Should I Buy Cryptocurrency Because Everyone Is Getting Rich

The fear of missing out on crypto gains is real, and we are not here to tell you what to buy or avoid. Instead, let us apply timeless investment principles that have worked across every asset class for over a century and see what they tell us about making this decision wisely.

Warren Buffett's rule is clear and non-negotiable: never invest in what you do not understand. Before buying any asset, can you explain how it derives its value? What generates its returns? What is the fundamental source of its cash flows? If you cannot answer these questions clearly, you are speculating on price momentum, not investing based on value. That distinction matters enormously because speculation can work for a while, but it eventually catches up with you.

Charlie Munger warns that even brilliant people make terrible investments when driven by temperament rather than analysis. The stories you hear about overnight crypto millionaires represent survivorship bias -- you do not hear about the far greater number who lost everything. For every person who bought Bitcoin at $100, there are thousands who bought at the peak of a cycle, watched it crash 80%, and panic-sold at the bottom.

Howard Marks offers a useful framework: whenever an asset class generates extreme excitement and seemingly everyone is making money, that is precisely when risk is highest and expected returns are lowest. He calls this "the perversity of risk" -- safety is most present when it is least felt, and danger is most present when it is least perceived.

Benjamin Graham's principle of margin of safety applies here directly. When you buy an asset with no earnings, no cash flows, and no tangible backing, there is no way to calculate whether you have a margin of safety. You are entirely dependent on someone else paying a higher price -- the greater fool theory. That can work spectacularly well in bubbles, but bubbles always end.

Here is a practical framework for thinking about crypto or any speculative asset:

Your Action Plan

The Bottom Line

Discipline does not mean avoiding new asset classes entirely. It means approaching them with the same rigor you would apply to any investment.