Please click the link below to listen to the 67th episode of my weekly crypto podcast ‘Two Minute Crypto.’ These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Consider dropping a like and or a review on iTunes or Podbean if you enjoy the podcast. Comments and critiques welcome.
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2020 and Beyond
Welcome to Two Minute Crypto. A new decade is upon us, judging by the last, crypto enthusiasts have a lot to look forward to. However, if you are currently invested in crypto – a word of caution. Don’t look to 2020 for price blast off. While you are at it, don’t look to 2021 either. The simple truth is that no-one is privy to the definitive knowledge as to when or even if crypto will achieve broader adoption. Short term price volatility does not equal long-term investment returns.
What then may be stated with a degree of confidence?
First and foremost – if sustainable value accrues to crypto the lions share will flow to Bitcoin. BTC has established functional history, network security, relative decentralization, and brand recognition. Only Ethereum comes close. It follows that if you are financially exposed to crypto then BTC should comprise a significant portion of your portfolio.
Secondly, it’s all going to take a lot longer than expected. Each and every step towards wider market adoption will be fraught with delays and setbacks. From software bugs to developer infighting and regulatory pushback the return on investment horizon for crypto is a multi-year horizon. Part of the issue here stems from the unreasonable expectation of return based on late 2017. The massive run-up of BTC from 3k to 20k and the ensuing ICO craze saw monumental returns across the board. It was nice, very nice indeed, but that moment has passed and it is essential to recalibrate expectations to more realistic levels. Sure, some random crypto on some random dodgy exchange will pump 800% in the next day or two but you won’t be privy to which one and when. It will be all smoke and mirrors and over before it has really begun; predictably leaving late-comer retail investors holding the proverbial bag.
This is cryptos decade. While it is nigh on impossible to pick when blockchain will go mainstream it seems entirely reasonable to assert it will do so in some sectors to some degree in the coming decade. Who, what, where, when, and how are all up for debate but the ‘if blockchain’ question seems about to be definitively answered. Once the Chinese Central bank party roles-out a state-sponsored crypto – over a billion people will find themselves ‘living with blockchain’. A darker vision to be sure but blockchain nonetheless. A slew of other central banks are set to follow suit. The 2020s will see the Bitcoin as a store of value thesis put to the test with no less than 3 halvings in the coming decade.
Across the board, the touted benefits of blockchain will either be adopted to some degree or debunked. That blockchain will see adoption in some areas of the economy seems virtually certain. Why for example would blockchain not become the medium for document verification such as university degrees? Logistics and blockchain record-keeping could hardly be better matched. That some project or number of projects will find success in this area hardly seems a ‘big call’.
Lastly, it’s going to be a bumpy ride. From bugs to bans cryptos across the board are extremely likely to see large price swings. As an investor rather than an opportunistic day trader your goal is to be on-trend (over a multi-year time-frame). Whether BTC is up or down double digits on a given day is entirely irrelevant over a multi-year horizon. Expecting linear growth is entirely unrealistic as is catching either the bottom or the top. If you have done your research and understand your investment you are far less likely to be distracted by market noise. One absolute certainty is that the coming decade will be full of distractions – from decentralization is dead to XYZ to the moon. Screening out momentary price volatility while retaining the engagement to identify meaningful fundamental developments will be a key factor to staying in the crypto game over the coming years.
Enormous sums of money stand to be made by investing in crypto but rewards will primarily flow to the well-informed and the patient. Treating crypto like a typical investment is far more likely to lead to long-term success than succumbing to the ‘crypto is different narrative’. Yes, crypto may fundamentally change the world but the rules of successfully investing in it remain essentially the same as for other asset classes.
In summary, 2020 will be an exciting and development-rich year but none of that implies a run-up in value – take the long-term view because ultimately, that’s where the money lies.
Thanks for listening.