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Future of Cryptocurrency: Predictions after 10 Years of CryptoShare on Linkedin

Future of Cryptocurrency: Predictions after 10 Years of Crypto

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10 Years of Cryptocurrency: What We’ve Learned so Far

Bitcoin is the best investment of the last decade. Although Bitcoin’s price (and that of crypto assets in general) are known for being volatile and dropping drastically at times, over the course of its ~10-year existence, Bitcoin has wildly outperformed any other asset or asset class. And it’s not even close.

Although asset classes like stocks, especially United States ones, did great during the 2010s, with $1 turning into about $3.46, Bitcoin stole the show completely. $1 in Bitcoin at the start of the decade turned into more than $90,000.

future of cryptocurrency - bitcoin vs other assets
Bitcoin compared to other assets like Amazon and Apple stock over the last decade. Though $AMZ and $AAPL did great, Bitcoin was in a category of its own. Image credit: Howmuch.net

Aside from the news about cryptocurrency prices, Bitcoin and other crypto assets have seen  more merchant adoption as a form of payment, investment firms have launched crypto-related financial products like futures and options, and governments as well as large companies have dedicated teams to researching the potential of crypto and its underlying blockchain technology.

Is the future of cryptocurrency going to continue to look strong? Here’s what we think.


Increased Awareness of Crypto thanks to Central Bank Digital Currencies (CBDCs) and Corporate Digital Currencies

Although cryptocurrency is used much more for legal activities than illegal ones, crypto assets still have an unfavorable image of being used for illicit activity. This is due to Bitcoin’s early association with Silk Road, an early “dark web” marketplace where users could buy drugs, order hits on people, and do other nefarious things. Another reason is mainstream media’s desire to delegitimize crypto and portray it in a negative light.

However, in 2019, Facebook announced that they were working on a project called Libra, a digital currency that would function like a stablecoin, by deriving its value from a basket of government-owned, relatively stable currencies like the US dollar, Euro, Japanese Yen, Pound sterling, and Singapore dollar.

While this would not be decentralized like cryptocurrencies, such as Bitcoin, Facebook’s announcement legitimized the idea of blockchain-based digital currencies in general since it means that blockchain technology is serious enough for a big company like Facebook to work on.

Choosing to name Facebook’s digital currency Libra instead of the “Zuck Buck” likely helped people take Facebook’s project more seriously (joke). Image credit: Business Insider

Aside from well-known companies like Facebook and JP Morgan leveraging blockchain technology to create their own centralized digital currencies, another interesting development is central bank digital currencies (CBDCs), or digital currencies created by governments.

While other countries have either shied away from the idea of a digital currency or are merely in the “research phase”, China is a country that’s gone full speed ahead on its own CBDC. Although no date has been set for the Chinese CBDC, it has been officially announced by China’s leadership and apparently has been a work in progress for 5+ years.

One thing that is worrisome about projects like Libra and CBDCs is that corporations and governments will wield more control over people’s lives if completely controlling their finances. Taxes could be deducted from transactions on the spot, all financial activity could be completely tracked, and those who go against government or corporate policy could be easily cut off from money itself.

Full censorship and tracking of all financial activity is power that even the worst dictators couldn’t dream of. Image credit: PBS

Hopefully, big name initiatives like Libra and CBDCs will at least get more people interested in digital assets, which might whet their appetites for less centralized alternatives like Bitcoin.

Although Bitcoin can also be tracked due to its open ledger, or record of transactions, there are ways to enhance the privacy of BTC, as mentioned in our Monero vs. Bitcoin article. You could also opt for privacy-focused cryptocurrencies like Monero.

Will increased awareness and adoption of digital assets lead to the use of centralized digital currencies, decentralized digital currencies, or a mix of both?

While we do hope that users opt for assets that they control instead of placing their livelihoods in the hands of corporate handlers and government bureaucrats, it’s clear that the future is going to be digital no matter what, since more than 90% of global currency is already digital.


The Price of 1 Bitcoin will Surpass $100,000

Did we lose you with that price prediction? Before you X out, hear us out!

Ray Dalio, a famous hedge fund manager and investor worth $18.7 billion published a Linkedin article called Paradigm Shifts in the summer of 2019. In the article, he explained that in his decades-long investing career, he’s noticed that every 10 years or so, there is a “paradigm shift” in how the financial markets operate. Identifying and adapting to these shifts, according to Dalio, is crucial for investing success.

While central banks around the world were able to prevent a complete global financial meltdown in 2008, when the US housing market bubble popped and the stock market collapsed, Dalio believes that trouble is around the corner.

Global conflicts like trade wars, upcoming debt and non-debt (e.g. pension and healthcare) liabilities that need to be paid, perpetually negative interest rates, and continuously depreciating value of money means that hot investments like stocks and real estate might lose out to other asset classes.

In order to deal with conflicts, fund debt liabilities, and try to keep the economy chugging along, Dalio believes that the central bank will only have a few options:

  1. Monetize large amounts of debt (create new money to buy up government debt)
  2. Currency depreciation (value of currencies like the dollar goes down) to make repayment of debt easier (e.g. the total value of debt stays the same but the value of the underlying currency goes down, meaning that it’s not as much of a burden to pay the debt)
  3. Heavy tax increases

Since option #3 would be political suicide, it’s likely that central banks and governments around the world will opt for options 1 and 2. These would have the net effect of massively devaluing government-owned currencies like dollars and euros.

