The quality of life the average person has today is a product of many years of innovation, invention, and production. Our everyday life consists of solutions that others created to make life easier and simpler. One of the systems that has tremendous impact on how we live our lives today is money.
Money is simply a universal measure of value. It makes people quantify their relevance and enjoy rewards based on it. People earn money when they do what others find useful, and with money they can obtain goods and services that they don’t personally produce based on how their society measures value.
The current financial system today is based on paper money, famously known as fiat currency.
These currencies are issued by the countries of the world and they are essentially based on the individual country’s resourcefulness and strength. It wasn’t so initially. For example, the U.S. dollar used to be backed up by gold bars held up in treasury by the Federal Reserve. But in 1971, the currency was taken off the gold standard and the USD became backed up by basically the reputation of the USA.
At specific intervals, people who are high up the financial ladder get overwhelmed by greed or carelessness, and a crisis occurs.
The most recent financial crisis, which happened in 2008, was led by a drastic decline in home prices in the US. The big problem was not the decline in the stocks, jobs, and asset value — rather it was the solution that was more disturbing. More money was pumped in to stabilize the economy without any additional value being created.
Also, those who made the mistakes (i.e. the bankers) appeared to be rewarded by the solution (that is, government bailouts).
It was no surprise that Bitcoin rose from basically nowhere during the 2008 crisis, and began to build momentum. The idea was simple: a peer-to-peer medium of exchange of value. It was intended to cut out the bank’s control over money, and provide a means of exchange that is fixed in supply.
This is a simplified case for cryptocurrency.
While the crypto industry has come quite a long way from where it started, it is still not too late to invest in it. An investment in the crypto industry is currently the best expression to advocate for a change in the global financial industry. Aside from the fact that it has flaws, the current system is old, stale, and due for a change.
Crypto has the capacity to provide financial inclusiveness to anybody wherever they may be.
If you think you’ve missed the boat when it comes to crypto, you actually haven’t. Here are 5 reasons why it is not too late to invest in Bitcoin and cryptocurrencies.
Why It Is Not Too Late To Invest In Bitcoin And Cryptocurrencies
1. The Current Value of the Entire Cryptocurrency Market is Just a Fraction of the Worth of Some Companies
Satoshi Nakamoto’s vision was for cryptocurrency to be the new form of money. The industry has come a long way since Bitcoin’s visionary whitepaper, but where it is today is still very small when compared to the money and financial value in circulation.
The current total market cap of the crypto industry is just under $200 billion.
This is significantly small compared to the current valuation of companies like Amazon and Apple. The valuations of these companies are what they are today despite the fact that they do not service up to half of the world’s population. Meanwhile, if cryptocurrencies achieves the long-term vision of becoming the new form of money, a large percentage of the world (if not all the world) would be using cryptocurrencies.
To put it in a simpler sense, imagine what would happen if the 2 aforementioned companies decide to incorporate cryptocurrency into their systems. Currently, many crypto projects are forging partnerships that will enhance their usability and help accelerate real-world applications of blockchain and cryptocurrency.
Moreover, when we look at the graphic above, it’s clear cryptocurrency still has a long way to go in getting a foothold in the total value of money in the world.
To be modest, we could assume it would get to the point of being on the same level with gold. But considering crypto’s vision of replacing physical money, the upside is substantial.
2. Institutional Money is Yet To Be Priced In
Cryptocurrencies are yet to governed by stable regulations. In fact, many authorities are still having a debate as to what the definition of “cryptocurrency” is. Some say it is a currency, some say commodity, others disagree with both. There are still concerns that the securities law could be applied to some cryptocurrencies.
These doubts and concerns, and many more, have kept institutional investors from venturing into cryptocurrencies.
Most of the value currently priced into cryptocurrencies is from tech enthusiasts, financial traders, and a few capitalists.
Institutional capital, which is often very substantial and managed by big investment firms, has not yet ventured in the crypto industry. Morgan Stanley has already signaled keen interest, and Fidelity has already gone one step ahead. Others are expected to pick up to avoid being left behind.
3. The Crypto Industry Still Has a Lot of Room for Growth
Even though cryptocurrencies already do solve the issues related to money transfer, the use of blockchain still has several issues that require resolution.
Blockchain platforms have developers working to make them better optimized for their functions everyday. For example, Ethereum is still working on a solution to scaling and Bitcoin requires the Lightning Network to better handle high transaction loads.
It can be said that the current market cap of the crypto industry reflects the current state of crypto projects. Only 36 of the top 100 cryptocurrencies have working products thus far, which shows that the industry is still in its infancy.
Another area for growth has to do with the current nature of the crypto market which seems to be largely driven by speculation and sentiment, rather than actual technological progress. It will take time for the market to mature, and become less influenced by sentiment and more driven by actual progress.
As blockchain technology develops further and crypto investors mature, we could see exponential growth in the space in terms of both actual usage and market cap.
4. Crypto’s Potential as a Store-Of-Value in Times of Crisis
One of the problems the world has with the current financial system is that people are conditioned to use the currency of the country they are from. While some have the privilege of living in countries with sound financial systems, others find themselves in countries that are not so responsible financially. Governments could make a mess of the financial industry and the people will have no choice but to stick with their national fiat currency.
Cryptocurrencies are not state-owned or government-directed. They are not physical, and hence inflict no physical burden to carry. With a wallet address and private key or hardware wallet, cryptocurrency can be a store of wealth especially in times of crisis. Some recent examples include the case of Venezuela and the economic crisis of Zimbabwe.
Bitcoin is often considered in this light, having a total supply of 21 million. It sounds reasonable to store wealth in the topmost cryptocurrency. If Bitcoin is recognized globally as a store of value, that will likely drive the demand for it. This is because people will be willing to buy and hold it, but will sell only as a last resort.
5. More and More Companies Are Working to Apply Blockchain Technology in Their Industry
In July, 2018, Forbes listed 50 public companies exploring the use of blockchain technology. The list includes American Express, Oracle, IBM, Facebook, Comcast and more.
The efforts these companies put into blockchain development is a positive sign for the future of the industry. While these developments may not have a direct effect on the value of current cryptocurrencies, the successful use of blockchain for other uses could have a spillover effect and encourage the adoption of of crypto as a whole.
With so many companies already considering blockchain integration in their operations, it would not be surprising if we see massive growth in corporate adoption of cryptocurrencies over the next 5-10 years. Projects that are geared towards enterprises as well as those that provide Blockchain-as-a-Service will only serve to accelerate enterprise adoption.
Investing in cryptocurrencies is not just about buying the coins and waiting for a pump or price surge. Using useful skills to create or develop something in the space is investing. Creating useful products and services complimentary to the crypto industry can also be classified as an investment.
While investments often involve buying coins, it doesn’t end there.
The value of most cryptocurrencies has dropped by more than 70% (from their all-time-highs) in 2018. Many wished in January (during those highs) that they had bought Bitcoin at $6k. Now, at $6k, they are skeptical. This is by no means to encourage you to buy Bitcoin or any cryptocurrency at the current price — this is to give you a perspective of the mindset that goes into the investment process.
Whether we like it or not, at some point in the future, the financial system will be completely changed. It’s just like the famous saying “change is the only constant.” The bankers have had their time, and crypto looks to be the next era in the financial sector.
Just like Anthony Pompliano said, “Short the bankers!”