Setting aside Bitcoin and (maybe) Ethereum, investing in the crypto market should be seen more like venture capital (VC) investing rather than investing in stocks. VC is a form of private equity and a type of financing that investors provide to startup companies and other early stage companies that show potential for high growth. VC investing expects a rather small percentage of their investments to result in positive returns. But when they profit, the expectation is that the profits will be significant.

• 3 % of companies exit above $100 million
• 0.7 % exit above $500 million
• 0.2 % exit above $1 billion
• 0.06 % exit above $2 billion

Source

Most cryptocurrency investments should be treated accordingly. Unfortunately, I think too many investors treat crypto as an extension of the stock market. (OK, some treat it as a slot machine, but we’ll ignore that percentage of the crypto investing crowd for now. 🤣) The risk profile for crypto is far closer to VC than the stock market. Most of the projects out there are three years old or less. Speculation is high. And, since you can trade the coins and tokens, volatility is high as well. Since VC is private investing, the day-to-day volatility is not an issue like it is in the crypto markets. Imagine if VC investments were on a public market from the start. That is what we have in crypto today. For better or worse. I consider it for the better because it opens up opportunities for individual investors like me who have relatively small amounts of money that I want to put into high risk investments like crypto. I also realize that the odds of these investments making big returns are small, and the possibility of losing most of that money is quite high.

I mention this because of what has happened recently in the crypto market, which has some thinking crypto winter 2.0 is in the making. Another crypto winter is possible. Not only is there high speculation at play, but the crypto market is relatively small and can be swung in either direction without a lot of investors making moves. Also, let’s not forget that the crypto market is 24x7x365. You can make and lose big on a Sunday morning, Wednesday at midnight, or any other time. Early stage investing is fun, no? Early stage investing in public markets is even more fun! 😈