So where is the truth, and what are the facts?
For one, the big guys and institutions, i.e., the “smart money”, are about to move into this asset class in a huge way. Currently, nearly all the investors in Bitcoin and cryptocurrencies so far have been individual investors, early adopters, developers and insiders, i.e., the ” small guys’’. That’s because the big investors have not been able to access this asset class yet. Why? Because the infrastructure and appropriate regulatory systems have not been fully developed to allow for the billions and eventually trillions of dollars that will be invested in this market. There has to be SEC oversight (to make sure investor protection is in place), custodial solutions (big funds and institutions cannot hold customer assets in their own possession), and the ability to handle thousands and sometimes millions of transactions per second (which requires the development of both the cryptoassets and the crypto exchanges to handle this).
Obviously, despite rapid progress on all these fronts, it still takes time (remember the dial-up Internet and super slow downloads and speeds; that didn’t stop the Internet from developing, and continuing to develop.). Right now, in order to invest in Bitcoin and cryptocurrencies, the investor has to open up an account to change fiat currency into bitcoin, then open up one or more accounts to trade bitcoin for other cryptocurrencies (just like stocks, there are several exchanges, with different exchanges listing and trading different cryptocurrencies.). Then the cryptocurrencies need to be moved into secure storage. This takes time and effort and is quite a hassle.
In fact, it is EXACTLY for the above reasons that the individual or small investor presently has the advantage over the “smart money”! We have the ability to get into these investments before the big players can enter. This may be one of the only times in history where that happens!
So why am I so sure this will occur? I’ll give you several good reasons:
1. I can’t think of any industry that won’t be seriously affected or transformed by blockchain technology. Any industry that involves a central control, authority, or middleman will be significantly changed. You can Google any industry and the word “blockchain” and you will probably find many articles on the subject.
2. Large institutions such as the New York Stock Exchange,NASDAQ,Fidelity, and all the world’s largest banks and exchanges are all setting up platforms utilizing blockchain technology to transact in cryptocurrencies.In a recent report by Deloitte, one of the “Big Four” global accounting and professional service firms, 95% of companies surveyed in multiple industries revealed that they are investing in blockchain and distributed ledger technology.They all see the threat and the promise of this new revolution, and understand that they must either adapt or become obsolete. These groups are not known for throwing large sums of money at passing fads or useless technology. Great investors learn to follow where the money goes and get there early.
3. The hottest place for today’s brightest, most ambitious techies is the blockchain and crypto asset space. These are the same people that conceived and developed the personal computer, the Internet, and the associated platforms that rule the world today and are the most valuable companies by market cap. They see the future of this technology and are betting their careers and futures on it. They are more motivated by technologies that change the world than they are by the monetary rewards. Thus, it makes sense to follow where the brain flow goes.
4. Many institutes of higher learning not only offer courses in cryptoassets and blockchain technology, but some are setting up major and minor degrees in it.
5. There is now credible research demonstrating that investing a small part of one’s portfolio into cryptoassets actually DECREASES the risk and volatility of the entire portfolio. It sounds counterintuitive that investing in a volatile asset can reduce overall risk, but it’s true! This is due to the fact that cryptoassets are not correlated with other asset classes. There is a well researched book on this subject: “ CRYPTOASSETS : THE INNOVATIVE INVESTOR’S GUIDE TO BITCOIN AND BEYOND” by Chris Burniske and Jack Tater. So, as this knowledge becomes more widespread, think about all the financial and portfolio advisers, pension funds, and institutional investors that will have to invest in cryptos as part of a balanced, diversified portfolio for their clients.In fact,Yale’s endowment fund, the most successful and visionary of all endowment funds, announced that it was investing a significant amount of its money into cryptoassets. Most all of the other major endowment funds are in the process of doing the same. If 1-5% of all this international investment money eventually goes into cryptoassets, we are talking trillions of dollars. Remember, these institutions have a fiduciary duty to their clients, and they all tend to follow the herd when it comes to spreading risk over multiple asset classes.
6. A fantastic new book by the visionary tech guru George Gilder, “LIFE AFTER GOOGLE”, presents a compelling argument as to why blockchain technology will replace the present dominating platforms by Google, Facebook, et al.There are two fundamental reasons for this: security and personal control of one’s data.The main flaw with the present Internet is lack of security, as it was not built from the ground up into its architecture.This will be its downfall. Blockchain has security in its core. The second issue is that people are tired of having their personal data controlled and monetized by all the internet platform companies. Blockchain gives control back to where it belongs – the individual. Gilder believes that these two main issues will ensure the inevitable success of this technological revolution.
7. Just recently the Chartered Financial Analyst Exam has added topics on cryptocurrencies and blockchain into their curriculum. That means that CFAs will need to be educated on these topics in order to serve their clients. This is a very conservative group when it comes to financial assets, so the fact that they are addressing this new asset class is another powerful development.
8. It is expected that a bitcoin/ cryptocurrency ETF that meets all the SEC regulations will finally be approved in the near future. This will be a watershed moment, as it will allow almost anyone to easily invest and trade in this market.
9. Despite the brutal crash in the value of bitcoin and the crypto market, there’s been tremendous developments in moving the technology forward.The big players and institutions have invested much more money into the space during this bear market.Again, these groups are not known for throwing good money after bad or failing ideas.The present “crypto winter” is doing what it supposed to do, with the weak hands capitulating and the strong hands accumulating.It is also separating the strong cryptos from the poor ones , thereby strengthening the overall market and preparing it for the next move upward.
10. The HALVING. This will arguably be the main influence on the value of bitcoin within the next year. Every four years the amount of bitcoin mined decreases by half.That means each bitcoin becomes rarer and more valuable.So as long as the demand for bitcoin doesn’t drop in half, the value has to go up.Looking at the previous halving of bitcoin, there have been two.Let’s look at what happened prior to and after those halvings :
First halving (11/28/2012) : Bitcoin price started an uptrend about one year prior.Within one year, the price increased by 8000%.
Second halving (7/9/2016) : The price started moving up around nine months prior, and peaked 1 1/2 years after the halving for a gain of 2800%.
Therefore, we are already in the pre-halving uptrend to the May 2020 halving, and if history is any indication, we can expect a major price movement in bitcoin afterwards.
The recent technological revolutions that change the world ( think personal computers and the Internet) occur about every two decades. This is our chance to get invested in the next one before it becomes ubiquitous!