Kyle B. Russell has observed a trend among millennials in the San Francisco Bay Area.

They've seen the once-in-a-lifetime returns bitcoin has brought, and they want in on it.

Their resulting investment decisions make Russell uneasy.



As someone who nerds out about personal finance and investing as much as new technologies like augmented reality and AI, I've been pleasantly surprised to have more casual conversations recently about money, investing, and planning for the future with friends my age.

But as someone who personally subscribes to the philosophy of Ben Graham — that those who aren't willing to take a hard look at the fundamentals behind the assets they're considering buying would be better served by investing in conservative baskets of investments with more predictable returns and lower downside risk—I'm increasingly concerned about the thought processes leading folk to invest in highly speculative assets in the cryptocurrency space.

These folks have generally started investing in bitcoin in the last few months. Having seen the once-in-a-lifetime returns to early holders in 2017, they want to jump on the train while it's still got track in front of it.

They don't know how the protocol verifies transactions via mining, or how that enables trust in a decentralized network, but they do know one big thing about the cryptocurrency that fuels it: there will only ever be a set amount of it, and as more people decide to invest, that limited supply can only go up in value.

As these folks first became interested in the space, I introduced them to Coinbase and suggested that due to volatility in the space, it made sense to make investments a little bit at a time—dollar-cost averaging into the asset, so that you sometimes get it "at a discount" and sometimes buy on the way up—and they generally followed that advice.

But after a few months of high returns, these same people have gone all-in, putting high percentages of their net worth in bitcoin to maximize their returns in the short-medium term without concern for the risk of massive downswings in the next few years.

Now, this might end up working out great for these folks. Despite governance and scaling issues, bitcoin could become the digital equivalent of gold, worth trillions of dollars as a globally recognized store of value.

Suggestions to put 10% of one's income into low-cost index funds returning less than the average return in the 20th century might look like quaint advice when these folks in my age cohort fondly look back while sipping on a cool beverage, lounging on their private islands.

Some observations of the people I'm talking about:

they live in the San Francisco Bay Area

they're in their mid-to-late twenties

have student debt burdens ranging from "pay it off in a few decades" to "had rich parents"

have incomes ranging from surviving with little savings to living comfortably and making enough to save for a comfortable retirement while driving an entry-luxury car and not living with roommates

non-technical backgrounds

Based on some of these observations, there are a few assumptions that don't seem like a stretch to make about their motivations:

They've been exposed to outsized success on a regular basis. It's not easy to spend a few years in Silicon Valley without bumping into folks who've had an exit after some time at a startup and can be more picky when thinking about their career path. Investing in bitcoin and other cryptocurrencies looks like a way to have this kind of outcome without committing yourself to work at a particular company for half of a decade (assuming you have the skills and other privileges that make you a candidate for roles at these companies in the first place).

Knowing that a conservative investment plan will generally have pretty astounding returns on a long enough time horizon doesn't seem to mean much when it looks like you'll still be indebted for much of that time frame due to student debt.

The American dream means buying a house, and accomplishing that AND paying off student debt AND building up a nest egg AND saving for your kid’s education seems impossible. Instead of investing slowly and steadily, they'd rather gamble for the chance to accomplish all of those things.

I've had enough conversations with these folks to know that arguments based on historical trends in either traditional assets or the cryptocurrency space can't overwhelm the emotional reasoning happening in their heads due to the above circumstances, and so this post is not a data-centric argument for more conservative investment practices.

I'm simply calling out some observations that have left me uneasy, with a low-key feeling that there's some systemic event building up.

That might be a fundamental shift in the kinds of things people invest in and the time horizons they consider, or it might be a bubble that sets a portion of my generation even further behind on their long-term goals.

Kyle B. Russell does product marketing at Skydio. He was previously a VC at a16z and has been a reporter at TechCrunch and Business Insider.