Is Cryptocurrency a Once-in-a-Lifetime Opportunity?

2017 has been the year that cryptocurrency went mainstream. While many have been following for a long time, this year marks the time when Bitcoin and other cryptos truly penetrated public consciousness.

It’s been a wild ride, with so many ups and downs it’s hard to properly reflect on them all. As prices have surged, a flood of new money has entered the space and “legitimacy” seems well within reach. The levels of FOMO permeating the air have become palpable, and everyone is in a rush to get in before it’s “too late”.

Given this crush of activity, it appears that a lot of people are answering the above question with a resounding “yes”. But why exactly?

There are many reasons, but Ronnie Moas, the founder of Standpoint Research believes he has the real answer. In the following, we’ll dissect on his opinion and offer the other side of the coin.

Reasons for Optimism

Active Reddit users will have seen some variation of the following questions quite a bit recently:

“Bitcoin has gone up x amount in the last x is it too late for me to get in?”

“Should I buy at these prices?”

“Should I hodl or cash out and wait for the dip?”

Cryptocurrency may have had a meteoric rise in 2017 but Moas reminds us:

[…]even though you may have missed out on the big move in the last few years, it was a big move off of a very low base and this industry is still in its infancy relative to where it could go in the next 5-10 years […] in my opinion, bitcoins are undervalued, they are worth in the $25,000-$50,000/coin range.

This was written in July 2017 when BTC prices were still below US$3,000, which make the estimates almost appear conservative in hindsight.

Moas was interviewed on CNBC more recently and he updated his predictions:

Bitcoin is already up 500 percent since I recommended it in the beginning of July, and I’m looking for another 500 percent move from here. The end-game on bitcoin is that it will hit $300,000 to $400,000 in my opinion, and it will be the most valuable currency in the world.

What’s underpinning this bullish sentiment? Simple numbers and a few assumptions.

In this Reddit post, Moas lays out the key facts.

First, that the value of Bitcoin is based on demand and the fixed supply guarantees a degree of scarcity. “I don’t know how much gold there is in the ground, but I know how much bitcoin there is, and in two years there will be at least 300 million people in the world trying to get their hands on a few million bitcoin,” he said.

“If Bitcoin goes to $25,000 (to use his original hypothetical) per/coin that would lead to a market cap of $475 billion (25,000 x 21,000,000).”

This is still paltry compared to the $8 trillion in gold or the $80 trillion in cash and stocks. The bond market is even bigger. Add them together and you get almost $200 trillion. But gold and bonds are not exciting investments and they rarely move, the stock market is arguably overvalued and cash (US dollars) has been steadily losing value since the 1960s.

Moas’ assumption is that at least 1% of this $200 trillion of wealth will end up in cryptocurrency. After all, the $80 billion (now well above $500 billion) in crypto represents 1/25 of 1% of $200 trillion. If investor behavior of late is any indicator, it’s hard to disagree on this point. If the transfer of wealth goes as high as 4%, then a $10,000 investment just became $1,000,000, or a 100X return.

Many other voices have joined the wave of optimism as bitcoin futures trading started. Max Keiser host of the Keiser Report is primary among them.

Right now the pipe is small, it’s a relatively minuscule market compared to the bond futures, currency futures, and stock futures. By expanding these futures contracts and derivatives, bringing Wall Street and Chicago into the mix, your taking that small straw which is an onramp for fiat into Bitcoin and your making it massively bigger.

Whether Moas, Keiser, and others are correct (and what that will mean for the cryptomarket as a whole) has yet to be seen. But it should be noted that….

Not Everyone Agrees

Not everyone sees such a bright future.

Vasu Menon, vice president of Wealth Management at Singapore-based bank OCBC commented:

We think that it’s risky […] I don’t see strong fundamental drivers for this (most recent) bitcoin rally.

To find other warnings or negatives opinions you needn’t look far.

Forbes contributor Adam Ozimek notes in his article Why I Would Bet Against Bitcoin:

The market is filled with people who think Bitcoin is going to grow very rapidly and give them lots of returns, and it’s filled with people who think it’s going to become a widely used currency. It can’t be both.

Or take billionaire Mike Novogratz as another example. Novogratz has publicly invested approximately 10% of his net worth into cryptocurrencies, yet he referred to crypto as “speculative mania” in a recent Bloomberg interview.

He said:

None of these protocols will be ready for prime time for, at least, 2 to 3 years.We are selling the story about what the future’s gonna be and people are piling on.

On the flipside, the skyrocketing prices have caused some of those closest to the technology’s development, such as Vitalik Buterin, to be introspective.

There are also more than a few dissenting voices on the original Reddit thread from Moas’ post.

Some people dismiss these comments as scare tactics. Others don’t read heavily into what any “expert” says due to the likelihood that they are somehow shilling for their own interest. Everyone will ultimately have to make up their mind for themselves but the truth is no one really knows what will happen with bitcoin or any other currency.

And, arguably, that’s the most exciting part.

Final Thoughts

The advent of cryptocurrency is a unique phenomenon and undoubtedly offers a once-in-a-lifetime chance for many people. If you’re just starting out or thinking of getting involved, check out our beginner’s guide to investing in cryptocurrency.

Or take Moas’ bitcoin advice:

I look at bitcoin the same way I look at Amazon. The way to play Amazon for the last 15 years was to buy it, hold it, and add on the dips. That’s exactly the way I think people should be playing bitcoin.

Whether you agree with the more aggressive predictions or side with conservative contrarians, Moas makes another point that is hard to dispute regardless of your bias:

If you invest money you can afford to lose, what would be more painful… sitting on the sidelines and watching this jump by 1000% or 2000% over the next 5-10 years or losing some of the initial investment?

 

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