According to a report, global crypto ownership rates are anticipated to grow at 3.9% in 2021, with over 300 million crypto users worldwide. Currently, over 18,000 establishments accept cryptocurrency payments.
Though several governments globally have tried to impose regulatory pressures on cryptocurrencies, the mere catch of multiplying money – sometimes more than 100 times- is enticing enough for investors to swoop in. But Bitcoin and other cryptocurrencies solve numerous use cases and are much more than speculative assets.
Mark Yusko, CEO and founder of Morgan Creek Capital, believes that by fueling the Internet of Value, cryptocurrencies would generate “untold riches.“
According to him, cryptocurrency and blockchain technology – the “trust net” – will generate much more wealth than Web 1.0 and Web 2.0 together. Let’s discover with Mark Yusko how the crypto-powered internet is set to accumulate more wealth than its predecessors, from his recent interview with Cointelegraph.
Bitcoin and Allies: Innovation-oriented Investments
“Infrastructure around the technological waves matters the most.”
Initially a sceptic, Yusko recalls his first investment in then-upcoming infrastructure, Google, in 1996. As his investment doubled, he realized how the “ infrastructure around the technological waves matters the most.” Infrastructure is what adds value to a network, and blockchain is an infrastructure in itself. It will be “an operating system” supporting numerous dApps, DAOs, NFTs and cryptocurrencies for the next iteration of the web – Web3. The Internet of value powered by blockchain will be greater than the mobile internet in terms of wealth generation and expansion.
“Price is a liar”
Yusko mentions how around 2013, his early investment in Pantera Capital grew 11-12x, while at the same time, Bitcoin’s worth was multiplying 350x. He called Bitcoin “the fastest-growing hedge fund in the history of hedge funds.”
There has always been a sense of scepticism stemming from the volatile prices of Bitcoin, which, for most of the time, have been misleading. Yusko steals from John Burbank and quotes, “price is a liar“. Prices rise and fall in response to euphoria and fear prevalent in the market and cannot be an actual indicator of an asset’s actual value.
While the price of Bitcoin fell from $500 to $185 in 2013, it soared again in 2015 but all throughout, the Bitcoin network was gaining value. Despite its notorious price history, Bitcoin is not only the top cryptocurrency but also holds a major market share of over 40%.
“Innovation is an asset”
While there are four risks (bond risks, structural risks, illiquidity risks, and equity risks), illiquidity risks are the most rewarding in nature. Illiquid investments particularly concern private investments in real estate, equity, projects, etc. Most big investors generally invest in private innovation-oriented investments, like in the case of venture capital. Yusko efficiently puts the conscience behind this – innovation is an asset. Printing dollar bills will never turn a pauper into a prince, but innovating your investments will. Blockchain and its allied tech, including Bitcoin and other cryptos, being an innovation in themselves, would create businesses that in turn will create stocks, bonds, commodities, etc. Innovation-oriented assets are a key asset in successful global portfolios, and cryptos are nothing but innovation – technology+tokens.
“Bitcoin is the perfect uncorrelated asset”
Uncorrelated assets can be of incredible value to a portfolio as they negate and reduce risk. Yusko adds, “Bitcoin is the perfect uncorrelated asset.” It adds zero risks to the portfolio and ensures increasing returns. While traditional investment generally restricts citizens on culminating bonds or assets regionally, Yusko stresses that the future will be all about global portfolios. Bitcoin has a 0.15% correlation to stocks and can provide the necessary diversification required for any portfolio.
“Bitcoin is an innovation of money”
Yusko calls Bitcoin “an innovation of money.” and reaffirms the nomenclature of ‘DIgital Gold’ for Bitcoin. For 5000 years, gold has been the ultimate store of value, but it is not very portable or divisible. As we move from the analogue world to the digital world, Bitcoin is the perfect money. It is portable and can be broken up to its 100 millionth unit, thereby democratizing and decentralizing investment like never before.
Is Bitcoin the Only Leader in This Innovation Movement?
“We are going to have a protocol stack for Web3”
Yusko asserts that while Bitcoin is truly a “fantastic asset,” there are tons of other blockchains that will fuel the web3 internet protocol similar to the web2 protocol stack that we have today. Yusko regards Bitcoin as the base layer, atop which there is Filecoin, and in the middle, Solana, Polkadot, and Ethereum acting as the ‘www’ tying everything together in a toolkit.
So while Bitcoin generates a vast opportunity, other protocols also do. Ethereum, he notes, solves the challenge of the non-generation of income in an asset by enabling revenue sharing. Gaming, play-to-earn, NFT, and metaverse will all be of monstrous significance in the future. NFTs will serve huge possibilities in a wide range of blockchain applications- starting from anything digital, including art, fashion, licenses and certificates, collectables, sports to real estate, domain names, digital identity and virtual land.
“Exponential growth matters”
Currently, the number of tokens is limited, but Yusko predicts that we will have billions and trillions of tokens for every currency, commodity, and financial asset in the future. What the internet did for commerce, Blockchain and crypto will do for financial services.
The development of the mobile network in 2007 surpassed the growth of the internet, not linearly but exponentially. And this exponential growth will lead to greater wealth generation. Yusko explains the magnitude of wealth generation via a parabolic curve where web 1.0’s wealth will form the part of the curve parallel to x-axis web 2.0 will have the middle curve to itself, while web3 wealth generation will be equivalent to the curve parallel to the y-axis.
Can Regulation Stop this Surge?
Although Yusko predicts that Bitcoin would reach $2,50,000 soon in the coming years, he comments how there will be a ‘bust’ from regulatory friction, from fear, from the infrastructural shift to applications.
He emphasizes how incumbents will try to slow down the development of cryptocurrencies with regulations, but that would be just a temporary hurdle. Incumbents are economic actors, and he throws a light on how this behaviour to curb innovation is natural and has been going on for a long time in different scenarios across industries.
Mark Yusko ends on the note that all factors surrounding the short-term prices of Bitcoin, cryptocurrencies in general, are driven by sentiment rather than value. Short-term developments are pretty notorious in general. For 2021, he predicts that the more likely scenario is Bitcoin being in the range of $45,000 to $60,000 and only with another spike can it hit the $100,000 value.
Let us hope that Yusko’s predictions come true for all crypto-enthusiasts out there. Visit WazirX, India’s most secure platform to buy crypto!Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.