[Editor’s note: “Prepare for Gains in the Crypto Boom of 2023” was previously published in April 2021. It has since been updated to include the most relevant information available.]
OK, given the market climate lately, you probably think I’m a crypto bear…
Far from it.
I’m a big believer in innovation. And crypto – blockchain in particular – represent some of the most promising innovations of our times.
Just like the internet before it, the blockchain will fundamentally reshape the world.
This won’t happen overnight. But long-term, I am extremely bullish on crypto.
That said, we’re in the midst of an months-long crypto crash.
This will likely persist for another few months. And, to bring the internet comparison to its natural conclusion, it will end the same way the dot-com crash of 2000 did… with a few market winners rising from the ashes and soaring hundreds or thousands of percent.
Here’s the story.
DeFi Is the Future
I love cryptos. More broadly, I love the beneficial disintermediation made possible across all industries by blockchain technology.
I won’t bore you with the details in this issue. But big picture, with its centralized and immutable ledger, blockchain is arguably the most disruptive technology since the internet.
This thoughtfully constructed ledger enables innately untrustworthy individuals and entities to collectively create trustworthy systems, without the need for any central authority – hence the term “disintermediation.”
Blockchain removes the middleman from legacy systems and replaces them with a collective ledger.
Now… why would we do that?
Because middlemen are often unnecessary profit-takers.
Further, they’re sometimes subject to corruption (see: the financial crisis of ‘08).
By removing and replacing them with an automated and incorruptible technology (which doesn’t need a paycheck), we can make today’s systems and processes more trustworthy, faster, and cheaper.
The applications here are theoretically infinite.
And one major use case is crypto. These digital currencies create a new era of decentralized finance (DeFi) that doesn’t involve big banks as profit-taking intermediaries.
And DeFi is the future.
The Biggest Opportunity in Crypto Right Now
DeFi, however, is not where I see the most upside in the blockchain/cryptocurrency megatrend.
After all, DeFi is intended to disintermediate banks, like Goldman Sachs (GS), JPMorgan (JPM), and Wells Fargo (WFC). Those are multi-hundred-billion-dollar companies, and the disruption opportunity there is huge.
But there are other cryptos I feel very strongly could deliver massive long-term returns.
That’s why I love the idea of “dApps,” or decentralized applications.
DApps are software applications built on the blockchain. This can be any application — a video media application like YouTube, a driver-rider app like Uber (UBER), a music streaming app like Spotify (SPOT).
The central link is that these apps are coded on the blockchain. And therefore, there is no central authority that “runs” and makes money from the app, either via subscription sales or digital ads. By removing that central authority, dApps create a new generation of truly free software applications.
Often times, these dApps have underlying cryptocurrencies. Those crypto are used as a form of in-app currency in the dApps or as an incentive token for app developers and blockchain participants.
The appreciating value for these crypto represents the economic value of the dApp. For example, instead of developers making money from digital ad sales, they make money by owning the dApp’s crypto, which rises in value as more folks use the dApp.
I firmly believe that dApps will disrupt everything. And the future YouTube, Uber, and Spotify will all be dApps.
Who Survives the Crypto Bubble?
That means it’s time to go out and buy a bunch of dApp-linked crypto… right?
Not so fast.
Cryptocurrencies are where internet startups were about 22 years ago: in the depths of a major crash.
Just consider… back in 2000, the Nasdaq had 5,000 technology companies in the index… by 2003, around 1,000 of them had filed for bankruptcy, while most of the rest had been acquired at a fraction of their peak valuations.
Sure, the internet did end up turning into the future. And out of the dot-com crash emerged trillion-dollar internet titans like Amazon and Alphabet. But the point here is that all the “rewards” of the internet were hogged by a handful of companies. Indeed, most internet startups in 1999 lost investors their shirts.
You’ll see the same rodeo play out with cryptocurrencies.
Cryptos are the future. But all the “rewards” of that future will be hogged by a few strong cryptos. Ninety percent of coins out there today will be worthless in a few years.
And yet out of the rubble, a few strong tokens will emerge and fundamentally change the world. And they’ll turn early investors into “Crypto Millionaires.”
The Final Word
The key to striking it rich in the crypto market, then, is to buy the right cryptocurrencies – the most technologically-advanced cryptocurrencies with the most value-additive applications.
Which ones make the cut?
The tokens we’re most excited about are those that add real-world value — cryptos using the blockchain to solve real-world problems, like the energy crisis.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.