I must admit, I am going through a severe case of FOMO — Fear Of Missing Out.
The valuations for cannabis stocks and cryptocurrencies have gone through the roof and I am, once again, sitting on the sidelines, watching.
My FOMO is justifiable.
This is not the first time I have missed out on opportunities to rake it in. I have no one to blame other than myself for not taking the risks that may have yielded high fiscal rewards. One would think that working in the technology and social media space would have prepared me to seize opportunities when I saw them. Instead, I played it safe while other braver souls jumped in and rode various waves to riches.
For instance, I could have simply cornered some would-be popular domain names in the late 1990s and and sat back while companies bid to take them off my hands. As sketchy as that sounds, it would have been perfectly legal at that time. Going by this list of Top 20 most expensive domain names, I would have made out ok.
Then there were all the stocks that I did not buy — Facebook, Netflix, Apple, the list goes on. In hindsight, I could have been in early on many of them, but again chose to stay conservative and stick to mutual funds and balanced investment portfolios.
I have done ok. But I haven’t retired yet, if you know what I mean.
Anyway, that’s all water under the bridge now.
Back to cannabis stocks and cryptocurrencies.
If someone had told me a year ago, that marijuana — medicinal or recreational — would be the darling of the Canadian stock market, I would have asked them:
“What are you smoking?”
I am no investment expert. But, between cannabis stocks and cryptocurrencies, I lean towards the former. I like the fact that Marijuana is a real, physical thing — something you can see, touch, and smoke (if you choose to) — versus an abstract concept like the cryptocurrency Bitcoin.
If you put ethical considerations and volatility aside, cannabis stocks are no different from other stocks that you buy and trade. All the characteristics that you would look at while buying stocks in a superheated stock market would apply. Product quality, cost of production, forthcoming legislations, financial backers of the company, and other such factors come to mind.
You may be late to the cannabis party, but there is a silver lining. All indications are that legalization of cannabis is imminent. Check out this press release from the Ontario Government, “Ontario Preparing for Federal Cannabis Legalization.”
Here is what I believe:
Irrespective of the fundamentals and sentiments, there is one thing about cannabis that you cannot dispute. Recreational cannabis, as a legal product, is only about to get the nod. Cigarettes and alcohol have been legally around for a while and have had their run. We should not be surprised if people continue to be high on the prospects of cannabis stocks.
Just in case you are curious, here is a list of the cannabis stocks that have recently garnered a lot of attention in Canada. https://www.bnn.ca/marijuana.
That brings me to cryptocurrencies.
When it comes to cryptocurrencies like Bitcoin, most people I know are confused by it. My own interest in Bitcoin and blockchain technology had been peripheral at best, until recently.
My interest peaked when I heard a Bitcoin story — which I surmise to be true — from a friend in India who had lent the equivalent of two thousand dollars to his son in 2012. The son invested it all in cryptocurrencies — mostly Bitcoin — and held onto it until 2017.
I ‘ll pause here for dramatic effect.
The price of Bitcoin in 2012 was $13 and the price in December 2017, $17,900.
You do the math!
But what really intrigued me was the latter part of the story.
In a bizarre reversal of fortune, the young millionaire lost most of his cryptocurrencies in a computer hard drive crash. He had chosen to store his cryptocurrency wallet (digital “private key”) as a file on his hard drive to avoid potential hacking threats on wallets stored in the cloud!
Apparently, his story is not unique. Here’s another story that proves that cryptocurrencies are not for the careless and the faint of heart.
So as a layman I did a little more research. And in layman’s terms, here is what I understand.
Bitcoin is only one of over 1300 cryptocurrencies or digital currencies in existence today. Twenty-nine of these companies have valuations over $1billion. Over and above the likes of Bitcoin, Ethereum, Ripple, Litecoin, and others that offer cryptocurrencies, there are companies who profess to leverage blockchain — the technology behind cryptocurrencies. Some of these blockchain users have also benefited significantly from the hype around cryptocurrencies.
If I was going to get rich by playing the cryptocurrency field, I had to make sure that I understood the fundamentals behind it. Without professing to be any kind of an authority on cryptocurrencies, here are a few things that I picked up during my research.
At a minimum, there are three things that you need to get into the world of cryptocurrencies.
A cryptocurrency wallet, which is comparable to a secure bank account that only you have access to. The difference is that you keep the wallet with you, not at a bank (unless you chose a company to store it for you.)
A safe storage mechanism for your crypto wallet and private key. Similar to your regular wallet, Cryptocurrency wallets can be lost, misplaced, or stolen. Once lost, it is lost for good — for you and for the cryptocurrency community.
A cryptocurrency exchange which is similar to a stock exchange to buy and trade your digital currency
Among the various posts that I read, this post titled “How to Trade Cryptocurrency – For Beginners” was the easiest to follow and is specifically targeted at beginners. You may want to check it out.
Before I wrap up, I want to mention the two things that I find very disconcerting about the world of cryptocurrencies.
One: While blockchain technology and cryptocurrencies are believed to be hack-proof, the industry itself is completely unregulated. You have no recourse if something goes awry with your transactions or fall prey to scammers and fly-by-night operators.
Two: While there are multiple ways of storing cryptocurrencies, each one comes with its own inherent risk. The fact that you can lose all your money by a careless mistake or a misplaced key seems too big a risk for such a robust currency system.
And on a final note, I want to be clear that this post is written from a general interest perspective and not intended as investment advice.
As for my get-rich-quick aspirations, I am going to park them, for now.
I may not become rich, but I sleep better!
Note: This post has been in the works for over a week; any resemblance to an article by Rob Carrick in January 26th’s Globe and Mail is purely coincidental.
Thanks for your likes and shares…