Jump to page sections

Crypto is here - and it is here to stay

Bitcoin logo

Initial date of publishing: 2024-06-08 00:20 UTC+2. Last change: 2024-06-17 22:38 UTC+2. Author: Joakim Borger Svendsen.

Link til norskspråklig artikkel her.

I wrote an article about "the future of crypto" two years ago (2022-07-17). It occurred to me that I'd be close to a madman if I still held the same beliefs fully. So, I shall update you all on my latest 'intellectual' (😅) musings regarding cryptocurrencies. Enjoy the synaptic experience about to unfold.

When I wrote the previous article, the hardcore crypto community was hoarding crypto at what has now turned out to be a significant discount. I remember reading someone on Twitter saying that it was like getting an apartment/property for a fraction of the price (1/x where x>2). I considered this and kept buying a little here and there, but I didn't have the same confidence (or should I say faith) in crypto at the time as the author of that tweet.

If you read my previous article from 2022, when Bitcoin was at $16k, you will see my discussion about conventional commercial actors entering the crypto market in the future. And what happened? Exactly that. I'll mention some spot Bitcoin ETFs listed shortly after the approval of spot Bitcoin ETFs in January 2024, as an example of the already-plentiful supply (and demand!):

As of May 10, 2024, according to Morningstar, $12.1 billion had found its way into Bitcoin ETFs.

Before the approval of spot Bitcoin ETFs in the USA, the only way for investors who didn't want to buy the cryptocurrency directly was to invest in the Grayscale Bitcoin Trust ETF or Bitcoin futures ETFs that tracked the price. These methods had downsides, such as the costly 2% expense ratio in Grayscale Bitcoin Trust, and both often struggled to track Bitcoin's price.

Over $10 billion has moved from Grayscale to primarily Fidelity and Blackrock's ETFs. As of May 10, over 80% was in these two exchange-traded funds, according to Morningstar.

Spot Bitcoin ETFs opened up investments in Bitcoin to a wide range of new investors, lowering the threshold for investing. I have read that this stabilized Bitcoin's rate and reduced its volatility, creating a significant resistance/support level at around $52,000. Experts agree that it's unlikely Bitcoin will dip below $50k (or $60k for that matter) within the next decade (we shall see!).

I do not see it as an either/or situation with CBDCs (Central Bank Digital Currencies) and 'free' cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH/ETH2), and Solana (SOL). I believe in having both and exercising freedom of choice when transferring money, based on everything from philosophical convictions to avoiding being traced for various reasons. Admittedly, many possible reasons could involve illegal activities, such as drug/weapon trades or tax evasion. However, a part of me appreciates the freedom linked to more privacy, a commodity in severely low supply in 2024.

Bitcoin's ledger/history of transactions is public and can potentially reveal the identity behind a transfer. If you want privacy, other cryptocurrencies offer guaranteed untraceable transfers, such as Monero. For better or worse. (I have never used Monero myself, and I report my crypto holdings to the tax department).

Interoperability between 'wild' cryptocurrencies and CBDCs is an exciting possibility. The tracing is there in the CBDC, but as soon as it is converted to another cryptocurrency, it is subject to the rules of the destination currency. Cool, right?

To the critics of crypto, I have to say that for virtually every flaw—whether moral or environmental—that you uncover, the crypto community will have answers. Crypto does not protect against people taking excessive risks, but neither does the stock market, which is considered legitimate by most

Why will the price be sustained?

Bitcoin has evolved into what economists call a 'store of value' through its vocal community, largely because humans are social creatures with a penchant for dreams coming true. People talk about crypto.

While the plethora of alternative 'coins'/cryptocurrencies might seem excessive, other crypto winners like Ethereum, Aave, and Solana are not valued without reason. They offer practical and technical improvements to the pioneering Bitcoin cryptocurrency and could turn out to be other long-term winners.

PayPal recently introduced their stablecoin PYUSD on the Solana blockchain, stating that while Ethereum works fine, retail trade requires at least 1,000 transactions per second and fees in cents, not dollars. Solana offers solutions for these requirements.

I think we will see the emergence of other stores of value beyond Bitcoin. Ethereum is probably already there. Someday, the 'big shift' might happen when a cryptocurrency other than Bitcoin has the largest market cap (total value of all tokens/coins). That said, Bitcoin has a unique level of recognition and trust. It is likely to remain at the top for maybe another decade (my guess, I could be very wrong!)

Over the coming years, huge amounts of money will shift from bonds, 'bank cash', stocks, and other instruments to crypto. We are already seeing traditional banks take positions in Bitcoin, such as Wells Fargo recently—although their current investment is quite symbolic for a bank of their size.

The kids dig crypto

It's worth noting that changes tend to move across generations, and younger generations are definitely more likely to invest in crypto than older people. The baby boomer generation owns about 65% of the world's wealth. As they inevitably pass away, and younger generations inherit, a lot of money will move from bank accounts, mutual funds, ETFs, and whatnot into crypto. It's fully conceivable that crypto will evolve and increase in overall market cap value for decades to come.

So, I have come to believe that crypto is an exciting, interesting, and quite safe (😳!) investment, with some currencies already functioning as stores of value. I kind of dig it, despite some notable downsides (crime, environment/e-waste, personal tragedies). I think it's a plus for humanity since the average human now is wealthier because of crypto, despite the tragedies that can occur with or without it.

Although I don't mean to diminish the tragedies such as personal bankruptcy and even suicides, I cannot come to any other conclusion than that more money exists on Earth because of crypto. And it's not all in the hands of the 0.1%. Some new people have joined the ranks of the 0.1% (the richest 0.1% of the population owns 99% of the money/assets, as seen in the Pareto graph).

Let's ban tumble dryers instead?

Regarding the environment, the crypto community counters with the fact that the Visa payment system uses several times more non-green power than Bitcoin (reportedly 7 times as much) and that Bitcoin mining's power consumption is roughly equivalent to that of the world's tumble dryers. Although I acknowledge the current problem with accumulating e-waste in the form of obsolete mining rigs and other related equipment.

These are some of my current thoughts. I felt obligated to update my blog with my newer thinking. As a disclaimer, I will mention that I own fairly small amounts of crypto myself.

I would like to remind you that the cryptocurrency market gives and takes. There is a risk you will not get back the money you invest. This is not meant as financial advice. Consider talking to a professional advisor before you make choices about investing.

Finance      Finans      Bitcoin      Crypto      Cryptocurrencies      Ethereum      Solana      CBDC      Valuta      Currency      Cryptography      Krypto      Kryptovalutaer          All Categories

Google custom search of this website only

Minimum cookies is the standard setting. This website uses Google Analytics and Google Ads, and these products may set cookies. By continuing to use this website, you accept this.

If you want to reward my efforts