The cryptocurrency and blockchain industry has exploded this past year into mainstream news. While most people have heard of bitcoin or cryptocurrencies, many are still left confused on what a digital currency actually is. Bitcoin is a digital currency that operates as a transfer of value within a blockchain, which is a public and immutable ledger of transactions. Since bitcoin’s emergence, many different cryptocurrencies have developed for specific use cases of this new technology. As of this writing, there are over 2000 “alt-coins” with a market capitalization of over $220 billion. The most popular alt-coins are Ethereum, Dash, Bitcoin Cash, Litecoin, Ripple and Monero.
"Many individual and institutional investors only associate bitcoin and cryptocurrencies with the meteoric rise in values that occurred from November 2017 to January 2018"
While each alt-coin serves a specific purpose, the fundamental technology powering all of these cryptocurrencies is the blockchain. For businesses, blockchain technology presents a massive opportunity in financial services, supply chain management, data storage and cybersecurity. With bitcoin or Litecoin, international businesses can make multi-million dollar payments across the world in minutes for fractions of a penny. For individuals, cryptocurrencies offer true custody of one’s assets, an international payment network, censorship resistance, and alternative investment opportunities. Remittance payments and banking opportunities for the previously unbanked are areas being disrupted by cryptocurrencies for consumers.
Many individual and institutional investors only associate bitcoin and cryptocurrencies with the meteoric rise in values that occurred from November 2017 to January 2018. In the industry, this event is called a “hype-cycle” because of the media frenzy that drove the price of bitcoin to over $20,000. The market has since stabilized around $6,000 per bitcoin, leaving many investors that recklessly invested in the hype-cycle with major losses. The media has recently vilified bitcoin because of the decrease in value from its peak in December 2017 calling cryptocurrency a fad and a bubble.
Instead of considering the spike in investments and use of cryptocurrencies a fad, we consider it to be a prelude to the potential of this market when regular consumers invest in and use cryptocurrencies. The struggle that most blockchain and cryptocurrencies are having today is consumer adoption. While there are many fantastic consumer use cases, adoption of these new technologies has been slow. Investing in cryptocurrency needs to become more seamless for consumer investors and education in the space needs to be paramount.
On the investing side, we see cryptocurrency bundles as the next big wave in cryptocurrency investing that will allow more consumers to invest in a diversified position in the market. Industry sectors are beginning to be carved out within the market, like bundles for privacy coins, currencies, decentralized applications, infrastructure blockchains and others. Investors will soon be able to invest in specific industries within the cryptocurrency market just as ETF investing became a staple of consumer investing. Instead of the S&P500, we will have the B&D100 as a bundle of the top 100 cryptocurrencies so consumer investors can invest diversity into this emerging, alternative asset market.
Established institutions like IBM, Fidelity, Facebook, Microsoft and even the New York Stock Exchange are all looking for ways to incorporate blockchain technology and cryptocurrencies into their operations. The market is still emerging, but with continued development and innovative ways for mass consumers to adopt the technology, the only option for the industry to grow.