Charlie Shrem, Bitcoin advocate and founder of now defunct BitInstant, has some words on the current price volatility of the market and how investors should respond to the constant ebb and flow of cryptocurrency: “Just have fun with it.”
Shrem, who spent one year in prison for charges related to money laundering and aiding and abetting unlicensed money-transmitting in the Silk Road controversy, has been a mainstay in both Bitcoin and cryptocurrency since 2011 when he founded BitInstant, one of the first marketplaces for the purchase of BTC and facilitating BTC-based transactions.
While the industry has come a long way since Shrem’s founding of BitInstant and the subsequent fallout that involved the Silk Road court case, he was seen at the time as an innovator in the field, providing users and investors with a more simplistic means for purchasing and using cryptocurrency.
Now, speaking in an interview with Yahoo Finance at the MoneyShow Conference in San Francisco, Shrem shared his feelings towards how investors–particularly those new to the industry–should handle the rampant price volatility that has come to characterize the market. Rather than attempting to day-trade, time the market or stress over the daily price fluctuations, Shrem advocates selecting a high profile project with a large market capitalization and taking a long-term approach. Compared to the myopic view imposed by most of the industry, in particular when it comes to price predictions, Shrem takes a decidedly unique approach to crypto-investing by supporting a long position and holding coins for several years,
“Pick something in the top 10 or 20, and look at those, learn about them, and take a stake in them. Any crypto you’re going to buy, hold for five years. Say, ‘I’m going to lock this, and this money is locked for five years. There’s a high probability you’ll come out ahead in five years, because usually, these bull and bear markets go in two-year cycles.”
Shrem’s method of investing not only avoids creating a daily price-centric view of the industry, but it also provides relief from the masses of investors who track Bitcoin and altcoin pricing hourly through smartphone tickers and coinmarketcap. Shrem’s opinion of crypto-investing also puts more responsibility on the investor for researching their currencies of choice, as opposed to being swayed by the daily fluctuation of the market. Cryptocurrency has been criticized by Warren Buffett in the past as being more similar to gambling than investing given the endemic lack of a diligence that goes into the average asset purchase.
Shrem does contend with the volatility of the market, and how it can backlash despite taking a long-term approach. However, he also believes investors should be more comfortable with the risk of their crypto investment, echoing the typical financial advice to not invest more than a person is willing to lose,
“You’re putting your wealth in these things, and they break. Things happen. The values go down 90%, then the values go up 100%. I always tell people if they want to get into crypto, ‘How much money, if you lost it right now, would you be OK with?’ ‘$500,’ they tell me. So invest $500 in a basket of crypto, and then just have fun with it. Just enjoy it, learn. There’s a lot of good ones: bitcoin, Ethereum, Dash, Litecoin. Just learn what makes them different.”
Shrem also sounds off on the current conversation surrounding a Bitcoin Exchange-traded Fund that has dominated the industry. While he believes a BTC ETF approval by the SEC is eminent, he warns that the industry must prepare itself to handle the responsibility of such a monumental new asset class, stating,
“We only have a ‘first shot’ at it. If we have an ETF, something happens, we get screwed. They shut it down. You know hard it’s going to be to have an ETF again?”