260: Does Crypto Have a Role in Real Estate?

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In case you didn’t notice, we are in the middle of a massive cryptocurrency bull market. We haven’t been here since 2017 and who knows how long it will last. For those of you with solid positions, enjoy the run but don’t get greedy!

I certainly learned my share of lessons from the last cryptocurrency bull run. I could have come away from it with a lot more money than I did if I had done things differently.

However, like anything in life, investing is about learning from your mistakes and trying not to repeat them. Let me give you an example of one of the lessons I learned.

In 2017 I invested in an initial coin (ICO) offering on a project that I liked. ICO’s were all the rage back then but have since been banned by the SEC in the United States.

I invested $50,000 into that project. One day the guy who told me about the project in the first place shot me a text that read “you must be happy you bought into that ICO!”

Indeed, when I looked up the price of the token, my $50,000 was worth $4 million! Now there are times to buy and hold, but this was not one of them. That kind of profit on a token that really represented an idea more than anything else was a sell for sure in my humble opinion.

The problem was that I couldn’t sell. You see, first of all, the only platform where the token was trading was not open to Americans. My friend who texted me is Canadian so he didn’t have that problem.

So, for several months, I watched handcuffed as the euphoria around the project drained out. By the time it was on a platform where I could theoretically trade it, it was worth $500K.

That was still 10X so nothing to scoff at. But then I ran into another problem. There was virtually no liquidity on the platform where I could trade it. In other words, the token I had may have been theoretically worth something, but there weren’t any buyers.

By the time the token was on sizable trading platforms available to Americans and had some liquidity, crypto winter was upon us. Soon, my $50K that was worth $4 million was worth only $20K.

What a miserable story right? You’re right but I can’t say I ever let it bother me that much. This kind of stuff happens once in a while when you are an active investor or trader. The key is to learn something and don’t repeat the mistake again.

For those of you who are holding on to significant profits in alternative coins right now, make sure you can sell them if you want to. You might even consider very slowly moving out of the token into something traded on Coinbase where everything is liquid.

Anyway, I thought I’d share that story with you for you to learn from my experience. Crypto is the wild west still, despite tons of added regulation. Have fun and try not to lose money. In frenzies like this, that is very easy to do.

Speaking of frenzies, beware of charlatans in times like these. Just like last bull run, you are going to see a lot of unnecessary tokenization and random companies adding the word blockchain to what they do in order to create a buzz.

Here’s a case study: an iced tea company called Long Island Iced Tea. The company made beverages from 2015-2017. But suddenly, in December of 2017 at the peak of the crypto market, the company changed its name to Long Blockchain Corp. (LBCC). The company never really made its mark in anything related to blockchain and, in a press release stated, “there can be no assurance that the company will be successful in developing blockchain technology, or in profitably commercializing it, if developed.”

In other words—they were just using the name to pump the stock price. And sure enough, the share price increased by 500 percent!

The moral of the story is that in times like these, it is important as ever to ask questions. Yes, I do believe blockchain and, more broadly, distributed ledger technology is the biggest technology advance since the internet. But make sure when you hear people using crypto terminology actually have a real purpose for it other than marketing.

There certainly are some potential use cases. My guest on this week’s Wealth Formula Podcast, for example, wants to securitize real estate ownership via security tokens. Does it make sense to do so? Well, listen to this interview and decide for yourself!

Jason Ricks, CCIM, is chief operating officer of Liberty Real Estate Fund, the world’s first net lease security token fund. He is a native Texan, real estate investment expert, and security token pioneer. Mr. Ricks is a principal with Concordia Equity Partners, LLC, and was vice president at AMLI Residential (Morgan Stanley), an $11 Billion+ private REIT; BH Properties and Tarantino Properties. He is also a published author and has been featured on real estate and investing podcasts.

Shownotes:

What would be the benefit of a single-tenant property within an investment portfolio?
What are Net Leases
Why would you choose to invest in a fund if you can just afford to go out and buy some triple net real estate?
How the security token works
libertyfund.io