Investing vs Speculating

One of the important distinctions that is missing in today’s markets is that Speculation is not the same as Investing. Crypto is speculating (today). Don’t be fooled by the holding mantra as a smokescreen for crypto investing.

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” -Benjamin Graham

Definition of Speculation: the forming of a theory or conjecture without firm evidence.

Speculation is relative. It may be a theory without firm evidence to the majority but if you dig in eventually you see that Crypto is inevitable. At that a-ha moment it’s no longer speculation for you. Your thesis hits bedrock and you now stand firm in your conviction. The Internet did not have firm evidence for it being ubiquitous when it started out, it was speculative, but now it’s obvious to everyone. When did you finally figure that out? What gains did you miss out on being skeptical?

Reality today is there are very few practical reasons to buy crypto. Surprise! No one uses that shit! Crypto is 100% speculation for 98% of the population. Speculation gave birth to the dot com boom when people still had dial up modems. Wall St speculated in the mortgage market and caused a housing bubble. Speculation is time bound. It’s speculation until it becomes obvious, then the returns skyrocket. The early speculators are the future titans of industry…..IF they survive. I don’t want to step over survivor bias but rather than address it head on I’ll just share a Jesse Livermore quote:

Basically, idiot speculators don’t survive.

You have a decision point in front of you. Crypto is a new field. Will it survive and thrive? Is it the future? If it’s the future what are the likely returns? What does a Bitcoin need to be worth in this scenario? Imagine if you did that kind of due diligence when Google was $80 at it’s IPO.

There is no promise of safety or satisfactory return in Crypto. In fact, while speculating in Crypto you are likely to catch a live grenade and lose a limb every six months. In exchange for forgoing safety for that level of risk there is a chance of outrageous returns. But you won’t get those returns applying investing rules in a speculative world. Investing rules will have you exit in a drawdown for the “safety” of your stockholm syndrome annual index of choice + 3% returns, like a pleb.

The only way Investing works to change your life is if you live to 300 years old like Warren Buffett grinding out the earnings potential of GE every quarter to gain a few percentage points in your portfolio. No thanks!

So if you are an investor leave that investing knowledge at the door. It’s served you well. Channel your inner speculator. Research until you are comfortable or just swing out in Crypto with your riskiest portion of your portfolio. Accept you may lose a limb or two and pony up to the Crypto table. Today’s speculators are tomorrow’s billionaires, at least the ones that survive.

About coinspeak

20 years as an IT consultant. Escaped the rat race in 2015. Addicted to travel and tacos.

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  1. “I don’t want to step over survivor bias”
    But then instead of just addressing it indirectly, you outright *ignore* it

    “If (Crypto is) the future what are the likely returns? What does a Bitcoin need to be worth in this scenario?”
    $0 – that’s how survivor bias works

    Bitcoin’s survival is dependant on the field of Crypto currencies to survive, but Crypto currencies can survive perfectly well without Bitcoin.

    • To be clear, I think your point about buying Cryptos as a good specualtive bet (but not an investment) is valid, but new investors (the type most likely to invest in cryptos) should undersantd that they can be right (“Cryptos are the future”) and still lose money (if the cryptos they choose don’t make the cut).

      Even the “best” cryptocurrency could lose if the market doesn’t adapt it. For example, Blu-Rays beat out HD-DVDs, and were generally considered the better ttechnology (for example, they held more data). Howeve, jump back 2 generatiosn and VHS trounced BetaMax, even thought Betamax was considered to have superior picture quality.

      This means that even if you beleive in Cryptos’ future, it is very important to diversify among different coins.. I’d shoose at least 5 differnt ones. You can also rest assured that if cryptos become more relevant, the gain in the market leader will far outstrip your losses in the losign cryptos.

    • I think you’re just looking for something to argue about and instead of making a point for me to respond to you showed your lack of reading comprehension.

      • If you don’t mind, please allow me to correct you. It’s a lack of intellect, not a lack of reading comprehension.

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