Do not panic the reader. I have not changed my mind, portfolio, or convictions. Quite the opposite. I have been explaining in this same forum and since 2016, the advantages and reasons why, from an investment point of view (or even just out of mere intellectual curiosity), one should understand what bitcoin is and how bitcoin works (BTC), to overcome this initial stage, understand the reasons why you should incorporate it into your pension plan, grasp the change in monetary paradigm and the utility it incorporates and, of course, being aware that all risks must be managed correctly forever.
In these six years of learning, I have had to deal with all kinds of situations and characters. On some occasions, I have had to explain the contribution of value of crypto assets in general and that of bitcoin (BTC) in particular and in others, I have been surrounded by fanatic “bitcoiners” I have had to fight with arguments of all kinds, since financial freedom is not achieved without effort or knowledge. I still think that the “hodler paradox” is a utopia to dupe newbies, I am aware that the concentration of wealth in bitcoin (BTC) follows a similar distribution to that observed in the global wealth of families (10% of the world population has 85% of the total), and each time a seer throws his price predictions on any crypto asset (Yes, let’s see if we understand since not everything is cryptocurrency …) of the style “we will have bitcoin (BTC) at 100,000 in December 2021”, I can not stop remembering Rappel and how good it was when I saw him in the TV.
Hector Estepa. Bogota
But beyond both extremes, the middle path is the one that I have been defending with greater or lesser success in recent years. According to this roadmap, The first phase that should be overcome started from a first acceptance and adoption of bitcoin (BTC) as a monetary asset that will present utility to an increasing number of people. That is the base (the utility) on which the true value and meaning of all this cryptoeconomy can and will be created. When a position is raised, whatever it may be, and you do not know or can answer that last question of what a specific project or protocol is about to improve or contribute, it will be a bad sign from an investment point of view. After this phase, well reaching a some consensus on the ability to be a store of value, a type of “sound money” or, the one that I have been defending as an asset class in itself, it will be necessary to incorporate it into a portfolio in its limited percentages (here you can see how, above 10% of a portfolio the risk assumed ceases to compensate for the profitability generated) and the second phase will develop further.
Notice that in the meantime, the three parallel points necessary for this stage to make sense are developing and being fulfilled. In the first place, there is less and less trust in our system and governments, which leads to the search for alternatives where there are no intermediaries. Second, both millennials and “centennials” are 100% digital and interact more and more in that environment, understanding much better than previous generations the value contribution that certain protocols incorporate. In addition, the former are beginning to receive the largest transfer of wealth in all of history, and they move in a social environment with a potential that we are not yet aware of. Third, Wall Street is already interested in this whole world because they have discovered that there is a lot of money at stake here and lately, they are beginning to be aware that the revolution is unstoppable and we have to join it. In this regard, I cannot deny some unease generated as a result of the signs of union between the crypto elites and the established ones (Fed, Wall Street and Silicon Valley), but that is another story.
Caitlin Ostroff Santiago Perez The Wall Street Journal
In the second phase and using open source architecture, the development of Smart Contracts should allow the creation of financial services without intermediaries and much more transparent, new business models and even better and much more democratic governance systems. As of today, it turns out that the total amount blocked (TVL) through the different Blockchains exceeds 163,000M USD. Although Ethereum is still the leader In the DeFi ecosystem in this regard (even with prohibitive gas costs for the small investor), other infrastructures at Layer 1 (L1) level such as BSC, Terra or Solana are gaining ground. The development and construction of new projects does not stop growing and, being these totally open to everyone, the copy that incorporates improvements is facilitated and ends up generating a better product than the previous one on many occasions. That’s what the new crypto economy is about.
In the early days of crypto assets, it was hard to find value outside of Bitcoin. Hence his dominance in terms of capitalization and the reason for the little real success of projects like Litecoin (LTC) or Doge. With the emergence of Ethereum and Smart Contracts, that talent at the level of software developers and thanks to economic incentives, has gone into a second revolution where the entire DeFi environment (decentralized finance), that of NFTs, Blockchain gaming and lately the DAO, are the examples of this new wave in which we find ourselves.
On the one hand and taking the main DeFi projects, the ability to generate cash flows “on-chain” means that there is intrinsic value and that conventional valuation measures can be applied. A glance at pages like “Token Terminal” allows to observe the income referrals on the most important protocols. Uniswap (UNI), Sushiswap (SUSHI) or Synthetix (SNX) are clear examples of what has been said. It’s worth noting that these DeFi protocols are tremendously efficient at replacing human labor with automated software. If a part of the current infrastructure of the financial system it could be replaced by code (which can already be done), the saving would be brutal. At the governance level, these DeFi projects are built with the idea of using tokens to vote in decision-making. DAOs are another of these proposals that we will see emerge in the immediate future.
And despite the fact that at the moment a large part of these protocols are focusing on achieving deposit solutions, loans, Decentralized Exchanges, etc. used by investors and speculators, the real economy is already making use of all these advances. An example is EthicHub, a “crowlending” platform that connects investors with farmers who do not have access to financing. Through the use of Blockchain applied to financial inclusion With impact, it is allowed to lend money to coffee projects in small unbanked communities, on the other side of the world. With the Ethix token, an improvement in the security of the ecosystem is achieved thanks to the incentive system that it incorporates, serving as a bridge for these decentralized finances and the economy of impact.
In this same phase and currently, we are witnessing the “hype” of non-fungible tokens (NFT) where USD 11.8 million are being paid for a “jpg” of a CryptoPunk, or 69 million for a digital work of Beeple. In August, the total sales volume of this type of tokens amounted to 715 million USD (Art Blocks concentrated 87% of the total), highlighting what is digital art and gaming. OpenSea, one of the largest NFTs trading platforms, has more than 25,000 users (interacting wallet addresses). Axie is the greatest exponent of online games based on NFT, which shows that an internal economy can be generated within a game.
But beyond the prices and the absurdities paid, what really matters is the infrastructure that is being created for future business development. The NBA and its “Top Shot moments”, Asics with its first collection launched last month, collectibles to connect with fans As Team GB did in the Tokyo Olympics, Alibaba through SCMP and its “Artifact” project, brands such as Gucci, Louis Vuitton or Burberry are already experimenting and releasing NFTs that open up other ways of communicating and doing business with their clients. And that’s what matters.
The Wall Street Journal James mackintosh
And that leaves us in the third phase that I have catalog as the one where “the software will eat the software.” Thanks to the combination and development of all the above, new applications are being created that are improving and replacing current business models, generating increasing flows In time from the classical centralized financial systems, it made the environment of programmable finance.
In summary, Bitcoin has proven to be the safest network to date, thanks to the use of cryptography and incentive systems. Your unit of account is demanded for different purposes that are proving its usefulness and that, thanks to its limited offering in a higher adoption environment, you may end up fulfilling your goal. But that’s not the most important thing anymore. While the former fulfills the main function of security in this concept of value reserve, other Blockchains such as Ethereum are allowing the development of the cryptoeconomy, with unpublished and code-based business models, which are already generating monetary flows very important, attracting the attention of the main world players in all sectors and that, if they know how to interpret them correctly, offer not inconsiderable investment options.
However, as I always tell you, it is not about buying penguin NFTs to sell them more expensive (not at all), but to be able to identify opportunities at the infrastructure level and bet on them. Always from a point of view of maximum rigor, fully understanding the risk assumed, the value bet made and, of course, limiting that through the reduced use of the savings destined for this purpose.