Any high risk investment is a gamble. Most cryptocurrencies are garbage, useless and will eventually disappear. But several of them (in my view) are interesting and will be around. Investing in cryptocurrencies isn't riskier than angel investing in a startup. if you love losing money, invest in 10 startups. You'll most likely lose money on all 10 deals. Your chances of making a massive return by investing in crypto are probably significantly higher.
At the end of the day, if you can risk $1 to potentially make $10 or 20, with an 80% chance of you doubling your money, a 50% chance that you 10x and a 25% chance you 20x your money -- honestly, why wouldn't you do that? Not with your entire net worth, but those odds are just too good not to put some money in.
In fact, I'd say more, anyone who hasn't at least invested some money in cryptocurrencies.. just doesn't like making money. What if Bitcoin actually ends up becoming digital gold? You'll have lost out on the best possible investment in our lifetime. What if Ethereum ends up powering most dApps? etc
One, you mucked up your arithmetic (80% + 50% + 25% > 1). (I’ll assume you were expressing cumulative probabilities.) Two, you left off the tail of the distribution where one loses money.
Put together, I’d say no to your pitch—schemes promising a greater than 100% chance of making lots of money and 0% chance of losing any are 100% scams.
That’s one hell of a bet to encourage others to take. (You aren’t encouraging anyone. But the original article is.)
> limiting investment opportunities to HNWIs, while a sane approach, isn't working
I used to believe this. Cryptocurrencies have shown me the existing rules are closer to being correct. Given the chance to discern fraud from fact, investors without teams of lawyers bought into every single form of elementary fraud the Securities Act of 1933 successfully, to a broad degree, stomped out.
Cryptocurrencies’ buyers aren’t investing. They are gambling.
The fundamental problem is diligence costs money. In the public markets, reporting requirements shift that burden on companies. Many companies don’t want that burden. They stay private. To diligence them, investors must be able to bear the cost of diligence and risk of their investment.
Given VC investors, on average, fail to systematically outperform public markets, I fail to see the merits of the case “investors who invested in stupid things A (cryptos), despite having access to sensible thing B (registered securities), should be given access to marginally-less stupid thing C (unregistered securities).”