Off The Rails

DIY Money and Personal Finance

James Moreau
January 09, 2024

Going Off The Rails - Thoughts on DIY Money and Personal Finance

Welcome to my newsletter! Subscribers will receive a weekly note on the intersection of pop culture, crypto and personal finance from the perspective of a lifelong learner navigating family, career, business and health.

This soft landing’s got hands, huh? I know what you’re going to tell me - “respect the pump” or some such nonsense. Indeed, only a special brand of weirdo opens their investment portfolio tracker app of choice in the morning and is unhappy to see number go up.

With crypto and other assets, you really should be looking at your exposure to price movement, whether up or down, with a skeptical eye at all times. Today I’m going to discuss the one big risk to my (and your) crypto holdings that occasionally keeps me up at night.

Getting Derailed

Before I go off and wax philosophic on some topics that I am neither credentialed, nor formally educated in, I will preface by saying that this is in no way shape or form financial advice. With that being said, I think the setup to the geopolitical and economic landscape that we seem to be wading into at the moment has been set up for quite some time by a variety of political and bureaucratic decisions that have shaped our society more than we care to admit.

Case in point - when Russia invaded Ukraine in February 2022, the sanctions regime slapped on Moscow forced a massive amount of global trade that Russia had with the rest of the world to go underground to a more black-market state overnight. Did it stop Russia from exporting goods (specifically oil) to the world? No. Did it hinder Russia from importing necessary components it needs to fuel its war machine? That’s debatable, too. But this regime of sanctions required the resources of several global powers to coordinate around a common objective to continue the flow of resources at almost any cost (often to the benefit of the buyers of these goods).

I’d draw a similar conclusion to the value and liquidity of one’s crypto portfolio. Yes, I’ve read The Sovereign Individual like all good crypto-nerds should, but I don’t kid myself for a second that I and pretty much every living person I’ve ever met is highly dependent on the fiat-backed system we live in - both locally and globally. Frankly speaking, with the regulatory uncertainty around crypto in the eyes of law makers and the heightened (and tragic) state of domestic and international affairs, you must realize that the biggest existential risks to your wealth associated with your crypto holdings are not only sociopathic criminals, exchange hacks and market manipulation, but rather fiat on-ramp and off-ramp rails being limited or closed with little to no warning.

In a world where just about anything can be politicized into a partisan issue that is part of the Zeitgeist, aka literally being the end-all-be-all in the life or death struggle against good or evil (as everything seems to be these days), cryptocurrencies and their supporting infrastructure are a relatively easy target. So when you see over-zealous influencer on X (Twitter, whatever the fuck), talking about sovereign, un-censorable money, you better add a dash of salt for your enthusiasm of buying/owning Bitcoin or any other type of crypto.

Regardless of any hype you hear about how cryptocurrency can change your financial life, always remember:

Not your keys, not your coins

This core tenet of self-custody cannot be overstated. Self-custody is something that could be covered in great depth and nuance (I am down to do this if you the reader are interested), but just know that if you have exposure to Bitcoin, crypto or even stuff like paper claims on gold or other hard assets, you do not actually own them - you have only a claim to them. If you have not dedicated 40 days and 40 nights to non-stop study, self-custody katas and monk-like contemplation, you are not a holder of the truth yet - back to the normie wilderness for you.

Being Truly Un-banked Is Not Fun

What good is any asset if it’s illiquid and you cannot exit into a form of currency, fiat or otherwise that you can actually buy stuff with? It’s helpful if you can use, it, of course. Like a house, or something like that. Always keep in mind that including assets like crypto, gold or real estate in your net worth is only as useful as the banks or financial institutions willing to let you borrow against them or sell them for something else (fiat). As more stress enters the financial system and more banks fail due to broad macro-conditions like interest rates, you’ll find less risk-comfortable options to manage your capital related to non-traditional assets. That is, your ownership of these assets and your ability to leverage them is tenuous at best unless better regulatory clarity in favor of crypto comes about - but that’s probably not happening in the short term. Then again, you might be able to buy a piece of land, pay developers and barter with what blue-chip crypto you own - just know it isn’t going to be easy.

If nothing is correlated or everything is correlated - diversify!

Despite many thousands of hours of contemplation, research and (let’s be honest) podcast listening - I really don’t think an all-weather asset or portfolio that is immune to any environment. Your personal goals, the phase of the economic cycle you’re in and so many other factors would determine how you can best preserve and grow wealth. This is to say - always question yourself and popular assumptions when you find yourself so overly enthusiastic about some asset class that seems like a sure-fire bet - because what happened in the Great Financial Crisis to single family homes can happen to other sure-fire, over-inflated (bubble) fads as well.

Please don’t take what I’ve shared here as my not believing in the potential of cryptocurrencies, or any other asset class for that matter. I’ve had enough exposure to crypto through the last 10 years of my career that I’m aware that lore does not meet the reality we live in yet - and that many factors outside of crypto could cause disruptions that some influencers in the space foolishly seem to think are insignificant.