Are crypto and NFTs good investments, Mr. Maschmeyer?

Are cryptocurrencies and NFTs good investments or is the hype around them already over? Financial expert Carsten Maschmeyer answers the most important questions you should currently ask yourself in the big atechbook interview.

Many may be familiar with Carsten Maschmeyer as a fixture on the television format “Die Höhle der Löwen.” As a start-up investor, the 62-year-old is invested in dozens of companies. He also made a name for himself as a book author. With his latest work, “Die Start-up Gang,” he already wants to teach children entrepreneurial thinking.

Last but not least, Maschmeyer is active in the financial markets. He recently extended his expert knowledge on stocks and investments in general to crypto and NFTs. In an interview with atechbook, Maschmeyer gives important tips for investors and warns against mistakes.

Are cryptocurrencies fundamentally a good investment?

Carsten Maschmeyer: “Yep, cryptocurrencies have some important advantages. Because they fluctuate so much and are risky, they have the potential for high profits. Even pension funds are already putting some of their deposits into crypto to get more returns. Conversely, you can also lose a lot of money due to the violent ups and downs of the prices. In addition, crypto can protect against inflation. Especially now, with inflation rates of seven percent recently, that’s a big plus. In addition, assets can be hedged in times of crisis by such cyber currencies, similar to gold.

Part of the truth is that there is plenty of mischief going on with it. Crypto is a popular means of payment for the criminal scene because it runs anonymously, for example for drug trafficking or ransom payments. And in the Ukraine war, crypto can help Russians circumvent the ruble’s decline 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 for deliberate ‘speculation’.”

Are NFT’s basically 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 the Dutch tulip mania or the dotcom bubble than of a serious investment. When hundreds of thousands of dollars are paid for animated cat GIFs, or $69 million for digital paintings at Christies recently, I think it’s crazy.

I expect this NFT bubble to burst soon, at the latest when global liquidity and investment sentiment drops a bit. Currently, the market has already collapsed by half in just a few weeks. Except for a few NFTs, all will lose their value almost or completely, only the works of very well-known artists will remain, in my opinion. But if that’s how it develops, it wouldn’t be too tragic, because the basic idea of NFTs wasn’t to create a gambler’s 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 how it works, as well as the advantages and disadvantages of cryptocurrencies and NFTs. Then they 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 wealth and subjective risk profile?

Investors should also get an overview of the many different cryptocurrencies – there are now already more than 18,000 different currencies, most of which are of course completely unknown and meaningless. And then it is still worth knowing the political and regulatory environment. Recently, the EU Parliament voted on a possible ban on cryptocurrencies that cause particularly high climate costs. If the motion had passed, it could have led to a ban on Bitcoin trading in Europe. And if wealthy people in Russia increasingly circumvent Western sanctions by means of crypto, the US and Europe will certainly not accept that. They will have to intervene, perhaps to the point of crypto bans.”

How do you rate crypto and NFTs compared to other forms of investment?

Carsten Maschmeyer: “The big difference between shares and cryptocurrencies: Shares are backed by existing values, so you buy a share in a real existing 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 investor tip is to always diversify one’s portfolio with different asset classes. What you additionally need to know: The carbon 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, for example. I’m already surprised that this aspect often almost goes under despite the broad awareness of climate protection.”

What percentage of his income to invest in crypto and NFTs?

Carsten Maschmeyer: “You can’t say that across the board. It always depends on the individual’s current life situation. What is my investment horizon? How risk-averse or risk-friendly am I? And importantly, how much money do I have in total, how much would I be able to absorb as a loss in a worst-case scenario without getting into financial trouble? But to put a number on it, I personally would reserve a maximum of ten percent for such investments.”

What dangers do you see with 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. Then, regulatory changes can lead to restrictions on tradability or even to bans. And the advantage of anonymity can also be a disadvantage, as criminal transactions can be encouraged. When it comes to investments in crypto, there is a principle that also applies to stock investments: don’t put all your eggs in one basket, i.e. don’t just bet on one currency, but on several, and do so over the long term. And I also strongly advise against using crypto primarily to build or preserve one’s wealth.”

“What was your biggest technology mis-purchase, Mr. Maschmeyer?”

Bottom line: who should invest in crypto and NFT, and who shouldn’t?

Carsten Maschmeyer: “Those who have some money to spare, are risk-averse and have a long investment horizon can invest a portion to diversify their portfolio, but should see this as play money.”