Bitcoin now sits comfortably around $13,000 despite news that a stimulus package will not happen before the election. Though it is in some sense possible to tie this development to the apparently high likelihood of an upcoming change of the guard in the Oval Office, it seems more likely that the markets are largely moving along without much attention to the presidential election. Ethereum 2.0 (ETH2) is apparently getting very close to ready for launch, and as a result it may be that the present moment is a pivotal one.
This moment in history is also made possible by an increase in visibility for dozens of crypto-based startup companies which are being evaluated for possible purchase by finance giants such as PayPal, which announced that it was in talks to pick up BitGo, an institutional cryptocurrency management startup.
Talk of a Bitcoin supply crunch is just beginning to hit the airwaves and speculators such as myself cannot help but nod in approval as institutional money increasingly takes note of the stability, transparency, and simplicity that cryptocurrency based products are offering. We’ll want to think through the situation, evaluate our holdings, and be sure we’re in the right position moving into the next few months even if the next stimulus package never happens at all.
Fintech, Meet Crypto
The company that got me into cryptocurrency investing and speculation managed to hook me by telling me about a debit card that works anywhere Visa is accepted — possibly negating the currency exchange problem simply by subordinating it to a cryptocurrency market! Fascinated, I signed up. I made a few market plays that worked, and a few short weeks later I made my first deposit. And the debit card linked right up to my iPhone’s Apple Pay system, and I made my first purchase less than an hour later, before my Blockcard even arrived in the mail. If you want to try them out, feel free to use my link here.
This major breakthrough in cashflow technology has been facilitated by the Visa network and is currently under construction by a startup company that works in close cooperation with the global payments giant. The current market cap of Ternio, the cryptocurrency issued by the company which offers consumers its Blockcard product, is only $6M or thereabouts.
The technical problems involved in a global crypto product like this is are substantial, so it is possible that Ternio may be a target for acquisition by Visa in the future.
In a phone call I had with Daniel Gouldman, CEO of Ternio, a few months back, I asked about the financial situation of Ternio. He confidently responded that the company was not looking to raise money. An email that went out to Blockcard members a few weeks ago announced yet another Visa partnership, which we can only assume includes additional funding to continue building out technology that works well in conjunction with the Visa network.
The most significant piece here is that major companies have been dumping enough money to run entire startups into these spaces for years now.
Ternio is by no means the only exciting startup in this space. Recall that BitGo, which has been around since 2018, has been announced as a candidate for acquisition by PayPal as it looks to increase its exposure to Bitcoin in a well-investigated and thoroughly thought-out plan to break into the cryptocurrency marketplace. The goal appears to be a sandboxed cryptocurrency system to allow customers to buy and sell Bitcoin via the PayPal application.
Almost immediately after unveiling this, PayPal could add a service to let users send one another payments using BTC for a fraction of the current cost to send money. The big issue for PayPal is that 3% is an astronomical fee in the cryptocurrency world. Their mission needs to be to either find a way to cut almost 100% of the fees they currently charge using crypto to do the heavy lifting for them, or to prevent the current payments architecture that already exists in the cryptocurrency universe from becoming more user friendly.
Nexo is another crypto debit card startup planning to put out a debit card. There is a good chance they will end up being evaluated by larger companies for acquisition as well, and they have their own debit card on the way already. There are dozens of these companies lurking out there, just beneath the level of conscious awareness, working with major players like Visa, Mastercard, and probably American Express. Problems exist, of course, but the general use-case (a crypto-powered debit card that can be used anywhere) has been evaluated and more or less given the go-ahead by major players in the space. This embrace of these technologies is perhaps the most bullish event of all time for Bitcoin, if and only if it can sustain its commitment to its principles in the face of massive and wolfish corporate interest.
How Likely Is Bitcoin Scarcity, And What Is A Satoshi?