Dalio, then, believes that the paradigm shift will be towards “store of value” assets that will hold their value when government-owned currencies see their values depreciate. Dalio specifically mentioned gold in his article and while he didn’t explicitly mention Bitcoin or crypto assets, Bitcoin in particular is another asset that has held its value over time (and then some - as evidenced by its performance since its creation).

Chart comparing BTC, gold, and USD. BTC shares characteristics with gold that give it advantages over government money like USD. Namely the fact that it is scarce (BTC has a fixed supply of 21 million) and isn’t controlled by any single person or group, such as a government. Such traits have led to some calling BTC “digital gold”. Image credit: ihodl.com

If investors do see BTC as a digital version of gold and flock to it in the coming years due to its store of value properties, BTC’s price might surpass $100,000 or more. This is because gold’s market capitalization is about $8 trillion as of writing.

If Bitcoin were to even capture a quarter of that value ($2 trillion), one BTC would be worth a little over $100,000. A $2 trillion market capitalization divided by the current circulating supply of Bitcoin (~18.1 million) comes out to ~$110,500 per BTC.


More Institutions will Continue to Get Involved in Crypto as Infrastructure Develops Further

Another trend we can expect in the cryptocurrency space is that as more people become aware of crypto assets, market forces move investors toward store of value assets like gold and Bitcoin, and prices of crypto assets increase as a result, more institutional investors will invest in crypto.

Institutional investors are large entities that pool together money to purchase investment assets like stocks, real estate, and crypto.

Since investment returns for other assets will continue to weaken, we can expect institutional investors to move towards assets like cryptocurrency in order to generate returns on investment. It’s hard to ignore something that’s been the best-performing asset class of the last decade as mentioned as well as the best-performing asset class of 2019 to close out the decade. After all, an investor’s job is to make money!

Nevertheless, in the past, big investors were more reluctant to get involved with crypto because of things like private keys and recovery phrases.

The fact that you can lose all your crypto if you lose your private key and/or recovery phrase due to hackers or just misplacing vital information is a bit foreign and uncomfortable for investors (and most people), who are used to accounts that are insured and can be frozen or reversed if something goes wrong.

This very real fear is being addressed by professional crypto custody providers, who look after their clients’ crypto in the same way that a bank would. While entrusting crypto to someone else defeats one of the main tenets of crypto (assets that you control), the situation is different for those who have billions of dollars on the line and want top of the line insurance and security.

Large financial companies like Fidelity, one of the largest asset managers in the world with $2.46 TRILLION in assets under management as of March 2018, have jumped into the crypto custodian space in order to service clients with large crypto holdings. Image credit: The Block

Crypto custody solutions should make it easier for institutions to get involved in the space, which will only further legitimize crypto. In a Fidelity Investments survey, about 1 in 4 asset allocators and managers said that they already had exposure to digital assets. Nearly half think that digital assets will have a place in their portfolios.


Cryptocurrency, Centralized Digital Currency, or Both will Become Mainstream

Due to things we’ve discussed like increased adoption and higher valuations of crypto assets and digital assets as a whole, we believe that cryptocurrency, centralized digital currencies, or both will become mainstream in the same way that the Internet did.

The number of people using blockchain-based wallets is roughly doubling each year, which closely mimics the early growth of the Internet:

future of cryptocurrency adoption
Source: Statista
Internet growth rate until 1 billion users. Source: Internet World Stats

Future of Cryptocurrency Quotes

The CEO of the New York Stock Exchange, the world’s largest stock exchange, said that bitcoin has the potential to be the world’s “first worldwide currency”. ICE, the company behind the NYSE and other stock exchanges, even created Bakkt, a place for institutional traders to trade Bitcoin futures (a type of financial product) and crypto custody provider.

“I am very intrigued by Bitcoin. It has all the signs. Paradigm shift, hackers love it, yet it is described as a toy. Just like microcomputers.”.

Paul Graham, Co-Founder of both Y Combinator, one of the most famous startup accelerators, and Hacker News, a famous social news website that focuses on entrepreneurship and technology.

“Bitcoin is a technological tour de force.”

Bill Gates

“[Bitcoin] is a remarkable cryptographic achievement… The ability to create something which is not duplicable in the digital world has enormous value…Lot’s of people will build businesses on top of that."

Eric Schmidt, former CEO of Google


Conclusion

It’s clear that since its inception, cryptocurrency has come a very long way. Is cryptocurrency the future of money? We don’t have a crystal ball, but it sure seems to be headed that way.

At this point, we believe that crypto has become too big to disappear. While it might not take over the world, as some of its most ardent supporters believe, it definitely will play a role in years to come. Whether that is in the form of decentralized crypto assets, centralized digital currencies, or both.

However, we at Exodus believe that a significant portion, if not majority, of the global population will lean towards money that they, and not some government bureaucrats or employees at Facebook, control.

The Internet revolution passed a lot of people by. Crypto is still in its early stages, so this time around, don’t let the cryptocurrency revolution pass you by.

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