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CRIPTONITE ASSET MANAGEMENT
Why Cryptocurrencies?
In a nutshell
We are convinced that cryptocurrencies and blockchain are here to last, and it is a matter of time until it becomes a broad asset class. In fact, acceptance of cryptocurrencies and blockchain has seen a steep rise over the past few years. Since the last surge in bitcoin prices which was very rightly considered as an immense retail bubble, things have changed massively and even accelerated at the speed of light.
A quote attributed to the Mahatma Gandhi fits perfectly the crypto currency market:
“First they ignore you, then they laugh at you, then they fight you, then you win”
Whatabouts in more details
Depending on individual experiences, crypto currencies could somehow either be familiar or absolutely unknown. But definitely not anymore “unheard of”. Everyone has heard about it one way or another. Whether it was a constructive discussion or just a hearsay.
This simple statement might be surprising, but it is actually the base of our growing interest into crypto currencies.
Let’s go back a few years behind to understand what it means.
“First they ignore you”
About 10 years ago, the Bitcoin was created by some anonymous talent (Satoshi Nakamoto, which is a pseudonym), who made the world discovers for the first time “blockchain” and obviously “Bitcoin”. The first moto for the creation of bitcoin was to decentralized currency and replace the USD… This happened as 2008 financial crisis hit the world and government had to massively print money to save banks.
Whilst this was surely a brave and possible necessary moto, most understood it was not for tomorrow that the world would get rid of the large currencies without a serious pushback from the most powerful government, who in return are assuring a certain stability in today’s world. As a former banker, I still have a hard time to imagine a world without central banks, a monetary regulatory body, at least for now.l
For several years this remained a very underground project, known only to the few involved in deep computer programming, which later became known as “crypto enthusiasts”.
In parallel, and arguably a strong reason why the “currency replacement” preached by the anonymous Satoshi Nakamoto faded away was that the central banks had achieved their goal of saving the world economy from total collapse.
The stock market reached a bottom in march 2009 and entered into it steepest and longest bull market in history until recently in march 2020.
“Then they laughed at you”
The following phase of the crypto market was noticeable with the first blockchains and demonstrations as of how it could transform vast areas of our everyday life.
Blockchain technology argues that through a decentralized network of computer spread around the world everyone and anyone could be the witness of a transaction, and then of a record on a commonly shared ledger. The strongest argument became that once it is written on the ledger or the blockchain, it cannot be removed.
To make things simpler to understand, the blockchain is safe kept by a large number of “accountants” who make sure that all transactions are written on the blockchain. As only the fastest one gets paid, all of them make sure that they have the best equipment in place.
To erase an information on the blockchain, it would require that all the accountants would agree at the very same time or disappear at the very same time to make it possible. As there are thousands of “accountants” spread anonymously around the world, it is impossible, guaranteeing the safety of the information on the blockchain.
Multiple ideas came up to use the blockchain, land registry, notary acts, stock market custody of shares, diamonds transactions, etc etc etc.
But the traditional world was clearly not ready to look at this seriously and as the crypto market was rising fast, it was very quickly tackled as a big bubble that would eventually burst and disappear forever. Everyone was arguing that it would not be seen again.
“Then they fight you”
The crypto currencies started a very steady rally around 2016 where the bitcoin was worth about $450. This lasted until December 2017 where it reached around $20’000.
This rally was fuelled by many things coming all at once. It was a bit like what we experienced at the end of the 90s when the “.com” was making the headline of the financial press, going from records highs to new highs. At the time as well, a lot of people were screaming that all money would be lost as this industry had no chance to survive. Nobody would be silly enough to buy anything on the internet, suspecting massive fraud and inability to scale up. I’m sure that Amazon’s CEO would somehow today disagree.
But this rally of crypto was suddenly alarming most of the regulators and banks around the world which started to see that those new players were actually growing both in numbers and in size. It was about time to take the big guns to fight it.
20.000$
Bitcoin value in December 2017
A similar situation happened during the “.com” era when the traditional retailers started to see some sales evading to the internet retailers. Charles Schwab was then the first one to start offering trading services online for a fraction of the traditional bank prices, etc etc.
25 years ago the same situation, the same weapons were used; we all know how this fight ended.
China and the US were for once aligned in their fight against crypto currencies, fighting exchanges, fund raising, miners, in summary everything that was linked directly or indirectly to crypto currencies were clearly earmarked as the enemy to kill.
Eventually they killed the rise of the market, as the bubble burst and prices collapsed to new lows, they were quick to claim that they had saved the planet from a new evil. But some details were left ignored
The first one was about the price of the bitcoin; it was $450 at the start of the rally and $3500 after the bubble burst! It was still about 8 times more valuable than a year before, was it really a decisive kill that governments had achieved?
Very shortly after the bubble burst, blockchains projects started to multiply at an even greater speed, new funds were coming towards the crypto markets, new projects, news tokens, millions of new users were registered week after week!
No, it started to be clear by now that their killing mission had in fact turned against all the perpetrators. Noticeably, Jamie Dimon (Chairman and CEO of JP Morgan), one of the most respected and influential banker in the world had changed his vision about Bitcoin from saying three years ago that it was an enormous scam to calling it a very important innovation that people can’t ignore.
If this is not a 180° change of direction!
“Then you win”
This is where we currently are.
*
Everyone against the crypto currencies have now changed their views and their actions against the asset class. China has decided to start preparing its own digital currency pegged on the Yuan. More recently it was the central bank of Korea that has publicly announced that it was speeding up its plan to launch a Korean digital currency. Even the US treasury has appointed the former legal head of Coinbase, one of the most important crypto platforms in the world to head their effort into digital currencies.
The US treasury has also announced that it has started to test within the treasury, Ripple network for speedy transfer of currencies both traditional and cryptos. Switzerland, world leading nation in banking and asset management has decided to legalize the crypto markets has they didn’t want to be left behind what they call the biggest revolution in banking and financial transactions for decades.
Christine Lagarde, newly appointed head of the European Central Bank has said in her introduction speech that digital assets must be addressed without delay.
We are now seeing a surge in the emergence of the use and utility of crypto currencies and blockchain, the market is most likely fomenting a sharp rise again within the next coming months.
But this time around, a major difference exists. Unlike the last rally where crypto currencies were impossible to buy unless you wanted to send money on some obscure Chinese websites; this time multiple sources are selling as simply as selling any shares or currency in the world.
The efforts that have been put together to access cryptos currencies have been massive and are continuing to increase every single day. Be sure that all of this fire power will fuel the rise of crypto currencies sooner or later.
This is why we have teamed up with Peculium in order to offer investors a simple and smart way of profiting from what we believe is probably the biggest investment opportunity of the last two decades.
This is truly internet 2.0.
