Why I like cryptocurrencies as a long-term investment
Cryptocurrencies and tokens are extremely volatile investments. I wouldn’t recommend to an average person that they invest if they plan on taking their money out within 3–6 months. Of course, with high price volatility comes many opportunities to make a profit and the crypto market is a day-trader’s paradise, but I would never recommend that strategy to the average person. In this post I’ll be discussing why I would recommend you might consider investing in cryptocurrencies as a long-term investment after you’ve done your own research and understand what you’re getting into. I’m not saying that you should definitely invest in cryptocurrencies, I am saying you should at least do some research and learn about the market so that you can make your own informed decision.
I’ve been involved with Bitcoin since 2010 and have been investing in it and other cryptocurrencies ever since. I help my company Lunafi host local Meetups to provide education on cryptocurrencies, I post a weekly Lunafi Crypto Newsletter to make keeping up with the market easier, and I will forever be positive and bullish on cryptocurrencies and blockchain technologies. I’m 100% biased and will explain why I’ve developed that bias in as pragmatic a manner as possible.
As usual, this comes with a big disclaimer: I’m not a financial advisor and this is not financial advice, this is my personal thoughts on the matter. Do your own research, never invest more than you’re willing to lose and always be skeptical of anything you read online or see on TV related to cryptocurrencies.
Blockchain technology is seriously groundbreaking
It’s sad that it’s become a bit of a joke when people say that they’re only in cryptocurrency “for the technology”. Yes, digital assets are treated as investments by many people, but that’s only because their underlying technology is promising and many people expect that it’s here to stay. If you’re only investing to make a profit that’s fine, but I recommend you learn a bit about why so many people believe in this tech.
Blockchain technologies allows things that simply weren’t possible before, so they are inherently disrupting existing industries as well as creating entirely news ones. For the first time ever, two parties can establish trust between each other and enforce strict rules for their interactions that cannot be cheated, all without having to rely on trusting a third party to facilitate that interaction. This decentralized digital trust is hard to wrap your head around, but it’s being used to do crazy things that benefit the consumer in undeniable ways.
For the first time ever, you can send money between two people, across the world, in under a second with zero fees (looking at you Nano) with absolutely no middleman to charge fees, track and sell your data, or censor who you can interact with. You can deploy software applications on a global network of computers without being forced to give cloud providers like Google or Amazon complete control of your data (looking at you Ethereum) and without having to pay massive fees to these providers.
People still don’t understand the benefits of decentralization
Right now it’s still difficult to explain to the average consumer the real benefits of decentralization, and it’s hard to demonstrate those benefits because there aren’t many real world applications out there yet that a consumer would understand. But hear me when I say that they are coming in massive numbers. We’re on the cusp of a new generation of software that will fundamentally and permanently change how our daily lives and our economy works, nothing like this has happened since the invention of the internet or the smart phone.
When the tangible benefits of decentralization can be understood and realized by the average consumer, I suspect widespread adoption will massively increase. With adoption comes demand, with demand comes higher prices thanks to free-market economics. Until then I will continue to acquire as many cryptocurrencies and tokens as I can.
Let’s take DuckDuckGo as an example. They’ve been around for awhile, providing a search engine that doesn’t base its business model around tracking user’s behavior and selling their data to advertisers. They never saw huge success until the Edward Snowden incident when the US population found out just how much of their online data is being tracked. This brought the problem of data privacy into the public’s eye and when it did DuckDuckGo saw a massive increase in users because people finally realized the benefit of the privacy their service offers. I believe we will hit a tipping point like this for cryptocurrencies and tokens as well, once people can easily see their benefits due to more consumer applications with a good user experience being developed.
Lots of smart money is going all in
There are many wealthy people smarter than you or I that are making big bets on the cryptocurrency market. The Wiklevoss twins famously hold an absurd amount of Bitcoin and own the Gemini exchange, one of the largest in the US. Tim Draper, venture capitalist and billionaire who has invested in many successful tech companies, owns around 30,000 Bitcoin and is extremely bullish on it longterm. Billionaire investor George Soros has announced he is getting into cryptocurrencies. Mike Novogratz, billionaire and former hedge-fund manager, has made massive bets on cryptocurrencies. Patrick Byrne, CEO of Overstock.com, has long been bullish on cryptocurrencies and is planning on building a digital asset exchange. Famous business mogul and billionaire Richard Branson has invested heavily in the Bitcoin payment processor company BitPay.
Of course, there are plenty of billionaires and smart people who will tell you that cryptocurrencies are a scam and that you shouldn’t go anywhere near them. When you see someone make such a claim, I’d suggest that you really look into how much they understand blockchain and decentralized technologies and their benefits. I find that 9 times out of 10, the people who are most vocally against cryptocurrencies understand almost nothing at all about them (looking at you Bill Gates 😒). I suppose some people just resist what they don’t understand. (Is my bias showing yet?)
