Why cryptocurrencies are an ideal long-term investment

Evan Francis, co-founder of Lunafi and a crypto enthusiast, argued that today's investments in cryptocurrency will bring multiple returns in the future.

Cryptocurrencies and tokens are extremely volatile investments. They are not recommended for those who plan to withdraw money in the coming 3 − 6 months. Of course, significant fluctuations in value give a lot of opportunities for earning, and the cryptocurrency market can be called a paradise for intraday traders, but this strategy is unlikely for an ordinary investor.

This article will talk about cryptocurrency as a long-term investment. From the investor will need attention to detail and understanding of industry specifics. I do not call for the purchase of digital currencies, but I recommend at least a minimal analysis and learn a little about the market, and then make an independent and informed decision.

I met Bitcoin in 2010 and since then I have been investing in other cryptocurrencies. I help my company Lunafi hold conferences and educational events on the ground, publish the weekly newsletter Lunafi Crypto, and I will always passionately believe in cryptocurrencies and blockchains. I take a cryptorink on 100% biased - you will soon find out why.

As usual, start with a warning. I am not a financial consultant, and you should not regard written as a call for buying or selling. These are just my personal thoughts on this. Conduct your own analysis, never invest more than you are willing to lose, and always be skeptical about everything you see and hear.

Blockchain has unique potential

Recently, the blockchain technology has become widely known. Many investors buy cryptocurrencies precisely because of it. The potential of the blockchain is great, and cryptocurrency enthusiasts believe that it has long entered our lives. Of course, you can invest money exclusively for profit, but I still recommend to learn more about this technology.

Blockchain makes real things that were previously impossible to imagine. It transforms existing industries and creates completely new ones. For the first time, it became possible to exchange payments in an atmosphere of mutual trust and without the participation of intermediaries. In addition, transactions cannot be distorted or forged.

Decentralized digital trust is difficult to realize, but it is this that allows you to do incredible things and brings tangible benefits to consumers.

For the first time in history, you can send money to a person anywhere in the world, and the payment will take a few seconds with minimal costs and without the participation of third parties collecting and selling data about you. Now you can create applications in the global network of computers without transferring to the owners of cloud services (for example, Google or Amazon) full control over the data and not paying them huge fees.

People still do not understand the benefits of decentralization.

At present, it is still difficult to explain to the consumer the advantages of decentralization or to demonstrate them with a real example, since there are not so many working applications available for the average user.

However, the situation will change soon. We are on the threshold of a new generation of software that will fundamentally and completely change our daily life and economy. Nothing like this has happened since the invention of the Internet and smartphones.

When an ordinary consumer experiences all the benefits of decentralization on his own experience, the popularity of blockchain technologies will increase significantly. Demand will follow popularity, demand will rise in prices (the main law of a market economy). Until then, you need to buy as many cryptocurrencies and tokens as possible.

Take DuckDuckGo as an example. This search service has been around for a long time. He does not monitor users and does not sell statistics to advertisers. The popularity of DuckDuckGo jumped after Edward Snowden's revelations - suddenly people realized that they were being closely watched and appreciated the benefits of a service that respects the rights of users.

I think one day a similar turning point will come in the cryptocurrency market. There will be new decentralized applications, and people will experience their capabilities on themselves.

"Smart money" put on the blockchain

Many wealthy and knowledgeable investors make large cryptocurrency bets. The Winklevoss brothers own a huge amount of bitcoins and the Gemini exchange (one of the largest in the USA). Tim Draper, a billionaire and venture capitalist, owns roughly 30 thousand Bitcoins and firmly believes in the potential of cryptocurrency. Billionaire investor George Soros is also interested in digital currencies. Mike Novograc, a billionaire and former hedge fund manager, has put a fortune on cryptocurrencies. Patrick Byrne, CEO of Overstock.com, plans to create a digital asset exchange. The famous tycoon and billionaire Richard Branson has invested heavily in the cryptocurrency payment system BitPay.

Of course, there are many billionaires and ordinary people who will tell you that cryptocurrency is a scam and you should stay away from them. When you hear such statements, try to understand how well the author understands the blockchain, decentralized technologies and their advantages. In 9 cases from 10, the most picky critics know little about cryptocurrency. Perhaps some simply resist what they do not understand.

