GOING LONG ON BLOCKCHAIN TECHNOLOGY. If there’s one thing that Blockchain Battles has been trying to convey, it’s that finding sensible ways to participate in the blockchain revolution is a smart move.
Decentralized crypto projects like Bitcoin and Ethereum are proving positive and transformative, not only as financial investments, but also as ways of taking back power from corrupt money-controlling authorities and intermediaries.
In the time since this column debuted in February 2021:
- Blockchain investments have doubled their total from 2020, and outpaced a previous high set in 2018
- The number of Crypto investors has also doubled
- Governments and financial institutions have markedly stepped up in interest, investment and regulation of blockchain assets and related crypto currencies
- The most recognized blockchain and crypto projects, including Bitcoin, Ethereum, Cardano, Binance, Ripple and Uniswap, have continued to offer opportunities to investors
- DeFi, built on smart contracts which allow direct lending and borrowing without intermediaries, much of it built on the Ethereum blockchain network, has experienced explosive growth
- NFTs, or Non Fungible Tokens and tokenized assets, have gained public awareness and seen rapid growth
- El Salvador become the first country in the world to officially adopt bitcoin as legal tender for payments; a number of other countries are watching closely and considering their own moves to bitcoin
It’s clear that a lot is happening in the blockchain sphere. In fact, there are so many things happening, it is understandably overwhelming to try to keep track of and comprehend it all, much less decide how to participate.
Keeping It Simple
Have the opportunities sailed on the largest market cap crypto projects? In a sense, yes. The days are gone when buyers and sellers exchanged 10,000 bitcoin over a pizza. No one is going to spend a hundred dollars at this point and become a bitcoin or ethereum millionaire.
But to consider just the past eight months, Bitcoin has traded as low as 29 thousand (at the start of 2021 and again in late June and early July), and as high as 65 thousand. Ethereum started 2021 at $731 per coin. It outperformed Bitcoin in an astounding late winter run-up to past $4000, then retreated to less than half that, at $1700, in early summer. It has since rebounded to the $3000 range.
Clearly opportunities for the King Crypto and number one “alt coin” haven’t ended. Both cryptos, and indeed the whole sector, has experienced some prolonged obvious periods of downturn. Those who purchased on dips are likely very happy with their investments.
The largest market cap cryptos can be purchased in increments on centralized exchanges like Coinbase or Robinhood. Signing up to such purchasing and trading exchanges can be accomplished in a matter of minutes, via a website or downloaded phone app.
Bitcoin and Ethereum to cite the two obvious examples, solve real world problems and / or create efficiencies that have made them valuable in the eyes of many investors.
Other projects like Cardano, Uniswap, Polygon and Solana either compete with Ethereum (Cardano and Solana), or add efficiencies (Polygon and Solana) or build things like DeFi on the Ethereum network (Uniswap and Aave).
Investing prudently, largest market cap crypto projects, with an eye on middle and longer term growth is one way of keeping it simple.
In general, blockchain and crypto investors should keep in mind, what problem or purpose is a particular crypto asset or project solving? What specific value is it representing or creating?
Another way of participating in blockchain growth and innovation, is via ETFs (Exchange Traded Funds) that invest broadly in the blockchain sphere. It’s currently a hot area, to say the least, with many traditional investment firms racing to establish ETFs.
To give an example, the Global X Blockchain ETF currently lists Coinbase, Hive Blockchain and Hut 8 Mining Corp among its top ten holdings.
ETFs have professionals choosing the most promising blockchain innovators and companies. History and performance of any ETF, and the managers behind a fund, should always be done before Investing.
Some of the current top blockchain related ETFs include:
- Amplify Transformational Data Sharing ETF (BLOK)
- Siren ETF Trust Siren Nasdaq NexGen Economy ETF (BLCN)
- First Trust Indxx Innovative Transaction & Process ETF (LEGR)
- Bitwise Crypto Industry Innovators ETF (BITQ)
- VanEck Vectors Digital Transformation ETF (DAPP)
- Capital Link NextGen Protocol ETF (KOIN)
- Global X Blockchain ETF (BKCH)
To sum up, the blockchain revolution, and the potential for higher ground for established cryptos, doesn’t have the stuff of rags to riches, to hold attraction for investors. By taking a prudent approach, and investing with an eye to riding out volatility for longer term gains, based on some pretty simple and solid metrics, opportunity is there.
