A year ago, we published an article on how to become a crypto billionaire. At the time, Bitcoin was trading at around $64,000 and firms like Coinbase (COIN) and FTX (private) were at the top of their games. There were somewhere between 6,000 and 10,000 variations of cryptocurrencies with a total market value of nearly $2 trillion.1 That was more than any other company in the S&P 500 Index except for Apple (AAPL) and Microsoft (MSFT).
As value investors focused on companies with strong fundamentals including cash profits, proven business models, audited financials and robust balance sheets, whose shares trade at sizeable discounts to their underlying value, we viewed crypto enthusiasm as a murky fad. But part of being an effective value investor is being curious about new investments. So, we dug into cryptos to see if we were missing anything. It turned out we weren’t.
Our article earned us ridicule and pointed questions. But with Bitcoin now trading at $17,800 (down 72%), Coinbase trading at $40 (down 88%), many cryptos at or headed to zero, and FTX exposed as an alleged fraud, the debates have faded away.
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One byproduct of our research was our development of a method that anyone could follow to become a crypto billionaire. In the post-crash era when most everyone is highly skeptical of such claims, we counter that this parlor trick is no less real than crypto itself. To the extent that being a crypto billionaire on paper (literally) is farcical, so is being a crypto billionaire in electrons.
So, the holiday party season is here once again. Below, we re-publish our method from a year ago2 that you can still use to make your friends and family crypto billionaires. Remember that billionaire status is a certainty.3 What better way to ring in the season!
1) Ask someone at the party if they want to become a crypto billionaire.
2) Using their name, create the cryptocurrency. Let’s say your friend is Katy Perry, the most-followed female musician on Instagram with 182 million followers. You choose the name “Katy-coin.”
3) Find a scrap piece of paper, preferably a plain white party napkin. Tear it in half.
4) On one half, write “1 billion Katy-coins.” On the other, write “1 Katy-coin.”
5) Give Katy both pieces of paper, as she is the creator and owner.
6) Buy the piece that says “1 Katy-coin” from her for $1.00. Use a real U.S. dollar bill. You now own 1 Katy-coin. And, you have established the price of a Katy-coin.
If one Katy-coin is worth $1, the implied total value of all Katy-coins is $1 billion.4 Presto! Your friend is now a crypto billionaire!
But this seems flaky. It’s just two people playing with paper. But, let’s see if we can make this more real.
Agree that you are placing a hard cap on Katy-coin at 1 billion and one. This creates scarcity. Then, ask someone else at the party to buy a Katy-coin for $1. This increases the trading volume and the credibility of the $1 price.
Encourage others to buy Katy-coins for $1. The deeper market makes it hard to deny that the price is anything other than $1. Soon, others will feel left out and want in on the action. Tell them that the price is now $2 for a Katy-coin. Boom! Now the price has doubled, and everyone is making money on Katy-coin, especially Katy who is now holding $2 billion of her cryptocurrency. After all, the “market price” is getting more firmly established and who is to say the market is wrong?
Take this meme coin to the next level – a real cryptocurrency. Have your friends DM their friends who may happily buy Katy-coin for $3 each! Buzz is growing, trading volume is surging, the price is becoming more legitimate. Everyone is making money. Maybe set up a simple website to make trading a bit easier among strangers, then transition all trading to Coinbase. Viola!
As simple as this sounds, this is exactly how cryptocurrencies are created (except for the paper launch, which is always bypassed for a direct digital launch). Absurd? Just ask Billy Markus and Jackson Palmer, whose Dogecoin – created as a joke in 2013 – still has a market value of nearly $12 billion (down only 58%)5. Give Markus and Palmer credit for being transparent!
This is a lot of fun and excitement! Memorize this process, take it to your holiday parties. Please don’t do a rug pull! As you make everyone rich, you will be the life of the party. At least on paper.
Two strategies that I oversee, the Cabot Undervalued Stocks Advisor and the Cabot Turnaround Letter, focus exclusively on buying shares of publicly traded companies. Each stock is backed by a real business with enduring value that generates real revenues and free cash flow in real currencies. We focus on buying these companies when their cash flows and business prospects are undervalued on conventional, time-tested metrics. Price is what we pay, value is what we get. What’s in your portfolio?
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- Based on estimates by SoFi.
- With updated statistics and data.
- At least, on paper.
- Technically, $1,000,000,001.
- Source: crypto.com.
