Are cryptocurrencies and NFTs good investments or is the hype already over? In the big TECHBOOK interview, financial expert Carsten Maschmeyer answers the most important questions that you should be asking yourself at the moment.
Carsten Maschmeyer should be known to many as an integral part of the television format “Die Höhle der Löwen”. As a start-up investor, the 62-year-old has invested in dozens of companies. He also made a name for himself as an author. With his latest work “The Start-up Gang” he wants to teach entrepreneurial thinking to children.
Last but not least, Maschmeyer is active on the financial markets. He has recently expanded his expert knowledge of stocks and investments in general to include crypto and NFTs. In an interview with TECHBOOK, Maschmeyer gives important tips for investors and warns of mistakes.
Are cryptocurrencies generally a good investment?
Carsten Maschmeyer: “Yes! Cryptocurrencies have some important advantages. Because they are so volatile and risky, they have the potential for big wins. Even pension funds are already investing part of their deposits in crypto to get more returns. Conversely, you can also lose a lot of money due to the violent ups and downs in prices. In addition, crypto can protect against inflation. Especially now, with inflation rates recently at seven percent, that’s a big plus. In addition, assets can be secured in times of crisis with such cyber currencies, similar to gold.
But the truth is that a lot of mischief is being done with it. Crypto is a popular means of payment in the criminal scene because it is anonymous, for example for drug trafficking or ransom payments. And in the Ukraine war, crypto can help the Russians bypass the ruble’s collapse and international sanctions. Overall, cryptocurrencies remain a very risky investment and, in my opinion, are currently only suitable as a long-term addition to diversified portfolios. Or just for conscious ‘speculation’.”
Are NFTs generally a good investment?
Carsten Maschmeyer: “As a technology, NFTs are extremely exciting. As an investment, they are pure gambling. The current hype reminds me more of Dutch tulip mania or the dot-com bubble than a serious investment. When hundreds of thousands of dollars are paid for animated cat GIFs, or $69 million for digital paintings at Christie’s recently, I think that’s crazy.
I expect this NFT bubble to burst soon, at the latest when global liquidity and the mood to invest slows down a bit. The market has already collapsed by half in just a few weeks. With the exception of a few NFTs, all of them will almost or completely lose their value. In my opinion, only the works of well-known artists will remain. But if it develops like this, it wouldn’t be too tragic, because the basic idea behind NFTs wasn’t to create a gambling instrument.”
What knowledge do beginners need?
Carsten Maschmeyer: “You should only ever invest in what you understand. Beginners should therefore first acquire knowledge about the technology and functionality as well as the advantages and disadvantages of cryptocurrencies and NFTs. Then you should answer an important question with a cool head: does an investment in crypto or NFTs fit into my personal investment strategy and my overall assets and subjective risk profile?
Investors should also get an overview of the many different cryptocurrencies – there are now over 18,000 different currencies, most of which are of course completely unknown and meaningless. And then it pays to know the political and regulatory environment. A possible ban on cryptocurrencies, which cause particularly high climate costs, was recently voted on in the EU Parliament. Had the motion been accepted, it could have led to a ban on Bitcoin trading in Europe. And if the wealthy in Russia increasingly use crypto to circumvent western sanctions, the USA and Europe will certainly not accept that. They will have to intervene, perhaps going as far as crypto bans.”
How do you rate crypto and NFTs compared to other forms of investment?
Carsten Maschmeyer: “The big difference between stocks and cryptocurrencies: stocks are backed by existing values, so you buy a share in a real company. Cryptocurrencies have no intrinsic value. I therefore consider an either/or decision to be counterproductive. Not only in times of rising inflation, the best tip for investors is always to diversify your own portfolio with different asset classes. What you also need to know: The climate footprint of crypto is an absolute disaster. The annual electricity consumption for mining bitcoins is as high as that of countries such as the Netherlands or Chile. I’m surprised that this aspect is often almost overlooked, despite the widespread awareness of climate protection.”
What percentage of his income to invest in crypto and NFTs?
Carsten Maschmeyer: “You can’t say that in general terms. That always depends on the current life situation of the individual. What investment horizon do I have? How risk averse or risk friendly am I? And important: How much money do I have in total, how much would I lose in the worst case without getting into financial difficulties? But to put it bluntly: Personally, I would reserve a maximum of ten percent for such investments.”
What dangers do you see in crypto and NFT?
Carsten Maschmeyer: “There are three major dangers: On the one hand, the extreme susceptibility to fluctuations, because in uncertain market phases many will flee this high-risk asset class again. Regulatory changes can then lead to restrictions on tradability or even bans. And the advantage of anonymity can also be a disadvantage, as criminal transactions can be encouraged. When investing in crypto, a principle applies that also applies to stock investments: do not put all your eggs in one basket, i.e. do not just rely on one currency, but on several, and in the long term. And I also strongly advise against building or maintaining your own wealth primarily with crypto.”
Conclusion: Who Should Invest in Crypto and NFT and Who Shouldn’t?
Carsten Maschmeyer: “If you have some money left over, are willing to take risks and have a long investment horizon, you can invest part of it to diversify your portfolio, but you should see this as play money.”