For all of the headlines, the dozens of sites for information, and thousands of YouTube videos with technical analysis and price forecasts, Bitcoin & Co. are still very much niche products. I’ll be a broken record player as long as it takes to say that if you’re here and you’re reading this, you are early to crypto. Currently [mid-2021] less than 2% of the world’s roughly 8 billion people hold or transact in crypto. What this means is that it won’t take widespread adoption of crypto to allow you to realize some pretty fantastic gains in your portfolio. Meanwhile, central governments everywhere continue to inflate away your savings and earnings. There are more than 9,000 cryptos listed on CoinMarketCap- which is too many in my opinion – but that still is a pinch of sand in the ocean of over 23 million businesses in the US alone. Probably less than 1% of those businesses accept crypto or even hold it on their balance sheets. Crypto’s presence in headlines would have you think otherwise, but don’t.
Prepare for the worst, hope for the moon
Only put what you are willing to lose into crypto. I love the asset class and technology enough to write about it nearly everyday, and I hold a substantial amount of money in crypto- but Ethereum, Bitcoin, Cardano, BNB, and others are nowhere near the stability one would need to have them be a reliable form of savings or even investment. While in the finance world blockchain tech is gaining legitimacy, the media narrative on crypto is largely that it’s funny money, a scam, and a hotbed for illicit activity. At a minimum people need to feel that Bitcoin and the like are liable to not suddenly lose value. We’re still quite a ways away from that.
Getting to the tipping point
History is littered with technologies that were actually better than whatever was widely used but never gained adoption. Somewhere out there in the world are people who will explain why the Betamax videocassette recorder was a technologically superior product to VHS- but most people don’t know what Betamax is. There are many who also believe Apple Computer’s technology and OS to be superior to Microsoft’s- yet 90%+ of the business world operates on Windows and PCs. Coinbase, Binance, Kraken and the like are still struggling to find segments of people to buy and trade crypto outside of their tech-minded early adopters currently trading on the exchanges. Crypto’s reputation could be forever ruined by bad press- and regulatory burdens that could be coming from congress paired with steep capital gains taxes and fees on exchanges might lead to crypto never gaining traction. This would lead it to lose the platform race- not enough users, not enough businesses or infrastructure accepting or transacting in cryptocurrencies and thus no reason to own coins.
It’s extremely unlikely that any central government will cede its powers to print and manipulate money supply and interest rates to private currencies, however democratically those currencies were formed. Many of these central governments- (over 70%) are currently looking into their own forms of digital currencies- the “if you can’t beat them, join them” approach. These Central Bank Digital Currencies (CBDCs) would likely be able to gain adoption because they already carry the clout of the base currency- i.e. the digital US dollar has the same value as the real US dollar- the chosen world currency, more or less. I honestly can’t say what implementation of something like this would mean for ‘private’ cryptos like Bitcoin, Polkadot, or Solana- this could increase crypto adoption or it could stifle these cryptos because a “better” alternative exists. By better, I mean the digital dollar would have the backing and security of the US government. However, CBDCs would be a gross infringement on individual liberties and essentially remove all privacy you have about where, when, and with whom your transaction happens. For this reason, I could easily see a US CBDC project getting scrapped. Likewise, I could see a Chinese CBDC project getting support and implementation. It will be the countries with the greatest extent of money control currently- China, Iran, Venezuela, Taiwan, etc- who will react the most aggressively against Bitcoin and others.
Hacks and Vulnerabilities
There aren’t many cryptos out there that haven’t suffered some kind of attack at some point in their existence, and coin holders were wiped out. While in actuality these attacks are in some form good because they expose vulnerabilities in these networks that are fixed and further bulletproofed, these attacks have outsize negative effects on crypto adoption. The nature of decentralized is very different from traditional banks that have databases and servers all in “one place”- and there’s likely to be growing pains along the way. These pains could turn out to be kryptonite for crypto.
Forever a crypto bull
Alas, don’t fret. Do you seriously think someone that runs a crypto blog is going to conclude that crypto is shit and will soon be history? In the first half of 2021 alone, over $17 billion in Venture Capital money has gone into crypto. VCs make mistakes- but not too many. If top leaders in the financial space like Jamie Dimon, The Winklevoss brothers, Ricardo Salinas plus Elon Musk are supporting crypto and its potential, that clout alone ought to make you optimistic about the crypto future. More and more of the investment class are asking their financial advisers about crypto and how they can get in on the action. Thousands of decentralized applications are being launched each year on blockchain tech like Ethereum and Cardano. When I lay out scenarios for crypto’s future, there are far more scenarios where crypto grows several times over than where it doesn’t. The asset class is so small and the technology has so many current and potential uses that it’s tough to imagine a future without the likes of Bitcoin and others!