Cryptocurrency: Being Our Own Asset Managers
People get excited when they see Wall Street asset managers starting to dip their toes into cryptocurrency. There is little doubt these firms are starting to line up to add to their holdings. The numbers we see are incredible.
Wall Street has money. They operate at a level that nothing else can rival, including governments. Liquid assets run into the tens of trillions of dollars. They can literally make or break markets.
The leading asset manager, according to assets under management, is Blockrock. They are assets totally almost $7 trillion. Think about that for a second. Their AUM is near 2.5 times the entire cryptocurrency market.
That is how much money we are dealing with. And keep in mind, this is only one firm.
Doing For Us
What is at the core of much of what is discussed in the cryptocurrency world is that fact that others "do for us". Wealth management firms take care of our money. It is their job to grow our holdings. For this service, of course, there are fees levied. Wall Street firms make billions in fees every year. This occurs whether they actually make their clients money or not. In the end, the company always wins.
Obviously, these entities are catering to some very rich people. They do not accept accounts of a few thousand dollars. People who go to these firms are showing up with millions of dollars to transfer over.
The question is do they really provide much of a service? On the surface, the answer is no. However, if we understand how the system works, they we reveal that there is a major advantage.
Managing one's money is not difficult. There are millions of videos online that detail what needs to be done. In this era, learning about all aspects of finance is fairly simple. The material is out there. Topics such as stocks, bonds, commodities, risk management, and Alpha are all explained. If one dedicates a few months, he or she can have a strong comprehension of how to handle personal resources.
Naturally, one is not going to have the quants of the major firms or the trading algorithms employed to take advantage of things such as high frequency trading. That is not required, however, for one to generate solid returns over time. After all, Warren Buffett is known for his half century of near 20% returns and he doesn't even have a computer on his desk.
We also see a system where access is limited. A firm like Blockrock is involved in many different aspects of the financial world. With the amount of capital they have access to, they are able to enter the Venture Capital world, something most of us are excluded from. This is the major advantage these companies have. They get into projects long before the general public has a chance.
In short, the major benefit to these entities is access.
Removing The Intermediary
Cryptocurrency is designed to eliminate gatekeepers. It is a system that is created to allowed direct access between interested parties. From the most basic level, value can be transferred between two wallets without a 3rd party. That is unheard of in the present system.
When it comes to a firm like Blackrock, this is an intermediary. It is a 3rd party instilled to provide a service for which they take a percentage. Since the most valuable benefit they bring is access, it is easy to see how our wealth is dependent upon them. In other words, it is with their approval that we can participate.
With something such as Decentralized Finance (DeFi) we can see a different model forming. Here we have a system where anyone with a wallet and some tokens can participate. There is no access granted based upon account size or firms being dealt with. One can invest $10 or $1 million.
By removing the intermediary, we set the financial world on a different path. The value of cryptocurrency is rising as more projects come online. We also see the present chains growing, helping to increase their value. The industry is rather young but the power of compounding is starting to be felt. As the numbers get larger, the growth, in totality, will be incredible.
The bottom line is we are going to be dealing with some enormous numbers in only a year or two. This is vital to our success going forward.
There is another factor to consider: personal responsibility.
We live in a society that does not embrace this concept. Instead, we are reared to partake in the "blame game". It is always the fault of someone else. With money management, if our account goes down, it is Blackrock's fault. Since we are not the ones making the decisions, we are relieved of the responsibility.
This is a bad approach. It is time that we all start to take responsibility for what takes place. Who can forget Mark Cuban being part of a rug pull and then screaming for regulation? Why is it so hard to accept where the blame lies? As opposed to blaming himself, it is the fault of the crooked developers who staged the rug pull. Or, perhaps, it is the regulators dragging ass and not doing their job. Either way, Cuban feels better by not blaming himself while calling for "Big Brother" to step in.
We need to resist this temptation. People often discuss the desire for freedom. As the saying goes, with freedom comes responsibility. If the power is in our hands, we need to understand what we are doing.
Cryptocurrency is opening up an entirely new world to everyone. We are seeing the pathway where anyone "can sit at the big table". The problem is few are ready for that. Another saying is "a fool and his money are soon parted". To phrase another way, like Buffett says, markets take money from the impatient and give it to the patient.
If we want to sit at the big table, with large accounts, we need to learn what it takes to be there. Failure to do this will mean we get slaughtered. The powers of fear and greed are always in operation with markets. They need to be tempered for long term success.
In conclusion, we are moving towards a realm where we are our own asset managers. It is our job to ensure that we act in a responsible way. We are tasked with gaining the understanding of what is taking place. This requires time and effort. Are you willing to do that?
Firms like Blackrock cater to those who are not willing to do that. They make billions of dollars because people will not invest in their own knowledge. For those with massive success under the present system, that works. However, for most, who are left looking in from the outside, it is time for a new path.
Cryptocurrency offers that path if one is willing to put in the effort.
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