Powerball. Reddit-fueled stock rallies. Crypto and NFTs.
These all grab lots of headlines when the prizes are big. The stories you hear can be tempting – who doesn’t want to stumble into an outrageous fortune? But none of these things are good strategies for long-term financial well-being, as you may have learned recently when the crypto market lost $200 billion in a single day (May 12, 2022).
When things start to pick back up, advertisers and friends alike might make you feel like you’re behind the curve if you don’t get a piece of the action, but don’t let FOMO (“fear of missing out”) drive you to make investment decisions that won’t serve you.
You don’t need a get-rich-quick scheme to win with money. You need a monthly spending plan, a debt exit strategy, an emergency fund, and a pay-yourself-first approach to savings and investment. And while you’re at it, you probably need (and deserve!) a raise. There are so many things you can do to build wealth that are statistically near-guaranteed to work out for you in the long term. The only thing you need to bet on is yourself.
Why the hate for crypto?
We do not recommend getting involved in any financial “crypto”/“blockchain”/”web3” instruments – all terms used to describe cryptocurrencies like Bitcoin, Ethereum, and Dogecoin, as well as “non-fungible tokens” (NFTs – more on those in a minute).
There are so many reasons we don’t support this stuff, even before the massive sell-off this month (May 2022). Bitcoin alone is down 55% from its November 2021 peak. Forty percent of investors have lost money on their investments, and most of those who have lost money appear to be recent investors who jumped on the train over the last six months. (Thanks a lot, Matt Damon… and everyone else who made crypto Super Bowl ads this year.)
It’s not just cryptocurrency; we don’t invest in any type of currency speculation. We’ve chosen to be calm, patient buy-and-hold investors; currency speculation is incredibly volatile and hands-on, and we don’t want that kind of anxiety in our life. (You may have noticed that the Fortuna Money program is all about reducing money stress.) Here are some additional reasons why we don’t like crypto:
Cryptocurrency is totally unregulated. This is advertised as a plus. What this means in practice is that when you are a victim of fraud or theft, no one will help you. If your bank account is compromised or your credit card is stolen, your financial institutions will make you whole. This is, in large part, because of regulations that require them to take care of consumers. Even if your investment account is hacked, major brokers like Vanguard, Charles Schwab, and Fidelity (not sponsored, but that’s who we use and like these days) have policies that can help you get your money back. The lack of regulation around crypto means no one has your back if your crypto gets stolen. In the blockchain, no one can hear you scream.
If you lose your access keys, your money is gone. Do you forget your passwords sometimes? Have you ever lost a thumb drive? Do you occasionally realize you can’t find some incredibly important information that you’re sure you left in a super-safe place? The owners of 3.7 million Bitcoin know just how you feel. At the time of this writing (May 2022), that amounts to an estimated $111 BILLION, just in Bitcoin, that has fallen down the cosmic storm drain because people have lost their hard drive or forgotten their login information or just straight-up died without telling anyone how to access their information. There is no customer support desk that can help you reset your lost Bitcoin password, and I find that terrifying.
Cryptocurrencies are a crime magnet for scammers and money launderers. As a former financial crime investigator, I’d be remiss if I didn’t point out that steering clear of crypto = one less way for fraudsters to get to you.
Finally, crypto has become really bad for the environment. If concepts like “sustainability” or “climate change” matter to you – if you care about the environment at all – you probably don’t want to participate in the blockchain because of how it’s made. Cryptocurrencies and NFTs “mine” their bitcoin through super-intense calculations performed across networks of powerful computers. These calculations “prove” that transactions happened, and they also “create” new coins. (If that sounds complicated, this explanation might help.)
Whoever’s computer gets the answer first is paid in bitcoin, so there’s a big incentive to win. Back when bitcoin first got started, it was possible to do on a personal computer. But the calculations get more complex over time. To keep winning this race, people need faster and faster computing methods, requiring more energy and bigger, more powerful machines.
At this point, those machines are consuming massive amounts of energy and producing literal tons of emissions and waste. Recent estimates peg the annual energy consumption of Bitcoin mining at a bit more than the yearly energy consumption of the entire country of Norway. The Bitcoin computing network generates an estimated 114 million tons of CO2 per year. And then there’s the electronic waste, estimated at 37,000 tons per year. These numbers are all just for Bitcoin. It’s the biggest cryptocurrency, but it’s not the only one, so this doesn’t even capture the full picture.
Is it possible that eventually the crypto industry will find a way to mitigate the issues of regulation, access, and environmental concerns? Of course! Plenty of major technological developments were controversial or dangerous when they first got started. But even if you’re an optimist, there’s simply no need to go all-in as early adopters here. As my dad likes to say, “The early bird gets the worm, but the second mouse gets the cheese.” In other words, it’s ok to let others take big risks while the bugs are ironed out. Let other people trigger the mousetrap – the rest of us can wait to see if things improve.
What about NFTs?
NFTs have most of the same issues as above, but there’s an additional vulnerability when it comes to viewing them as an “investment,” and it’s the question of value.
