The future is rapidly going digital and so too is money. Cryptocurrencies, driven by blockchain technology are at the front seat of the digitalization of everything.
An encrypted digital wallet, which holds the bulk of your assets accessed via smartphone app is becoming a reality. Think about it. Your stock portfolio is an app, your bank is an app, your cryptocurrency broker is an app, and you have a payment app for daily expenses all of this held on your smartphone.
You use your smartphone to buy a concert ticket, airline ticket, and pay with digital currency and receive a digital ticket and digital boarding pass. Your identification is digital biometrics.
“An encrypted digital wallet, which holds the bulk of your assets accessed via smartphone app is becoming a reality”
The future is going digital and so could assets. Cryptocurrencies may not be another tulip because it is being driven by blockchain technology, part of the fourth revolution, partly about the digitalization of everything, which is putting cryptocurrencies in the driving seat of the future
Progressive thinking is a survival quality in business and investing, bearing in mind that disruptive technology has reduced the lifespan of S&P companies from 61 years in 1958 to less than 18 years today. Moreover, with advancements in artificial technology and blockchain technology, where we are just at the tip of the iceberg to understanding the capabilities of the technology, we believe the lifespan could even be half that due to digital disruption.
Moreover, the technological genie is out of the bottle, where adopting the latest technology is about surviving and thriving, the alternative is to be outmaneuvered, out-competed, and made redundant.
“disruptive technology has reduced the lifespan of S&P companies from 61 years in 1958 to less than 18 years today”
Cryptocurrencies are part of this digital disruption and it has become too big to ignore
We may have reached a paradox of investing in stocks, where the best performing most profitable companies to invest in has a low headcount. For example, an online lender that can employ cloud security AI software to determine suitable applicants makes a better investment proposition than one which employs humans based in offices.
But if humans are being displaced by AI-enabled algorithms, then human participation rates and mass consumption could be in a terminal downward spiral.
In other words, the wealth gap between those working and investing in fourth revolution companies is likely to widen. So those few, capable of generating excess wealth will need a place to store their wealth and this is where cryptocurrencies enter the game.
“Cryptocurrencies are the currency of choice for Generation Z and young millennials for people in this country so you are almost tone-deaf to say it doesn’t matter, it matters to them” – Mike Novogratz
Cryptocurrencies provide a home for speculative investments without causing social and political tensions
Imagine if cryptocurrencies didn’t exist and wealth generators decided to invest in soft commodities as a hedge against inflation. The outcome would be higher food prices and social tensions.
Moreover, speculative capital flows into real estate would put first homeownership out of reach for the next generation of home buyers. Cryptocurrencies target a young generation who are likely to gain the most from its appreciation, thereby enabling them to acquire a deposit to purchase their first home or invest in a business.
“Cryptocurrencies are the currency of choice for Generation Z and young millennials for people in this country so you are almost tone-deaf to say it doesn’t matter, it matters to them” said Mike Novogratz.
The long-term benefits of investing in stocks are unclear, bearing in mind humans are being displaced from the productive economy at an alarming rate.
So where is consumption going to come from, in other words, average corporate revenues could be in a decline. The PE Ratio is at 42.57 near its historical two hundred years high.
But Universal Basic Income UBI could be one way of keeping consumption going and corporate profitability alive, after all, capitalism needs consumers.
So Modern Monetary Theorists (MMT) tell us not to worry about the skyrocketing money supply, just keep creating currency to get the economy out of stagnation, they argue.
It is the velocity of money, not the supply of money that determines the rate of inflation, argues the MMT school of thinking.
“the past few months have seen several technology companies allocate a small portion of their corporate treasuries into the benchmark cryptocurrency, bitcoin BTC” – Win Investing
But inflation through the debasement of the currency is knocking on the door. Shortage of chips and the reduction in the size of packages in supermarkets are there for all to see.
So, investing in bonds, fixed income assets is less attractive because the real yields are negative and cash held in a deposit account with no interest is a certainty that your wealth will wither away due to monetary debasement.
Precious metals are fine but try moving them across borders in a revolution, civil unrest and you risk the asset being confiscated and putting your safety in jeopardy.
In the age of digitalization and MMT, cryptocurrencies could have become a permanent fixture of modern finance and in so doing a new store of value
The past few months have seen several technology companies allocate a small portion of their corporate treasuries into the benchmark cryptocurrency, bitcoin BTC.
Jack Dorsey from Twitter, Michael Saylor from MicroStrategy, and Elon Musk from Tesla have all put Bitcoin on their corporate balance sheet.
Frankly, if the monetary authorities were planning to ban cryptocurrencies, they would have done it already. If the big cryptocurrency names crashed now, it could destabilize markets
In short, we have become cautiously optimistic about the future of cryptocurrencies.
Coinbase, the cryptocurrency broker, is a good starting point for cryptocurrency investors. We are particularly interested in Ethereum, which is the chassis of cryptocurrencies, with its decentralized, open-source blockchain and smart contract functionality. Ether is the native cryptocurrency of the platform; it is the backbone of cryptocurrencies technology.
So, cryptocurrencies use four revolution technologies and have been widely adopted by the coming generation, corporates have put part of their balance sheet in Bitcoin as cryptocurrencies go mainstream. Moreover, new SEC Chair Gary Gensler is considered a progressive thinker, MIT lecturer in crypto finance.
The likelihood of a cryptocurrency ban is remote and we now believe cryptocurrencies could have a bright future.
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