People I meet sometimes seem surprised when I tell them that cryptocurrencies are a top performing asset class.
It’s probably because they constantly get hit over the head with a lot of negative hype coming from mainstream media outlets — no surprises there!
But the fact remains …
So far this year, the top 10 cryptocurrencies by market cap — including bitcoin (BTC), ethereum (ETH), and Bitcoin Cash (BCH) — have outperformed the S&P 500, gold, and oil, according to CoinDesk. (Coinmarketcap.com is a good place to check for quotes.)
Cryptos got off to a rocky start at the beginning of the year but began to overtake these other asset classes by May, and they’ve remained in the top slot since. Bitcoin is a big reason for the bounce. It’s climbed more than 98% year-to-date as I write this.
If you really want to blow your mind, consider this …
If you had invested $1 in bitcoin in 2010, you’d now have $90,026, according to a study by Bank of America Merrill Lynch, which named bitcoin the best investment of the last decade!
By comparison, $1 invested into the broader stock market would have returned $3.46.
Shocking, isn’t it?
Bitcoin has moved from a curiosity to a mainstream asset class, which has huge implications for investors. Today, between $1 and $3 billion worth of bitcoin transactions are processed each day. Since 2011, over $2 trillion in transactions have been processed, $1.6 trillion of which occurred in the past two years.
So you can see why I believe bitcoin — not to mention other choice cryptocurrencies — are only getting started.
Bitcoin has a near-term catalyst called “the halvening” that’s set to take place in May 2020. The event happens once every few years and is written into bitcoin’s code. This isn’t a prediction. It’s a given.
Long story short, the halvening is when the reward for mining new bitcoins is cut in half. So the daily supply of new bitcoin coming into the market is halved.
Now, assuming demand remains the same, that could send the price soaring … exactly as it did in 2013 and 2016. German bank BayernLB predicts the 2020 halvening will send bitcoin prices to $90,000 (from around $7,200 now) — and that could even be low.
2020 is going to be an exciting year for the crypto market, and I plan to talk much more about that in the weeks ahead. Today, I want to share some of the highlights of 2019’s year in bitcoin, which will help give you a sense of where we’re going next. This is critical for a misunderstood investment with almost built-in upside potential.
The Institutions Are Coming
This year, we saw some of the world’s major institutions get into crypto in a big way. The Chinese government, the European Union, and even the U.S. Federal Reserve all made comments about looking into developing their own digital currency.
These major world powers have clearly come to see the value of the blockchain technology underlying cryptocurrencies — and the disruptive power cryptos have had on the world.
As Chinese President Xi Jinping put it: blockchain will provide “an important role in the next round of technological innovation and industrial transformation.” And he’s putting his money where is mouth is. Xi has demanded China become a world leader in blockchain and integrate the tech with other cutting-edge technologies like artificial intelligence, Big Data, and the Internet of Things (IoT).
Outside the walls of government, Facebook (NASDAQ:FB) also made a splash in the crypto world this year when it announced its own digital currency project called Libra in June. The project, which is slated for release in 2020, is a so-called stablecoin backed by a basket of stable assets that keep the price consistent. The coin would be used to make payments throughout the world. So far, it’s received a boatload of pushback from government officials around the world worried about privacy, among other issues. Time will tell whether Libra pans out.
Facebook is far from alone in trying to set up digital payments using the blockchain. JPMorgan Chase (NYSE:JPM) began trialing its JPM Coin in February as a means for its international business clients to make payments. The JPM Coin is backed, one-to-one, by U.S. dollars and could become the go-to means of making some $6 trillion in daily payments made through the company’s massive wholesale payments business.
Then there are the major players looking to bring institutional investors like hedge funds and pension funds into the fold. Fidelity Investments recently won regulatory approval in New York state to offer custody and trading services to institutional and individual investors. Providing regulated custody services for investors dropping millions of dollars into cryptos is a key step to bringing this clientele into the fold.
Bakkt, the institutional bitcoin futures trading service owned by Intercontinental Exchange (NYSE:ICE) — the firm behind the New York Stock Exchange and other exchanges around the world — recently announced that it’s even planning to launch a new crypto trading service for everyday customers. The app would let consumers use digital assets when purchasing goods from merchants. Imagine — within a year you could be able to buy your morning latte from Starbucks with bitcoin.
It’s just the sort of move into the mainstream that’s designed to bring more people to cryptocurrencies … and send bitcoin soaring to new heights.
More Ways to Make Money
In October, Grayscale Investments received regulatory approval to list the first publicly traded digital currency index fund. Listed on OTC exchanges, the Grayscale Digital Large Cap Fund (OTCMKTS:GDLCF) offers investors a basket of cryptos to invest in, giving wider exposure to this growing asset class.
Instead of simply buying and selling crypto assets, investors can now also lend their assets and earn interest for doing so. Several products have been built to allow users to borrow and lend directly on the ethereum blockchain. MakerDAO is probably the most complicated and widely used decentralized lending platform on the market where people can borrow. Compound is another.
In total, $640 million in decentralized loans — using smart contracts, math, and blockchain technology instead of bankers — were originated in 2019, compared to just $22 million during the first three weeks of the year, according to Blockchain Capital. Most of that money was borrowed by traders and startup crypto companies looking for working capital.
Back in August, Binance, one of the world’s largest crypto exchanges, started its lending option for investors seeking to lend out their holdings in select coins, including Tether (USDT), ethereum classic (ETC), and Binance’s own BNB. Lenders could earn up to 15% annualized for products with a 14-day fixed maturity term.
Binance also allows users to “lend” their Tezos (XTZ) holdings through a process called “staking” and earn rewards. Tezos holders are able to deposit their crypto on specific wallets or staking services and leave it there for a fixed period of time, where it can then earn more coins as rewards. Popular U.S. exchange Coinbase also lets Tezos holders stake coins from their Coinbase wallet and earn rewards.
Spotting the Opportunity
The crypto markets have come a long way this year. A somber start to the year kept entrepreneurs in the space focused on building better products that open up access to more and more people.
Meanwhile, prices — while still as volatile as expected for such a relatively new sector — have outperformed traditional asset classes.
The future for cryptocurrencies is looking bright. Bitcoin is just now setting up for its next big spike … and that can generate massive profits for investors smart enough to get in early.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.