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Invest in a company or in Bitcoin? What is better?

October 1, 2020

A business or bitcoin? It’s not uncommon for Bitcoin to be presented as an alternative that solves everything. In fact, the approach is very simple. The universal introduction of Bitcoin will solve all problems in the world economy. And it will do wonders for our paperback. I mean the utopian thinking of “Bitcoin fix that” and “a Bitcoin is a Bitcoin”. I’m not talking about Bitcoin as an investment with great potential. What is being addressed here is much more radical. It is intended to completely change the political, economic and financial system of the world. But, What are we doing in the meantime? How do we pay the bills?

That’s the difference between Wall Street and Bitcoin. The crypto community is obviously much more ideological than any other market. Of course, there is no official creed or list of principles, but there is clearly a narrative. State intervention in the economy is constantly being rejected and a kind of return to a hard currency system is encouraged. Apparently the bitcoin pattern. That means the separation between economy and state. This new world is based on libertarian ideas and free market fundamentalism. In other words, a kind of techno-anarcho-capitalist revolution.

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Invest in a company or in Bitcoin? What is better?
Invest in a company or in Bitcoin? What is better?

Now all of this is valid. But within the crypto community there is also a second group of people who consider themselves more investors than revolutionaries. I think they are the silent majority. This group cares more about the present than the future utopia. They are more concerned about their paperback than about the crash. And this group thirsts for financial sanity.

Let’s say we have $ 10,000 in the bank. What should we do? Start a business or buy bitcoin? Many people enter the crypto room out of curiosity. However, crypto is not very easy to digest. Newbies live in constant confusion. And many are intimidated by so much conflicting information. The whole thing seems to be a big cult. They all speak the same way. They all repeat the same anti-establishment propaganda that promotes the Bitcoin utopia. And in the meantime, new investors don’t understand what’s going on.

The strangest thing is that in the bitcoin utopia nobody is going to work apparently. Everyone is talking about savings and a hard currency. It is important that the currency does not lose value so that we can all save. What about the business? And work?

The Latin American businessman is no fool. Most entrepreneurs first heard of Bitcoin in 2017. It all boils down to this. In 2017, Bitcoin was $ 20,000 and 3 years have passed. Now it’s $ 10,000. In Latin America, an entrepreneur with a work ethic and some capital will get better returns than -50% in 3 years. In short, the sharp fluctuations in Bitcoin price don’t give the average businessman much confidence.

Despite the underdevelopment of Latin American economies, it is still possible to do business in the region, which offers excellent returns. Indeed, it could be said that the immaturity of the markets in Latin America makes it possible to achieve higher profit margins than either the US or Europe. That seems like a contradiction, but it is easy to prove. In Caracas, Bogotá or Lima, it is possible to find a company that offers more than 30% profit. For example, anyone can import a product from China or the USA and sell it at a high profit. It’s not that easy in the US or Europe.

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Let me share an anecdote. A friend (Venezuelan) bought $ 10,000 Bitcoin for $ 13,000 per unit in early 2018. Time passed and the price of Bitcoin fell painfully. In any case, he waited very patiently for a while. However, There came a time when he couldn’t take it anymore and he sold assuming a loss of 75% of his investment.

My friend is a businessman. Of course I recommended that he not sell. I also explained my vision as a long-term investor. However, he submitted his reasoning to me. “Gustavo, I need the money to do business.” “In a few months I can restore what I lost and do more.” “Why sit and wait?” “I can work with this money”

After our conversation, my friend actually sold all of his bitcoin. Then he used this money to import hoses from China, which he had found at a discount at Ali Baba. Within a few weeks, the hoses arrived at the port and then he was offering them to all hardware stores and related businesses in town. After a few months he sold everything. And he made a second import. Bigger this time. And he returned with his sales campaign. The business was all successful.

In less than 6 months he recovered from his investment and made a big profit. In fact, he made up for what he had lost with his Bitcoin sale. Now he has several cars for sale. Of course he’s still in the hose business, but now he also imports bicycles. After nearly three years, Bitcoin is still below $ 13,000 (the price it paid in 2018). He certainly sold his bitcoins ahead of schedule, but now he has a thriving business.

Bitcoin is an excellent asset. But we can’t forget that we also need to do business. There is no substitute for hard work. We should change “Bitcoin fix that” to “Hard Work fix that”. Hard work is the answer. And that’s important. We need to understand the difference between the transfer of wealth and the creation of wealth. A speculative asset like bitcoin or gold is about the transfer of wealth. There is no creation.

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Wealth transfer isn’t bad. It is perfectly valid to have gold or bitcoin. But we cannot forget to create wealth. That is, we can invest in Bitcoin, but we cannot stop working. The most sensible thing is a dual system. In other words, you have to have a business that generates capital. And then some of that capital can be placed in Bitcoin. Hard work and investment.

The creation of wealth must come first. Then we can think about the transfer of wealth. Production comes before investment. It’s not about being cynical about life. But ideology is a danger to the paperback. If we fully accept what many utopian bitcoiners tell us, we could be doing a lot of financial nonsense. Romanticizing Bitcoin is a very common mistake in this area. Very often falling in love clouds our sanity. In this sense, one has to be a little skeptical of the official narrative.

Our priority must be: take care of our money. When it comes to financial matters, you have to think as an investor, not a politician. That means we have to objectively examine the risks, alternatives and opportunities of our investments. We always have to make the most sensible, practical, and realistic decision.

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