Demand for blockchain jobs is exploding
With over 2,000 blockchain companies registered on AngelList as of writing, most of them created in the last two years, there is a ridiculous amount of demand for blockchain-related jobs. Growth in this sector is insane right now and yet we still haven’t seen a single application of decentralized technology with widespread enterprise or consumer adoption. This tells me that we’re in the beginning of a large growth of the industry over the next decade and that many wealthy people are betting big on blockchain and cryptocurrencies being here to stay. It just doesn’t seem possible for the market to remain at its current level once some of these products come to fruition since right now the market is almost entirely speculation.
Of course, like the dot com boom I expect the overwhelming majority of these new companies to get ridiculous amounts of funding and never produce a single product. On the flip side, also like the dot com bubble, I expect the ones that do make it will become some of the largest and most successful corporations of their generation, creating large numbers of jobs and driving widespread mainstream adoption since it’s in their best interest. As I mentioned above, when mainstream adoption happens we all benefit.
Future price potential of a brand new asset class is hard to beat
Cryptocurrencies and tokens are a brand new investment asset class. Can you remember the last time an asset class was created? I believe this is the first in my lifetime. This opportunity doesn’t come around every generation and you’d be smart to at the very least do your own research into it and see if you think it’s a good idea to throw some money at it. There is an inherently high risk, but the reward might be worth it depending on your current financial standing.
Let’s do some quick math to show what our potential future prices may be. This is all highly speculative and contains lots of assumptions, but these are the things myself and others might have in mind.
As of writing, the market cap for the entire US stock market is approximately $30 trillion (source). Today, the total cryptocurrency market cap is $431 billion. Bitcoin’s price is $9,394.56 and it sits at 37% market dominance (BTC is 37% of the entire market cap).
Hypothetical: What if the crypto market reached 10% of the stock market?
WARNING: wild assumptions and hand-waving inbound 👋. So, if the entire cryptocurrency market achieves 10% of what the stock market is today in terms of market cap, the cryptocurrency market cap would be at a $3 trillion market cap. If Bitcoin remained at 37% market dominance and every single Bitcoin had been mined (meaning all Bitcoins that ever will exist, did exist), that would put Bitcoin’s price at ($3 billion * 37%) / 21 million = $52,857.
$30 trillion stock market cap * 10% (arbitrary potential crypto market growth)
= $3 trillion potential crypto market cap
x 37% BTC dominance
= $1.11 trillion potential BTC market cap
/ 21 million Bitcoins (max that can ever exist)
= $52,857 potential BTC price
That is 5.56x the current price of BTC today ($9,394.56). Do you think the tokenized economy can achieve 10% of what the US stock market is today? I think it sounds a bit far-fetched at the moment, but I also think it’s entirely possible within a decade or two. When you start to look at the big picture, I dare say it might even look probable. I want to believe. 🙏
Cryptocurrencies are a hedge against government-controlled, debt-based economies
Do you understand how fractional-reserve banking works? If you don’t, go read a bit about it and come back. I’ll wait.
The US economy is built on the promise of people incurring massive debt that must be paid, and money being loaned that was never actually owned in the first place. This worries me quite a bit, add to that the massive influence that wildcard politicians can have on the economy and I’m not really comfortable putting all of my investments into markets controlled by the government or big banks. Don’t get me wrong, I max out my 401k contributions, I have a Wealthfront account for good diversification across US and foreign markets, and I own a couple US stock market index funds which have all done well. With that said, I’d like a hedge against these markets. I’m not the only one worried about this problem.
Cryptocurrencies are traded globally and exchanges run 24/7. Because of this the market is not influenced by only a single government, but by the decisions of many governments across the globe. Due to this, it tends to have a bit of independence related to other markets (to an extent). Furthermore, when governments have done irresponsible things with their citizens’ money Bitcoin can be adopted as a safe haven to get your money away from the grasp of big banks (see Greece in 2015 as an example). When the US Great Depression happened, citizens went to the bank and were told “Sorry, your money’s gone forever. We took it and you’re not getting it back.” That is actually impossible with cryptocurrencies since only you own your private keys. You’re the only person in the world who can access your funds. You are your own bank. That’s a very powerful concept.
That’s a wrap
So, am I a crazy fanatic who should just shut up about cryptocurrencies already? Hopefully I’ve helped shed some light on the reasons for my bias and why I believe in the tokenized economy being a solid long-term investment. There are many more things I could have talked about here, but this is a good high-level overview of why I’ve invested in cryptocurrencies and will continue to invest in them for the foreseeable future. Let me know what you think or other things you’d like to read about in the comments below 🤓!
If you like this type of content, you can check out our weekly Lunafi Crypto Newsletter, our daily crypto news aggregator The Lunafi Daily, and you can follow us here on Medium or on Twitter and the various other social networks. If you’re in Souther California, come join us at one of our many Meetup events with over 450 members!
