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In his recent Mad Money talkshow, Jim Cramer said that he last sold most of his Bitcoin at the peak before it came crashing down. This was so that he could pay off his mortgage. Then in the last few days, he bought back into crypto with Ethereum, citing institutional takeup.

Cryptocurrencies have increased significantly in retail as it has in the field of research. This is because the market behaviour and the volatility that investors both retail and institutions are called to stomach are extraordinary. #HODL!!! Is the name of the game, apparently, and you will do just fine. But research has shown that if you are able to play about with the swings, you will double or even triple your investments as compared to a buy and hold strategy.

Crypto is now gaining mainstream acceptance in that it is used not just as an investible asset, it is also deployed in everyday life as a means of payment. The adoption is still early phase, but if China has the digital yuan, the intention is for such digital currencies to take a more major role in daily life.

Unlike traditional financial assets, investors into cryptocurrencies must be aware that their tokens are neither backed by governments nor do they hold intrinsic value in and of themselves. On top of that, the lack of regulatory oversight and sufficient protection (mostly, close to none) is a deterrent for further mainstream adoption.

But there is certainly progress made and in due season, these dynamics will change. Think about it – we already have investment strategies and portfolio construction being set up for cryptocurrencies, along with machine learning, technical trading, all available through various means. On the other hand, skeptics are decrying and discouraging adoption because of reasons of the boom and bust cycles which happen because of tweets and narratives more than fundamentals (because they do not exist… these tokens have no intrinsic value in and of themselves!). People are profiting off the next greater fool, so to speak.

Bitcoin

Off its recent highs of nearly $65k, Bitcoin sits at a $34k level. What are its head or tailwinds? Mostly narrative driven, it still behooves the investor paying close attention to this coin because it remains progenitor of all tokens. If it falls, every token goes down with it. But when it rises, the acceleration of the altcoins become very pronounced.

At this stage of this development of the crypto world, investors and traders alike have come to accept its existence alongside fiat, and banks are warming up to it as well. Catherine Wood herself believes that given the velocity of money, Bitcoin’s scarcity and the various factors coming into play, that Bitcoin will remain in mainstream and has the potential to hit 6 figures in value. Her figure comes up to an ambitious $500k per coin.

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Will Bitcoin hit Catherine Wood’s figure or, more conservatively speaking, enter into the $100k zone?

This is a nearly 3x value from where it is right now. When that happens, we need to be mindful that the trajectory for altcoins and Ethereum (which is considered digital oil if Bitcoin is digital gold) will be far greater than Bitcoin itself. At the ATH (all time high) in May, Ethereum’s market narrative was 10k or a 2.5x its market ATH. This means every $1 you put into the token will give you $2.5 or a whopping $1.5 profit.

This is where we need to play the game right as investors. Remember – Bitcoin cannot be allowed to slip. So dumping Bitcoin for altcoins is akin to jumping off one wagon onto another wagon when both are tied in together for success and failure as well. Don’t do that. Bashing another token by maxis is also another immature behaviour because we need the entire ecosystem to succeed.

It is not an either-or because if we engage in such stupidity, it will end up neither-nor.   

What needs to happen?

We need to buy into both Bitcoin and altcoins simultaneously but allocating more to altcoins than to Bitcoin. The data is clear – if Bitcoin is trading sideways – maintains or rises, altcoins will moon. If Bitcoin slips and falls, altcoin’s decline will be steeper. You cannot discard one for the other.

What about stablecoins then?

Well, by implication, if the utility is just to serve as a peg to a currency, personally, it does not serve much of a purpose. If you are not into FX, or trade in currency, then the same concept applies here.

I would very much rather you invest in a top-notch altcoin like #Zilliqa, as an investor, and then stake for a whopping 14% yield, which also grants you the #gZil or governance token which is worth quite a sum of money for voting rights. When you participate fully in the ecosystem, get on with the community, support projects from within and build. This culture of true openness is needed across altcoins for them to thrive in the next 10 years. Many altcoins will fail after 5 years if the business model fails to produce a sustaining effect. If the business becomes a going concern, then the token will also cease to exist.

Again, this is not investment advice, so do your own due diligence.

Take a closer look at how the projects are going as you journey along. The more the businesses have traction on the blockchain that uses that particular token, the better the businesses will survive and the more the token will thrive.

Remember that the activities of the businesses thereof require gas fees that come in the form of utility these tokens (‘burning them’). This generates demand and supply and alters the price of the token. You will want to be a part of this process and fully grasp it to start investing early so that as the ecosystem grows, your chances of profiting greatly increases exponentially.

Till the next time,

Chief Editor,

BBA Market Perspectives

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