Investing in crypto isn't for everyone, and there's no shortage of speculative options available in this thriving but volatile market. That being said, long-term investors can certainly find compelling opportunities within the crypto space.
In this segment of Backstage Pass, recorded on Nov. 10, Fool contributors Rachel Warren and Taylor Carmichael discuss Taylor's first-ever crypto investments and their personal theses about the crypto market.
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Rachel Warren: Very cool, what about you Taylor, what are your thoughts on this?
Taylor Carmichael: It's fascinating, Rachel, I literally made my first crypto coin purchase last night and I bought them.
Rachel Warren: Wow [laughs].
Taylor Carmichael: I bought a basket like Connor did. I actually bought more, I think about seven or eight coins. These were tiny investments. I mean, the three-figure investments two figured, it was tiny, very tiny. But I like to get out and dip my pinky in just to kind of focus.
Once I own something, I have to start paying attention to it. That's my theory on that. I tried researching crypto a couple of years ago, and I literally got overwhelmed with my own ignorance. When I research a stock, I had all this information that I already know about the industry. So I go into it knowing some things. Crypto is like a whole new thing. I was just, the more I read, the more confusing it was. I mean, it's just bigger and bigger and bigger.
It's kind of mind-boggling. This is a couple of years ago, I never bought. I didn't buy any crypto, I was like I don't get it. I didn't get it, I didn't understand it. But I did buy a crypto bank, Silvergate Capital, and it's been an amazing stock. It went up-- my cost basis is $16 it's over $200 now I think although up to today I don't know where it is. It did that within 13-14 months.
Silvergate has been huge for me, so that gave me a little more confidence, and picks and shovels, that's one thing to do when people are going crazy. Get the bank, buy a bank that's trading in crypto.
If you own PayPal, you own Square, you own crypto. These guys are definitely in crypto. So you might think about that and think about who is changing the game with crypto. Bitcoin (BTC -2.14%) is a new asset class like gold, it's the one that's going to become a currency. The problem with Bitcoin, I figured this out just the other day actually, is too slow. You can't build on it.
We need fast cryptocurrency. I mean, think of it not so much as a currency. It's like you're making venture capital investments in early stage tech companies. They are building a new technology, it's called the blockchain. It's as important as the internet was 20 years ago, and it's revolutionary as that.
A lot of these big companies from Facebook to Amazon to Microsoft are terrified because they know Bitcoin is going to change everything. They're trying to figure out how they can keep their market share and keep all their billions. Because it's going to literally revolutionize a lot of stuff.
If you're buying coins, I would make tiny, tiny investments. I think Bitcoin as an asset class, I think it's pretty safe if you want to buy Bitcoin. I wouldn't buy one I'd buy third of one or or tenth of one But if you have the money by one, I guess [laughs] that's the interesting thing.
It's all percentages, just to be contrarian, I tried to buy one coin and it's impossible to do. You're not going to get one coin, you'll get a little more, a little less. But look at the tech and my big suggestion would be blockchain speed, blockchain speed, and blockchain speed. That's the really big thing.
Rachel Warren: I guess, I'm the odd woman out here because I do not invest in crypto. I think it's something I'm interested in. I think it absolutely can be part of a balanced portfolio.
I think it's important to weigh against your long-term investment philosophy and your personal goals with regards to investing in crypto if you're going to buy into this space. If you're looking at crypto, you think to yourself, is this an investment that you think has long-term portfolio staying power?
Or is it perhaps the hype that is of interest? I was thinking about the whole recent Squid Game crypto debacle where investors lost thousands of dollars, if not more. There's a lot of new cryptos entering the space and many of them are not worth the price of admission.
But then again, some of these cryptos, like Bitcoin, Ethereum, I think, could be a really great part of a stable long-term investment portfolio, if not a smaller part of such a portfolio.
I think the key here, and this is part of why I have not yet invested in this space. Take the time to understand know how crypto works, how mining works, and whether crypto fits in with your personal long-term investing goals. I think that is key before you take the plunge.