The smallest unit of Bitcoin cryptocurrency is called a satoshi. It’s .00000001 BTC, or 1x10^-8 if you prefer scientific notation. At $10,000 BTC, a satoshi is worth $.001, or 1/10 of one cent. That isn’t much! But if Bitcoin ends up reaching a $100,000 price tag, a satoshi will be worth $.01, a measurable unit of currency! Keep in mind that the BTC market cap will need to break $1T to get there, reaching roughly 1% of GWP, a measure that essentially contains all the money in the global economy, but BTC can be used for purchasing and hence is not necessarily something to be thought of as a commodity. As such, it may not be explicitly correct to temper our expectations of Bitcoin market cap against the GWP in the first place.
The concept of Bitcoin scarcity implies a massive price explosion from present levels which would eventually become manifest in some need for these miniscule slivers of a Bitcoin. If a BTC was eventually worth $10M, then a satoshi would be worth the same amount of value as the US Dollar.
The long-term, hard bull case for Bitcoin supremacy assumes that people will ascribe to Bitcoin the role of a store of value — and, as Chamath Palihapitiya loves to say, investing only 1% of one’s assets into Bitcoin today could eventually pay stunning dividends.
Taking into account the fact that a global architecture designed around Bitcoin is currently being rolled out at stunning speed, it seems less likely each day that Bitcoin scarcity will never be reached, but the contemporary case that seems to pop up more and more frequently in interviews today is perhaps too eager to imply that we’re on the cusp of that $1M BTC moment. In fact we still have quite a ways to go before that happens. It seems to be starting, but we do not yet know how large the current valuation spike will actually get or if it will subside like the 2017 BTC spike did.
So… We Discussed TERN, But Why Cosmos, BAND, and AWC?
I’ve written in the past about the tokens I hold and why, but only rather sparingly. I feel at this point that my reader deserves to know what I hold most of my money in and why.
Cosmos
I hold Cosmos the same way many people hold Ethereum (ETH). I believe that the best vision for an interoperable universe of blockchains is the vision presented by the Cosmos team, not the Ethereum team. My primary reason for this belief comes from the DBFT Proof-of-Stake model and the ATOM token’s seemingly gravity-free status in the market today. ATOM* rose from about $3 back in June to about $9 during the August rush, making me a very happy man as I invested more money into Cosmos in June than at any other point in my life and seeing that volume of money succeed is a high unlike any other.
I believe that the current trend exhibited by Cosmos suggests rapid growth is almost inevitable, given the bullishness of the market in general as altcoins begin to really find their stride. Ripple (XRP) is another very solid play which is making brilliant moves far from the madding crowd these days, but I prefer Cosmos because Cosmos represents the canvas upon which the best developers of the future will end up building their greatest applications. Ripple and Bitcoin just represent tools that move value around and are thus less appealing.
BAND Protocol
BAND is probably my second-favorite asset. I’ve actually lost a bit of money on it, as I got into it at the end of August after watching the meteoric ascent of Chainlink. I also bought a small amount of VEO after reading up on oracle networks. The selling point of BAND is that it is interoperable — it started off as an ETH token and was migrated to Cosmos to facilitate further interoperability.
In the US, where LINK is based, most things still run on Ethereum, but that doesn’t mean there aren’t other markets out there. BAND is more appealing to me than LINK at this point because I believe the cheap transactions that take place on the Cosmos blockchain will provide a long-lived competitive advantage in terms of price and ease of use.
AWC
AWC is a token I’ve loved and hated. I went hard long on it when I discovered its parent application, a blockchain-based wallet which exchanges one token to another. The interface is a bit clunky, the transactions are somewhat slow, and frankly there have been a number of technical problems that might have seen me leave if I were really able to do so by selling the tokens.
However, it is very difficult to sell AWC if you live in Texas. I’m still not sure who’s making these laws or why on earth they would want to keep me from accessing Binance, but I’m assuming they’ll get with the program before too long simply due to the pressure the markets are about to put on the people in charge of the governments at all levels.