Buying an NFT is sometimes pitched as similar to buying a signed limited-edition print from an artist that you like. That special print has value to you (and possibly other people) because it’s rare and can’t be duplicated, and you care about its uniqueness. In the case of an NFT, you don’t actually own a physical object. You own a digital piece of art or other digital collectible, and you have a special digital certificate of ownership that says it’s uniquely yours. You can show an image of your NFT on any digital screen, on social media, or in a “metaverse gallery” (a virtual room where you can put your NFTs).
Advocates of NFTs say that they offer a great way to support independent artists and creators. If you’re purchasing your NFT for that reason, without necessarily expecting a return on your investment, I can understand the appeal. But if you’re interested in recouping your investment someday, I have my doubts.
Part of why many people care about owning a unique piece of art is the component of exclusivity, which seems like it’s missing here. The CEO of Twitter sold an NFT of his first-ever tweet for $2.9 million. As we all know, nothing ever leaves the internet, so we can all still look at it. I’ve embedded it right here, and I didn’t pay a cent.
Plenty of NFTs being bought and sold are still out there for the world to view. So if you really like looking at a thing, you can still do that for free… and so can everyone else. Unlike looking at a print of a masterwork versus seeing it in person, the digital experience isn’t substantially different — but if you have a spare $3 million sitting around and it brings you joy to know that you own the official “signed copy” of an internet artifact, you do you.
However, most NFT enthusiasts aren’t encouraging us to buy things for fun; they’re telling us that NFTs are “an investment.” For anyone who needs a refresher on the exact definition of “investment”:
An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.Investopedia
Let’s be clear: I love the concept of “investing in yourself” by taking a class that gets you a raise-worthy credential, or “investing in your business” by paying someone to professionalize your website. This is not that. This is the purchase of an asset, and you can only use it in the future to create wealth if it has resale value.
I don’t consider the purchase of any asset to be an “investment” unless there’s a fairly large and reliable secondary market for it that shows a strong track record of that value increasing. People think NFTs have value now, so they’re paying massive sums of money for them now. But there was a time when that was true for Beanie Babies, and we all know how that turned out.
You are adults, and you can decide for yourselves if you want to participate in the blockchain. Some of you probably already do! If so, I’ll just ask you to please remember: crypto and NFTs are not a plan, they’re playtime. Money gambled should be treated as money spent, as entertainment, and this is very much a type of gambling. If you can afford to spend fun money on bitcoin or digital art or the craps table, and losing that money won’t affect your financial picture and these things genuinely bring you joy, go for it. But please don’t make the mistake of thinking of gambles as “investment strategies.”
If all of this feels like we’ve just popped your dream-bubble of becoming an overnight millionaire, there’s good news and bad news. Bad news first: we can’t make you a millionaire overnight. The good news: our approach means you can’t miss the boat. It’s there for you every single day of every single month. You don’t need to stress about timing the market because you’ll only put money in the market for the long haul, so ups and downs are no reason to panic. With our plan, the odds are on your side.
If you’d like to know how to put our program into action in your life, please reach out!
P.S. FOMO investing, but make it pink
Over the past few months, I’ve noticed some weird pseudo-feminist energy in crypto marketing. Female celebrities like Reese Witherspoon and Gwyneth Paltrow were shilling it hard for a minute there (although Reese, Gwyneth, and all the other celebrities are mysteriously silent these days now that Bitcoin has tanked; no one wanted to comment when the New York Times came knocking to ask what they had to say about the recent sell-off). I’ve seen multiple taglines directed at women like “Twice as many men invest in crypto than women. It’s time we stop feeling like new kids on the block(chain),” and “Web3 can’t leave women behind.” Lines like these give off a vaguely manipulative whiff of “Get in there, girlie! Get smart so you can get rich (like me)! Don’t let the boys have all the fun!”
Ladies*, hear me on this: We do not need crypto to get rich.
There’s a lot that we do need:
- Better wages, and the confidence to negotiate for them.
- Better savings habits than men, because women live longer than men on average and we deserve to enjoy those Golden Girls years.
- Bosses who are advocates and allies for our pay and opportunities.
- Supportive partners who don’t force us to be the default backup plan for childcare disruptions.
- Financial educators grounded in wise, time-proven principles who acknowledge our unique issues and help build our confidence (oh, hi!).
- Better laws and public policies: pay parity, universal paid parental leave, universal pre-k, and access to essential reproductive healthcare.
Not many celebrities and organizations are getting paid massive endorsement fees to advocate for these things, but they’d move the needle big-time on our financial well-being. You know what’s not going to help? Losing a pile of hard-earned cash on crypto because Goop said you should get in there. Don’t let pinkwashed FOMO advertising knock you off course. You deserve better.
*We do not say ladies to exclude anyone, but rather, to address the group specifically being targeted by this messaging. We welcome and support all who face gender-based financial disadvantages.
Lead photo by Worldspectrum on Pexels.com