I’m a little late to the party, but I finally purchased some cryptocurrency last month, $15,000 worth of Ethereum, and the results so far have been a little ridiculous. 90% gain in less than a month:
At a high level I understand how cryptocurrency works and it’s mass appeal but my biggest issue with crypto is that I don’t understand enough about the underlying technology to be able to very confidently assess the risks to the platform.
For example, quantum computers are still in its infancy, but with billions of dollars at stake what if some nation or entity created a quantum computer advanced enough to be able to steal cryptocurrency or attack the network before blockchain technology starts using post-quantum cryptography?
There are countless threats that someone could come up with, all with varying degrees of probability, but within the past several months I have concluded that the potential benefits, or specifically, the possible value or price of crypto to outweigh those risks at the moment.
There is real potential and benefits to the blockchain technology, but what most people really care about right now, including me, is just the price of cryptocurrency.
And to me, the rising price of crypto is simply the result of demand. More and more people are throwing money into bitcoin and all these other altcoins, which just increases it’s price and of course contributes to the very real risk of a bubble.
Over the past year or so, as cryptocurrency has begun to become more established and recognized, large institutions have begun to pour more money into crypto. I only see this growing more precipitously in the near term which is what is driving my belief that institutional money will push cryptocurrency higher over the next several years. Just simple supply and demand.
I don’t know if cryptocurrency will ever become the useful medium of exchange for monetary transactions it was designed to be, but that doesn’t matter to me right now. Assuming the technology continues to be safe enough, at the very least I see cryptocurrency becoming a widely held class, similar to gold.
Gold has value to people for various reasons, with the main one probably being that someone will give you about $2,000 an ounce for it today, but nobody really uses gold as a medium of exchange. Countless people and institutions hold gold in their portfolios and I think cryptocurrency will eventually mature to the point where it becomes an asset class that is widely held by many.
The market capitalization of gold, or just the value of all the gold in the world, is currently about $9 trillion. The total market capitalization of all crypto is about $1 trillion. So cryptocurrency would have to increase 9 fold to equal the market cap of gold today. For Bitcoin, that would mean rising from about $40,000 per coin today to approximately $360,000 per coin.
Nobody knows what the true value of bitcoin or cryptocurrency will be in the future, but to me, at least over the next couple years, I believe institutional money will drive crypto higher. How much higher? I’ve been telling people Bitcoin can conservatively be at least $100,000/coin in several years. Some investment analysts have issued a long-term price target of $146,000 for Bitcoin, which seems fairly plausible to me.
Crypto is not going to overtake or compete with the market cap of gold overnight, though based on a price chart of Bitcoin for the past month or so, it may seem like it sometimes.
Very few things go straight up. And if they do, they can drop just as hard, if not harder than it rose. Bitcoin has “crashed” many times since 2011, so it’s probably a safe bet it will continue to be exceedingly volatile for the time being.
Please note, this or anything else on MoneyElite.blog should not be considered to be investment advice. Cryptocurrency is extremely risky but for me, I consider the potential rewards at the moment to outweigh the risks.
