Cryptocurrencies as an Alternative to Stocks

 

Dear Reader,

Cryptocurrencies are the first major new asset class to appear in decades.

Actually, cryptocurrencies are alternative to common stocks investing. As Philip Fisher wrote "Common Stocks and Uncommon Profits", but the profits from cryptocurrencies investing are potentially much larger. For the simple reason that cryptocurrencies are not part of the capital structure of the firm and do not participate in the bankruptcy estate of the firm. So if you hold a company's cryptocurrency and the company goes bankrupt you are essentially left with nothing. While if you hold common stocks, you could still salvage some of your initial investment after bondholders and preference shareholders take their dues.

Cryptocurrencies are, essentially, much more leveraged play on a company's future than common stocks. If the company's project on which the cryptocurrency is based turns out to be successful, the investor in the particular cryptocurrency could make ten times his investment or more. And there are not more than a couple of dozen US listed stocks that have achieved ten times profit on the initial investment since 2000, for example.

Cryptocurrencies investment is, of course, fraught with risks. Due to the implicit leverage one can lose 100 % of the initial investment very quickly. One cannot, however, lose more than 100 % of one's initial investment.

Digital currencies, or cryptocurrencies, however, are the future. Cryptocurrencies are more efficient, more secure, decentralized and with higher profit potential than fiat currencies or stocks. Cryptocurrencies are essentially the democratization of currencies and finance. And the regulators, central banks and securities and exchange commissions, sooner or later, will be forced to realize that and allow more leeway for cryptocurrencies.

In short, cryptocurrencies could well turn out in the future, with more liquidity coming to the cryptocurrency market, a niche, risky but partially viable alternative to common stocks investing.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich