1. Upside Potential
Cryptocurrencies are the fastest growing technology in all recorded history, as cryptocurrency adoption has been growing at almost double the speed of the internet.
This is shown by the chart below (provided by gmi), which compares crypto adoption with the early years of the internet.
If crypto continues on its current path of adoption, we could reach 1 billion crypto users by 2024 and 5 billion by 2030, even with the rate of adoption slowing.
The cryptocurrency and NFT market reached a total value of around $3 trillion towards the end of last year, with a user base of around 300 million users.
If 1 billion users are attained over the coming years, which is probabilistic based on the rate of adoption we have seen so far, then the crypto and NFT market could reach more than $10 trillion of value – hence providing remarkable upside potential for long term investors.
In addition, the market cap of the largest technology companies in the world as follows are:
Apple ($2.7 trillion)
Microsoft ($1.9 trillion)
Google ($1.4 trillion)
Amazon ($1.3 trillion)
These are all individually greater than the total market cap of the crypto industry currently, which is under $1 trillion at the time of writing.
However, in theory, the networks which allow the most efficient transfer of value should be worth more than information networks, further pointing to cryptocurrencies having extreme upside potential.
2. Owning a Part of the Network
Before cryptocurrencies were born, the internet held the title for the fastest growing adoption of a new technology during its early years (1990s). During this time though, investors were unable to invest in the most profitable internet networks themselves. Some were able to invest in shares in the likes of Meta (Facebook) and Google early on, but this was mainly accredited investors.
The difference with cryptocurrencies is that you are able to own a part of the actual network, and therefore can potentially profit incredibly. This provides an incredible opportunity for those with small amounts of capital, but who are willing and determined to put the work in to find the next Facebooks and Googles, and therefore benefit financially.
By owning a part of the network, investors are also rewarded for doing so in some cases, particularly with Proof-of-Stake cryptocurrencies. These reward you with a yield for locking up your crypto assets, which can be compared to dividend yields with traditional stocks, except more lucrative.
The fact that you can own a part of these crypto networks allows for a new creator economy – a community-owned ecosystem, where both creators and their audiences can profit from their contributions. With cryptocurrency platforms/networks, there is a clear shift in power dynamics from the platforms to the creators and their communities. New forms of direct creator-community relationships are promoted, as opposed to creators just providing value to the platforms.
This allows creators to offer more to their fans, including financial upside, so owning a cryptocurrency can allow you to be more in touch with a particular community - enrichening the community over a centralised platform.
Owning cryptocurrencies and NFTs can provide investors with the comfort of knowing that your funds cannot be stolen, or the platform cannot be hacked, if you choose a secure storage option (GlobalBlock have partnered with Qredo to provide secure cold storage for client funds and also provide insurance options covering crypto assets from theft or malicious intents).
Cryptocurrencies and NFTs can offer investors diversification from traditional financial assets like stocks and bonds.
The crypto and NFT market has had a very high correlation with the stock market over the past 9 months or so, as a result of macroeconomic headwinds. This would suggest crypto and NFTs act as a poor diversification tool from an investor’s standpoint.
However, when we have macroeconomic tailwinds cryptocurrencies and NFTs become uncorrelated to traditional assets and behave on their own accord. We experienced this during the 18 months after the COVID pandemic broke out.
5. Outside of Government Control
The value of government-controlled fiat money erodes over time, due to the ability for governments to print as much of their currency as they would like. This has led the British Pound losing 99.2% of its value since 1910, and the dollar losing 96.7% of its value since 1910.
Cryptocurrencies on the other hand, are controlled by code and most have a maximum supply which cannot be breached. Bitcoin, in particular, has a monetary policy which is set in the code and is virtually impossible to change. This means we know the exact supply of Bitcoins entering the market each year.
It can be especially important to own assets such as cryptocurrencies, which are outside government-based financial systems, in cases where citizens lose trust in governments.
For example, when the U.S. government abandoned the gold standard in 1971, meaning the dollar was no longer pegged to gold, this resulted in a decade long rally for gold (almost 2000% return). Investors flocked to the scarcest asset that governments could not print endlessly, which could, from 1971 onwards, be done for fiat currencies.
With cryptocurrencies being even further outside the reach of government control than gold, and in some cases scarcer, they could play an important role in an investor’s portfolio.
If you would like to learn more about cryptocurrency, feel free to contact us. Globalblock aim to provide guidance and education throughout your crypto investment journey.