I could send my AWC to a friend who does have access to exchanges that support it, but I decided to set the funds I thus invested aside until the market access I need becomes available when I made the investment. I’m staked at 20%, but the market cap for this token is under $10M too, so the risk is acceptable even if I have to wait a year or more to cash in (as long as I don’t need the money for something!) because it could easily 10x for me on news of major exchange listings.
The Bull Cases
The various bull cases are simple enough to understand. Bitcoin is a media darling, Ethereum has a major development following, Cosmos is a likely candidate to compete with Ethereum for its following as demand for cheap transactions increases. BAND Protocol is a global darling of the oracle market that seems tragically undervalued compared to Chainlink (market cap ~$4.5B for LINK vs a measly ~$100M for BAND). TERN suffers from a few flaws but is actively working to improve and AWC is in much the same boat.
Each of these bull cases must be compared against the others. To make the calls I’ve made here, I’ve compared technologies across the board in spaces I’m interested in and made value-based plays against many of the most popular crypto assets on the market. Bitcoin may be the next standard of value, but if it explodes to a $2.5T, much less a $25T market cap, it’s reasonable enough to assume that Ethereum will outperform it because it’s actually used to do things people need to have done and are willing to pay money for. So to me, it seems like betting on a ~$50B market cap there’s an extra zero there at the very least and, given the possibility of ETH2 market dominance, perhaps even more than that.
Given these two bullish scenarios, and the allure of somewhat better pot odds in the Ethereum game, it makes perfect sense to look at my Cosmos play (made around $500M in market cap) and immediately recognize the purpose of it: outperform ETH and BTC over the long run by starting with a larger slice of a smaller pie.
BAND Protocol is the same principle applied again to a technology with traction but not cult status at present, and TERN and AWC are both no-namers that have unique selling points but could never sustain the portfolio percentage that ATOM has allowed me to hold all these months.
I hold a small chunk of BTC and ETH as well as these others, but my approach is rather diversified in accordance with risk and I am aiming for a return of 10x to 100x in the coming months. I also don’t have much in the way of assets, and thus am more predisposed to risks than say my parents might be. Nothing in this article constitutes financial advice, but I hope you enjoy the strategies and analysis I’ve developed and discussed here.
Conclusions
Risk and investment go hand in hand. If there were no risk, no one would think twice about investing and the returns anyone would get would be minimal and/or random. There is risk, however, and given my seemingly limitless appetite for it acquired during my startup and freelancing career, I’ve been able to successfully design a portfolio for myself that still somehow looks “just right” even all these months after its inception.
Many of the plays I’ve made have fallen off. Fortunately, I generally wade into new markets with a small investment and am thus not hurt much even when I lose 10–20% on a bad beat. Sometimes it goes the other way and I randomly make a few bucks before moving on with my money.
It takes a certain emotional connection to a project to be really able to appreciate the various costs and benefits inherent in a given token or blockchain ecosystem, and Polkadot was one token I liked and picked up at one point but was unable to justify holding long-term. It isn’t that I think Polkadot will fail; it’s that I’m worried that buying into a market cap of $5B already is going to severely limit my upside in the turbulence I’m expecting to see over the coming months.
Make no mistake: it appears that the media is starting to pick up on the crypto markets again and we all remember how bullish it was last time that happened. If 2020 ends up anything like 2017, most of the buys made now will be winners in a few weeks or months. The question is whether the win will be a 2x or a 100x.
My goal is to try to maximize over the next few months and that involves getting into the best position I can see before the wheels really get rolling on this. I’ve pulled some of my ATOMS out of staking to day trade with, not to try to make a bunch of money but just to entertain myself and stay focused on the news and the markets in the hopes that what ends up happening there provides me the leeway I’ll need on the financial side to never have to punch another clock.
Full disclosure: Author is long on every token mentioned in the article.
