Despite the travails of crypto winter, crypto currencies, non-fungible tokens, the blockchain, and decentralized finance are here to stay. If you ask anyone about the best long-term crypto investments they typically start comparing Bitcoin with Ether or another of the altcoins. What is the best way to invest in crypto for the long term? Something that comes to mind is a saying from the California gold rush days. The most reliable profits in that era when everyone was digging for gold came from selling picks and shovels. If that is the case today, what is a good pick and shovel crypto investment?
What Are Pick and Shovel Investments?
This expression does come from the California gold rush days but does not really mean selling mining equipment. As noted by Investopedia, the pick and shovel expression refers to investing in the technology that underlies the creation of goods and services. As many players fight it out to control an investment niche the few creators of the underlying technology win no matter which of the businesses ends up dominating the niche itself.
What Are Pick and Shovel Crypto Investments?
Rather than buying and selling Bitcoin, a person could invest in a crypto exchange. These folks make money no matter if Bitcoin goes up or down. For example, one could buy Coinbase stock. By doing this an investor only needs to worry about how well that business is run and not about how well individual cryptocurrencies are doing. On the other hand, Coinbase is dealing with an SEC lawsuit charging them with securities violations!
Investing in Tools That Run the Blockchain and DeFi
An investment alternative to DeFi, NFT, or blockchain developers is the computer chip maker, Nvidia. This company stands to make long term gains from crypto while not really being part of the immediate crypto ecosystem. Crypto mining relies on specialized computer chips called GPUs or graphics processing units. These chips are essential for the DeFi projects within Ethereum. It has long been our opinion that Ethereum will bypass Bitcoin in total market capitalization. As decentralized finance grows, so will Ethereum and so will the need for the high-speed, ultra specialized chips that Nvidia makes.
To the extent that AI becomes part of the crypto universe, or not, Nvidia is also central to the artificial intelligence revolution as its specialized processing chips are also essential there as well. While blockchain gaming is a growing part of the crypto world Nvidia prospers there as well because it has long specialized in the high end chips needed for video games.
Long Term Investing
There are individual investors who have become famously rich choosing investments for the long term. One whom we commonly mention is Warren Buffett, the so-called Oracle of Omaha. Buffett says his favorite length of time to hold a stock is forever. To make this work he does a couple of things. First of all he only invests in a company when he fully understands how they make money and how they are likely to keep making money into the long term future. This has to do with things like a strong product line and brand name. He has held stocks like Coca Cola for decades and invests in Apple not because of their technology but because of their devoted following. Buffet and investors like him use a concept called intrinsic stock value to decide if they should buy and hold a stock for the long term. Over the long term we believe that successful crypto investors will be those who follow the same game plan.
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