This week’s Coinbase initial public offering (IPO) is a major moment for crypto. That amazing $85 billion valuation is turning heads all over Wall Street. I imagine that for some old-school investors, this crypto thing suddenly looks more legit.
We were already in the midst of an institutional adoption cycle before. I think the Coinbase IPO is likely to drive us a lot higher.
Recent comments by Fidelity’s Head of Digital Assets, Tom Jessop, reinforce my view.
“I think we’ve reached a tipping point. I think you’ve had the accumulated experience of now roughly 12 years of the Bitcoin blockchain being operative since the genesis block in early 2009. And the pandemic, quite frankly, was a catalyst for institutional adoption, and specifically Bitcoin and the narrative, or use-case, around digital gold…”
“…Bitcoin adoption has hit a tipping point and investors don’t want to sit on the sidelines…”
I just love saying that: Fidelity’s Head of Digital Assets. It’s sometimes hard to believe that we’ve reached the point where Fidelity — an absolute monster with $4.9 trillion in assets under management (AUM) — has a big bitcoin division.
And Jessop is exactly on point. It’s the “digital gold” use that’s driving bitcoin higher, which is being fueled by low interest rates and ongoing quantitative easing.
Looking Back to 2017
In July 2017, I wrote an article titled “What Happens If Bitcoin Goes Mainstream?” Bitcoin was trading around $2,600 at the time.
As is the case with most new disruptive technologies, the world’s never seen anything quite like crypto. There’s still quite a bit of skepticism to overcome.
Bitcoin is still in the very early adopter phase, which means it still has quite a ways to go, assuming we’re headed for mainstream adoption.
At this point I’d say we’ve probably moved on from the “very early” adopter phase and into the “early” adopter phase. But there’s still a lot of skepticism to overcome — which is a very good thing, because eventually a portion of those people will buy in.
Institutional adoption is happening. And it’s working out extremely well for the early firms. This will fuel FOMO from other professional investors, which could drive prices substantially higher. I honestly hope it doesn’t get too crazy. I’d rather see a smooth and gradual ramp up than sudden chaotic spikes.
If these institutional investors are smart, they’ll hold long-term. It’s really the only reasonable way to invest in crypto. Unless you’re a professional trader with an amazing record, steer clear of short term trades. Buy and hold. You’ll almost certainly make a lot more money. And you’ll pay long-term tax rates instead of insanely-high short-term ones.
If a lot of these new institutional buyers are long-term buy and hold types — which I expect many will be — it bodes very well for long-term price and stability. Of course, it’s crypto, so anything can happen. But I continue to like the risk/reward ratio.
Source: Early Investing