IS GOLD VS. BITCOIN THE RIGHT QUESTION? If it was an MMA fight, spectators might be screaming for a ref to stop the massacre.
Quite simply, anyone who bought Bitcoin at any point from 2009 to 2020 and held it into 2021 ran rings around gold. That includes people who bought Bitcoin at 20-thousand in 2017.
As the crypto trading platform FTX recently observed, “A single bitcoin is now worth 21 ounces of gold. Poetic.”
Gold was trading at around $1,800 in 2011, during the vicissitudes of the “Great Recession.” At the time of this writing, gold sits at $1750.
It’s trading range over the past decade has been between roughly $1,050 (2016) and $1,950 (2011):
(source: SD Bullion)
Gold isn’t the only competitor Bitcoin has bested. It has outperformed every major commodity in terms of dollar gains, over the ten-year time frame from 2011 to 2021.
But those who hold gold as a stable store of value haven’t been wrong in an important respect. Gold has been much more stable. From 2013 to mid 2019, for example, the price of gold fluctuated mostly within a 300 dollar range.
Since then, inflationary pressures have seen it rise to a higher trading range of $1700 to $1,900.
The volatility of Bitcoin is legendary, even if the story to this point has been a happy one for “HODlers” (crypto investors who buy and hold).
Gold, Dollars and Bitcoin
Gold, everywhere, in all times, has been valued for its rarity, fungibility (use in trade and coinage) and beauty. It has a track record throughout history second to none.
People who accrue and hold gold to retain the value of their hard-earned labor have been rewarded. In the early 1970’s, when gold was fully restored as a tradeable asset in the U.S., it stood at $50 an ounce. A person who put an ounce of gold and 50 dollars in a drawer, would have 50 dollars in 2021, and $1750 worth gold.
The dollar has undergone considerable inflation, and thus gold has outperformed the fiat currency as a store of value.
What gold has not done, is introduce new values or efficiencies. Yes, it is used in some industrial processes. But it has not found any earth-changing new value there.
Enter Bitcoin in 2009. For the first time in over a hundred years, a fungible, rare (ie. limited in terms of effort to mine, and quantity that would ever exist) medium of exchange not controlled by government was introduced. Few, and virtually none in the established world of government and finance, took it seriously. It was a plaything of computer geeks.
Bitcoin has literally been a performance monster since its inception. But what it hasn’t been is a stable store of value, if by that one means an asset which behaves more or less predictably, according to broad economic factors.
Bitcoin is not digital gold.
Bitcoin is an amalgam of innovation, boom and bust speculative fever, and evolving use case that the world is still coming to grips with in many ways. It may be the oldest blockchain project in existence, but it’s still very much a work—and a phenomenon—in progress.
But already, Bitcoin’s ride has been one of the wildest in the history of humankind, and that’s saying something. Even if something replaces the King of Cryptos in the future, with just 21 million bitcoins in existence, the first digital coin will likely always have value as a relegated “original NFT.”
Solidity vs. Excitement
Of course, it’s quite easy to invest in both precious metals and cryptos like Bitcoin, Ethereum and Cardano. Any basic investment strategy contains a mix of hedge and higher risk growth assets.
But the debate of whether Bitcoin is “Digital Gold”, “Digital Money”, etc., has nonetheless created camps that apparently eschew investments in one or the other.
It’s a debate that doesn’t need to exist. In short, the answer to the question “Bitcoin or Gold?” is BOTH. And Ethereum. And silver.
And in that respect, Bitcoin might be a lot like gold after all.
SOLANA TRENDING AFTER CROSS ETHEREUM UPGRADE FEATURES. Several factors are powering all-time highs for Solana, a blockchain solution that uses novel innovations to scale to 50 thousand transactions a second, and theoretically much more.
