Musk’s outsized influence on crypto… the silver lining in his ability to move markets… three reasons the crypto sector is still in its early days

 

Elon Musk is the Pied Piper of the crypto world.

What he says about various cryptos immediately becomes actionable gospel for a certain group of investors. Unfortunately, that group is large enough to impact prices, leading to Musk-fueled volatility.

For example, when Musk revealed that his company, Tesla, had bought $1.5 billion of bitcoin, the crypto’s price surged 17%.

When Musk pumped Dogecoin, it popped 50%.

On the flip side, last week, when Musk announced that Tesla would no longer accept bitcoin as payment for its electric vehicles, the crypto fell almost 10%.

***The absurdity of Musk’s influence, as well as the influence of other high-profile figures, is captured in the crypto platform, BitClout

Here’s our macro specialist, Eric Fry, with more:

The cryptocurrency world, itself a hotbed of bull market mania, is also paying homage to Musk.

An influential cryptocurrency platform called BitClout enables “investors” to buy crypto coins tied to the reputations of folks like Musk, Snoop Dogg, Justin Bieber, Kim Kardashian, and even Donald Trump.

Which one is the most “valuable”?

The Elon Musk “creator coin” tops the list at $68,200, which is roughly the same as the base price of a brand-new Tesla Model S.

If you can’t quite envision what Eric is describing, think of Fantasy Football, in which you “draft” a team of various football players at the beginning of a season. Their individual performances each Sunday (the number of touchdowns, yards, points allowed, etc), gives your collective “team” a certain number of relative points.

In this case, BitClout enables you to bet on the influence of public figures by buying tokens associated with their profiles. These are called “Creator Coins.”

So, how does a Creator Coin become more or less valuable?

The answer is in the name – by measuring how much “clout” that creator wields over the prices of certain cryptos.

From Business Insider:

The Creator Coins gain or lose value depending on how many people buy coins associated with the profile, as there are between 100 to 1,500 coins in existence for each profile…

Even people outside of public figures and celebrities can profit off their own Creator Coins, as well as generate money investing in other accounts.

BitClout investor @Sigil told Insider, he invested about $150 Canadian dollars in his BitClout account and made thousands within three days. The 17-year-old was also able to push his own coin’s value from $0 to a market cap over $500,000.

Now, at face value, none of this looks good for the crypto universe…

When Musk, or guys like him, can push markets around based on tweets, that’s not good.

When the ecosystem glorifies and encourages market activity not based a coin’s intrinsic value, but rather, the extent to which a public figure pushes it, that’s also not good.

But there’s also something positive about all this – very positive, in fact…

***When guys like Musk can push prices around, and when platforms like BitClout are focusing on influence, not value, it shows how early we are in the development of the crypto world

And that means that there are still enormous gains ahead of us…though we’ll have to endure “Muskish” volatility along the way.

For more on this, let’s turn to one of our crypto specialists, Charlie Shrem, editor of Crypto Investor Network.

For newer Digest readers, Charlie was one of bitcoin’s earliest backers and today is considered one of the most influential people in cryptocurrencies.

He’s been mentioned in Fortune… Forbes… CNN… 60 Minutes… TED Talks… Bloomberg… and The Wall Street Journal… to name a few. His story has been featured in numerous Netflix documentaries and best-selling books. And yes, he’s become a bitcoin millionaire many times over thanks to his early involvement.

From Charlie:

With bitcoin tripling in the last six months and up nearly six-fold at one point in the last year, I’m hearing a lot of the same questions from both seasoned and potential crypto investors…

How far into this crypto bull market are we?

Is it too late to invest?

Are the best gains behind us?

These are important questions for any investment decision. The best gains come during the time of biggest growth, and that comes early.

When it comes to bitcoin and especially the newer and smaller altcoins, the answers are very encouraging.

The crypto bull market is still incredibly early.

It is not too late to invest.

And the best gains are actually still ahead of us.

Charlie points toward three factors behind this conclusion:

One, the number of people currently investing in cryptocurrencies remains low… Two, large volumes of capital continue to flow into the sector… And three, and perhaps most important, governments around the world are becoming increasingly interested in leveraging blockchain technology.

Let’s add some more color on each.