Record growth of blockchain vacancies

Of the more than 2000 blockchain companies registered on AngelList for the last two years at the time of this writing, most of them have a crazy demand for work related to the blockchain. The growth in this sector is simply incredible now, and yet the decentralized technology has not yet found application in either popular enterprises or end users.

This means that we are on the verge of developing a new industry that will occur over the next decade, and that many rich people are putting on the blockchain and cryptocurrency. The market simply will not be able to remain at the same level when these products will bear fruit.

Of course, as in the case of the dot-com bubble, it is possible that the vast majority of these new companies will attract astronomical sums, but they will not release a single product.

On the other hand, again, by analogy with the dot-com bubble, it is logical to assume that those who still continue their activities will become leaders of their generation, create a large number of jobs and receive wide recognition - all in their own interests. As you know, when a product becomes on stream, everyone wins.

It's hard to underestimate the price potential of a new asset class.

Cryptocurrencies and tokens are a new class of investment assets. Can you remember the recent emergence of a new asset class? In my memory this happens for the first time. Not every generation has this opportunity, and it is worth exploring at least in detail all the nuances to decide for yourself whether to invest in such a thing. The risks, of course, are high, but the result can exceed all expectations. It all depends on your current financial situation.

Let's do some simple calculations and see how prices may look in the future. This is only a theory based on pure assumptions, but most of the participants in the crypto-community, including me, have such thoughts.

At the time of this writing, the total market capitalization the US stock market was about $ 30 trillion, the cryptocurrency market was $ 431 billion, the price of bitcoin was $ 9394,56, and it accounted for 37% of the total market capitalization.

Hypothetically: What if the crypto market reaches 10% of the US stock market?

Thus, if the entire cryptocurrency market reaches 10% of what constitutes the US stock market today in terms of capitalization, the cost of the cryptocurrency market will be about 3 trillion dollars. If bitcoin remains at the level of 37%, and all bitcoins are mined (no new ones appear), the price of bitcoin will be (3 billion dollars * 37%) / 21 million = $ 52 857.

30 trillion dollars of stock market capitalization * 10% (arbitrary potential cryptocurrency market growth) = 3 trillion dollars x 37% domination index BTC = 1,11 trillion dollars of potential market capitalization of BTC / 21 million bitcoins (maximum set) = 52 857 potential price $ X

This is 5,56 times the current BTC price ($ 9394,56). Do you think the tokenized economy will be able to reach 10% of today's US stock market?

It seems that now it is not particularly similar to the truth, but I am sure that such an alignment is quite possible within a decade or two. And if you analyze the overall picture, then, I dare say, not only possible, but even likely. I would like to believe.

Cryptocurrencies are a tool to hedge state-controlled debt economies.

Do you understand how partial bank reservations work?

The US economy is built on the promise of people creating huge debts that will have to be paid, and on borrowed money that has never been owned. I am worried about this moment, especially given the fact that the economy is in the hands of unpredictable politicians, and I don’t like the idea of ​​investing all my money in the markets under the control of the government or large banks.

Don't get me wrong, I maximized contributions to 401k, started a Wealthfront account for quality asset diversification in the US and other countries, and I also invested in a couple of index funds, which gave a good result.

Given all the above, I would like to protect myself from the risks in these markets. And I'm not the only one who thinks about it.

Cryptocurrencies are traded globally, and exchanges operate around the clock. After all, this new market does not depend on a specific government, but on the decisions of many governments around the world. Therefore, it is relatively independent of other markets (to some extent).

Moreover, when governments recklessly spend the money of their citizens, Bitcoin can act as a safe haven, where you can hide money away from large banks (remember Greece in 2015 year). When the Great Depression happened in the USA, people went to the bank, where they were told: “Sorry, your money is gone. We took them, but you will not get them back. ”

Such a turn is simply impossible in the case of cryptocurrencies, because only you have your own keys. You are the only person in the world who can access your own funds. Your bank is you. Agree, a strong concept.