According to the Solana website the trick to speeding transactions involved a feature at existed from day one in the Bitcoin protocol:
“The Bitcoin feature is called nLocktime and it can be used to postdate transactions using block height instead of a timestamp. As a Bitcoin client, you would use block height instead of a timestamp if you don’t trust the network. Block height turns out to be an instance of what’s being called a Verifiable Delay Function in cryptography circles. It’s a cryptographically secure way to say time has passed. In Solana, we use a far more granular verifiable delay function, a SHA 256 hash chain, to checkpoint the ledger and coordinate consensus. With it, we implement Optimistic Concurrency Control and are now well en route towards that theoretical limit of 710,000 transactions per second.”
Nasdaq noted Monday that Solana’s rise, according to analysts, reflects the market’s increasing demand for higher scalability, as the recent non-fungible tokens (NFTs) craze has brought crypto to a more mainstream market.
Solana’s release of “Wormhole,” a cross-chain communication protocol between Ethereum and Solana, has fueled its momentum.
Despite that, many investors and traders continue to bet that Ethereum’s impending migration from a proof-of-work (PoW) blockchain to a proof-of-stake (PoS) blockchain will bring crypto to a more mainstream market.
Via Wormhole, the Solana blockchain can be used to add efficiency to Ethereum based token transactions. Specifically, Wormhole allows existing projects, platforms, and communities to move tokenized assets seamlessly across blockchains, while benefiting from Solana’s high speed and low cost.
Wormhole’s primary network went live at the same time that new methods for transferring digital currencies across different blockchains have shown susceptibility to attacks. Poly Network, a cross-chain DeFi site, was a target last week in a much publicised large scale attack.
But that hasn’t stopped investor enthusiasm for Solana, Nasdaq reported.
A BRIEF LOOK AT TRENDS JOURNAL CALLS ON BLOCKCHAIN AND CRYPTOS. For some prescient articles by Gerald Celente concerning the prospects for a blockchain revolution that made waves in 2018, 2019, and on a seismically different level, in 2021, check out:
- “Betting big on blockchains” (29 Sep 2016)
- Blockbuster profits coming from Blockchain technology (6 Feb 2018)
- “Beyond cryptos…” (26 Oct 2018)
The Trends Journal has historically been more circumspect regarding cryptocurrencies. Gold has a track record of basically all of human existence. Acquirable cryptos date from 2009. They have historically been, and continue to be highly speculative investments.
Past articles including “Gold vs. Cryptos” (21 Nov 2018) thoughtfully laid out some of the issues at stake.
As far back as 2013, while pointing out Bitcoin hype, the TJ named a use where Bitcoin would likely find traction:
“Still, efforts to build a legitimate investment environment and to create a vigorous infrastructure for bitcoin as a vehicle for international monetary transfers are being seriously and creatively undertaken. Many of the larger players are focusing on selling bitcoin as a way to avoid the high transfer fees charged by credit card and wire companies. They point to the more than $500 billion annually remitted to third world nations — and the $4.6 billion in transfer fees reaped by Western Union alone — as an opportunity for bitcoin to do good and prosper at the same time.” (“The bitcoin bubble: spike, crash, what’s next?” 6 December 2013)
After cryptos experienced a major downturn in 2018, Gerald Celente wrote:
“And as we have forecast, cryptocurrency’s growth, despite a turbulent path to legitimacy, is inevitable. It is a key dynamic of the 21st century’s financial revolution, and the evolution of the high-tech world that was unimaginable in the 20th century.” (“1: Cryptomania Cash-In”, 29 June 2018)
Since January of 2021, expanded coverage of the blockchain and crypto space has endeavored to provide actionable insights for TJ readers. Some recent touchstone articles include:
- “ESCAPE FROM BITCOIN? NOT LIKELY FOR WALL STREET BANKS” (16 Feb 2021)
- “WILL BLOCKCHAIN SAVE THE DAY?” (20 Apr 2021)
- “CRYPTOS: DOWN BUT NOT OUT” by Gregory Mannarino (25 May 2021)
- “WHAT IS THE VALUE OF CRYPTOS AND BLOCKCHAINS?” (15 Jun 2021)
“HUMAN RIGHTS FOUNDATION HEAD SAYS “BITCOIN IS THE REVOLUTION” (29 Jun 2021)