky, so it’s important to manage your expectations. Consider investing in crypto as planting a tree – it requires patience, understanding, and a long-term perspective rather than viewing it as a quick route to wealth.” This way, you can help them approach their newfound interest with a more measured and thoughtful mindset. After all, the path to success often lies in being thankful for the journey itself!

Highlight the Basics (Without Sounding Condescending)

Here’s your chance to lay down the fundamentals. Stick to key points:

What They’re Buying: “Bitcoin is digital gold. Ethereum is a decentralized computer. Everything else? Research before you touch it.”
How They’re Buying: Emphasize security. “Don’t buy anything unless you’re prepared to store it safely. Hardware wallets are a must.”
Why They’re Buying: If their only answer is “because prices are going up,” that’s a red flag. Crypto investing should align with a long-term belief in the technology or its potential.

As a crypto enthusiast, I find it beneficial to explain complex concepts like “smart contracts” and “layer 2 scaling” using everyday examples to make them more understandable for everyone, not just the tech-savvy members of my family. For instance, when discussing Bitcoin, I prefer to describe it as a modern form of money, much like email revolutionized written communication – where Bitcoin is to money what email was to letters.

Warn About the Risks (Without Being a Buzzkill)

Here’s where you channel your inner parental voice:

Volatility: “Crypto can drop 80% in a blink. Can you handle that without panic selling?”
Scams: “If someone promises guaranteed returns, run. Crypto has no guarantees except unpredictability.”
Taxes: “Every transaction is taxable. Yes, even your $50 of Dogecoin. Welcome to the IRS’s naughty list.”

Connect the topic to their level of investment expertise. If they’ve never handled their own investments before, it would be unwise to recklessly invest their life savings in this area.

Offer a Beginner’s Path

If they’re still keen, and you’re not prohibited from accessing the dessert table, direct them towards the most straightforward options:

Suggest starting with a tiny allocation, say 1% of their portfolio.
Encourage them to stick to blue-chip assets like Bitcoin or Ethereum, avoiding the siren song of meme coins.
Advocate for dollar-cost averaging (DCA): “It’s like setting up a recurring coffee order but with crypto.”

As a crypto investor, I’ve found platforms like Coinbase, Kraken, and Binance incredibly helpful for beginners. However, it’s crucial to never keep funds on these exchanges, as learning about events like the FTX collapse can certainly put a damper on any holiday cheer when explaining it to Grandma.

End With Perspective

Cryptocurrencies extend far beyond their current market fluctuations. They represent a paradigm shift in our understanding of money, they empower decentralization, and foster international innovation. Let’s ponder together: What other transformative impacts might this technology bring about as it continues to evolve?

Should you be curious, begin with modest steps, learn as much as possible, and keep a long-term perspective. It’s perfectly fine to observe patiently, because cryptocurrency is here to stay.

As a researcher, I find it crucial to maintain my role as an informed guide rather than a family financial expert. It’s essential to remember that transforming my kin into Bitcoin enthusiasts isn’t the objective; instead, I aim to assist them in making prudent decisions, allowing us all to relish the fruits of our collective knowledge.

This Thanksgiving, let’s toast to decentralization and maintain discussions as airy as pumpkin mousse. If Uncle Bob happens to join the ‘apex,’ remind him: it’s not just the turkey that might end up being cooked this year.

If you’re uncertain, consider this guidance from Chris Burniske who wrote on topic X: “Inform your friends and family that the bull market started two years ago. Therefore, current entry points may not be as advantageous. From the current entry prices, if their investment doubles (2x), advise them to withdraw half, leaving their initial investment amount (1/2 of 2x equals 1x) but securing a profit. If it triples from the entry price (3x), suggest they take out all their investment, or achieve a realized 2x and hold half (1x) of their original investment.

Bear market selling is for the weak or scared, but it’s uniquely hard to sell in a raging bull market. Sometimes people resent you for it if they feel they sold too early, though they’ll thank you later.

They also need to be careful if they take profits out and then chase the market again, reinvesting those profits as they feel FOMO when things keep going up — generally a horrible idea. If the market unexpectedly collapses, they can owe more in taxes on realized gains.

Every sale of a crypto asset is a taxable event, even when going crypto-to-crypto. Once I start taking money out for real, I aim to sit on it for 12–18 months in a traditional finance principal-protected, interest-bearing account. High-yield crypto stablecoin accounts don’t count.

Although ETFs and possible sovereign purchases might lessen the severity of potential Bitcoin bear markets, it’s important to remember that during every bull cycle, there are arguments put forth suggesting we’ll see unprecedented highs or avoid a bear market altogether. The concept of a “supercycle” is often a shared misconception.

It appears that there could be arguments supporting both a recurring cycle (peaking in Q4 2025) and a break from the traditional 4-year pattern. While we might experience consolidation post US inauguration, I’m skeptical about the idea of a brief cycle. This notion seems to stem more from past bear market experiences rather than current market indicators.

To put it simply, something moving a hundred times faster than normal carries a high risk of collapsing by about 80-90%, often due to excessive accumulation of profits and the number of participants involved.

If SOL increases from $8 to $800 during this cycle, it might dip or bottom out in the future, say around 2027, at a range of $80 to $160. So, if someone buys at the current price of $240 and holds on tightly, they could end up losing money by the next bear market. It’s often challenging for people to understand this during the excitement of a bull run.

As an analyst, I find myself in a position where I’m unable to promise astronomical returns or wealth from these current prices (SOL has already increased more than 30 times from its lows), but the allure of potential profits can be quite strong. It’s challenging not to succumb to this temptation when witnessing others reap significant gains. However, if I advise against purchasing and instead urge patience for a potential market correction, my advice might be met with skepticism, as they may believe prices will not drop any further.

Inexperienced investors often focus on dollar amounts rather than multiples or percentages. For instance, if you suggest SOL could reach $1,000, they might react with “Wow! That’s an extra $760 for each SOL!” However, they may not fully appreciate the increase from $8 to $240 because it represents a 30x multiplication.

Stay safe out there, and happy hodling.

2024-11-28 15:12