Bitcoin kept running after I penned yesterday’s insight. It ultimately hit a high of $89,500 before pulling back.
But as we discussed yesterday, to fixate on Bitcoin’s dollar price is to miss the big picture.
What matters is that Bitcoin is a world class reserve asset. And if we want to build lasting wealth, all we need to do is accumulate world class assets over time.
What we’re talking about is the exact opposite of what happened a few years ago.
In January 2021, GameStop (GME) – a company teetering on the edge of bankruptcy – suddenly saw its shares skyrocket overnight. It all stemmed from a plot that originated in the Reddit forum /WallStreetBets.
Somebody noticed that GameStop was heavily shorted… hedge funds were betting hard that its shares would go down. So this person shared that information with traders in the Reddit forum and they came to an informal accord.
The Reddit traders agreed to each buy shares of GameStop on the same day to push the price higher. And they knew that if they could push the stock up enough, it would force the hedge funds to buy back the shares they had sold short – which would send GameStop (GME) soaring. That’s known as a “short squeeze”.
It was a simple plot. But it was brilliant. And it worked.
GameStop (GME) closed at $4.71 on December 31, 2020. Then the Reddit traders went to work… and GME briefly surpassed $500 a share by January 28, 2021. Anyone who bought the low and sold the high turned every $100 invested into $10,515.
Of course, very few people saw those kind of results. Because as soon as the Reddit traders began to sell, GameStop’s share price began to plummet.
GameStop (GME) closed at $193.60 on January 28th – the same day it had surged past $500. The stock fell to $81.25 the next day. Three weeks later it was down to $40.59. Today, GME trades at less than $30 a share.
Clearly, the initial surge was not sustainable. And that prompted the Reddit traders to move on. They targeted troubled stocks like AMC (AMC), BlackBerry (BB), Bed Bath & Beyond (BBBY), and Express (EXPR).
Of those, Bed Bath & Beyond is now bankrupt. BlackBerry and Express aren’t far behind. As for AMC… we’ll see.
The term meme stocks became a household name. And suddenly lots of people who had never put a dime in the market before fancied themselves as investors.
Mobile-first brokerage platforms like Robinhood and Webull catered to these unsuspecting “investors”… and suddenly folks were constantly looking for new stocks or “cryptos” to buy on their phone.
That went on for a year or so. But I suspect most of those folks haven’t touched their brokerage account in nearly three years now. I’m sure many of them swore off investing as a scam when the markets tanked in 2022.
Here’s the thing – there’s a difference between investing and speculating. And my experience is that speculating usually doesn’t work out well. Worse, it siphons capital away from real investments.
To invest is to accumulate high quality assets at reasonable valuations on a regular schedule. Do this over and over again for five years and you’ll be amazed at what you have.
The key is that you only want to own the best assets. You’re building a house – a financial house. Why settle for anything less than the best construction material?
Here’s where to find the best material – no gimmicks, no fluff: https://membership.phoenicianleague.com/courses/phoenician
-Joe Withrow