***The crowd is still arriving

Guys like Musk couldn’t push prices around unless the crypto space had a limited number of investors – and that’s the current reality, despite the sector’s tremendous growth to date.

Here’s Charlie:

During the previous crypto bull market cycles in 2013 and 2017, market penetration was incredibly low. There weren’t as many ways to invest, so access to the market was a big limiting factor.

But that has changed dramatically in recent years, which is part of our bullish outlook. A number of new onramps make investing in the space so much easier. Square, Coinbase, PayPal, Binance.US, and many more have opened up that world up significantly.

Even so, market penetration is still low. We got more evidence of this just recently from Gemini, the U.S.-based crypto exchange started by well-known bitcoin billionaires Cameron and Tyler Winklevoss.

As part of a survey called 2021: The State of U.S. Crypto Report, Gemini talked to 3,000 investors and the “crypto-curious” – those who do not own cryptocurrencies yet but say they plan to soon or want to learn more. The results show that while an increasingly mainstream consumer base is engaging with cryptocurrencies, the number of actual investors remains very low. And remember, that’s even with the crypto market growing exponentially.

This is a very bullish sign.

Charlie points out that, according to Gemini, only 14% of survey participants currently invest in cryptos.

For context, let’s compare that to the number of adults with stock investments. An April 2020 Gallup poll found that 55% of adults are invested in at least some stocks – so about 4X higher.

That’s a lot of room for growth as cryptos continue going mainstream.

***We’re already seeing this growth picking up size and speed

Charlie points out that the same Gemini survey finds that about 13% of U.S. adults – roughly 19 million people – plan to diversify into cryptos within the next 12 months.

Back to Charlie to contextualize this:

That would nearly the double the number of crypto holders in the country. And if we figure that a large portion of the crypto-curious also start to buy, that number will only increase further.

Also note that this survey was U.S. adults only. Cryptocurrencies are clearly a global phenomenon. So if we apply these results on a global scale, we can see just how low market penetration is all over the world compared to the adult population.

Charlie does some back-of-the napkin calculations, comparing global stock ownership to global crypto ownership, finding that global stocks owners could be 36X the number of global crypto investors. Even if that ratio balances slightly, it would tremendous upside for crypto investors already in position.

***A major tipping point – sovereign governments are growing interested

Charlie points toward one final – huge – tailwind…

We mentioned earlier that governments have started to leverage blockchain technology. Yes, governments! They have been wary of blockchain for much of the industry’s lifetime, but we see a significant shift under way.

The biggest example yet of governments employing blockchain just happened at the end of April. The European Investment Bank (EIB) launched a digital bond sale on the Ethereum network.

The bank issued two-year, 100-million-euro ($120.8 million) digital bonds with 0% interest in collaboration with Goldman Sachs, Banco Santander, and Societe Generale. The bonds are available through a series of tokens registered on the Ethereum blockchain, where investors can purchase and pay for the tokens using traditional currency like the dollar or euro.

This is an actual government entity issuing securities on a decentralized blockchain. It’s a massive demonstration of the credibility of blockchain and DeFi in general (decentralized finance).

***We’re beginning to run long, so we’ll wrap up…

Forget Musk… Forget social-media fueled altcoins like Dogecoin… Forget making money from public figures with “clout” …

For bitcoin and select altcoins that offer genuine, intrinsic value, there are tremendous gains ahead given how early we are in the adoption curve. Prepare for volatility. Prepare for painful drops. But big returns are coming.

Here’s Charlie, summing it up:

Blockchain continues to transform the way we do things, providing solutions and efficiencies to virtually every economic sector. From the way we buy everyday goods and services to how we purchase a home, pay our taxes, vote, and even order a pizza.

And… we are still in the very early innings of this ballgame. We think the game has started, but we may still be in the first inning. There are plenty of opportunities still ahead.

As big money continues to build up their bitcoin stake, we expect the price will move steadily higher.

That’s just another reason why now is a great time to invest in our favorite altcoins that we expect will continue to perform even better.

To learn which specific altcoins Charlie believes will soar the most, and to get his full sector analysis as a Crypto Investor Network subscriber, click here.

Have a good evening,

Jeff Remsburg