The chairman of digital currency exchange Bitstamp says that cryptocurrencies like bitcoin will soon become serious assets for investors to have in their portfolios.
Dan Morehead, CEO of Pantera Capital, a blockchain investment firm, and chairman of Bitstamp, was speaking at the Sohn Investment Conference in San Francisco earlier this week.
Attended by portfolio managers and asset allocators, Morehead said:
“Bitcoin’s essentially going to revolutionize currency, or money.”
He added that:
“If it does work, the upside is so high, it’s a rational, expected thing to have in your portfolio.”
Morehead believes that bitcoin is ‘going to disrupt money just like voice-over IP‘ took away the dominance of major telecommunication companies.
According to him, most of the digital currencies that run off the blockchain are protocols. Yet, while the may run the Internet most of the profits are going toward applications, such as Google’s Gmail, which are built on top of the protocols, explains Morehead.
He adds that while bitcoin may take 95 percent of the earnings, only a small percentage goes to the application such as the exchanges.
“Only a tiny bit is in the companies.”
As an example, he cites digital currency exchange Coinbase. It’s valued at $1.5 billion compared to bitcoin’s market value of just over $70 billion, according to CoinMarketCap.
Consequently, this has a ‘very interesting implication for investing,’ says Morehead.
According to CryptoCompare, 12.6 percent of BTC/USD trading volume took place on Bitstamp on Thursday 5th October.
Bitcoin’s Dominance Continues
At the time of publishing, on the 5th October, bitcoin remains the number one cryptocurrency. At present, it’s trading at $4,245, a 0.60 percent drop in 24 hours. Over seven days its value remains up by 1.05 percent. Its market value is currently worth $70.4 billion.
The highest point the cryptocurrency has reached, so far, was over the $5,000 mark on the 2nd September. Then it helped to push the combined market value up near $180 billion for the first time. At present it’s worth $143.4 billion after climbing back up from below $100 billion on the 15th September.
On that day, bitcoin’s price was trading below $3,000, at $2,947, pushing its market cap down to $48.8 billion. This was brought about by China’s closure of domestic digital currency exchanges, which saw market prices decline. As a consequence, several prominent bitcoin exchanges announced they would be ceasing their operations. At present, Chinese exchanges ViaBTC and BTCC have stopped their services. However, Yunbi, OKCoin and Huobi are expected to stop functioning at the end of October.
ViaBTC is considering relaunching its operations overseas; yet no date has been announced.
However, in recent weeks the market has made a steady recovery. Many are proclaiming that bitcoin’s value will exceed previous highs as traders and investors regain confidence in it again.
Whereas, Christine Lagarde, the managing director of the International Monetary Fund (IMF) believes that cryptocurrencies may eventually give traditional banking systems ‘a run for their money.’ As a result, she thinks that ‘it may not be wise to dismiss virtual currencies.’
The Rise of the Crypto Market
Without a doubt, the digital currency industry is gaining increased prominence. Many bankers and other industry figures don’t seem to understand why this is.
Yet, despite this its popularity is continuing to gain traction. So much so, that James Gorman, CEO of Morgan Stanley, recently said that bitcoin is ‘more than just a fad.’ Refreshing to hear, this indicates that bankers aren’t all against cryptocurrencies.
As Gorman says:
“The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because what it says to the central banking system about controlling that.”
Not only that, but digital currencies like bitcoin improve settlement efficiency, particularly across borders. Instead of waiting days for a bank transfer to take place, peer-to-peer payments can occur through cryptocurrencies in a timely manner with low fees involved.
Countries such as India are realising the benefits of bitcoin. According to Arun Jaitley, India’s finance minister, there has been ‘notable growth‘ in the bitcoin market in recent years. This has been pushed along through the country’s move to embrace a digital economy. Not only that, but as the country is unlikely to ban the currency it is considering regulating it. This will no doubt further help toward furthering its adoption.
Another factor toward bitcoin’s rise is because it’s being driven by ‘a story.’
That’s according to Yale economics professor and Nobel Prize winner Robert Shiller. He claims that bitcoin resembles a bubble and that bubbles are brought about by stories.
Shiller, who won the Nobel Prize in economics for his work on bubbles, said:
“I think that the thing that’s driving bitcoin at the moment, like other examples of bubbles, is a story.”
However, he adds:
“And it’s the quality of the story that’s attracting all this interest, and it’s not necessarily sustainable.”
The main attraction being that no one knows who the creator of bitcoin, Satoshi Nakamoto, is. While there have been people claiming to be the illusive figure, no one is entirely sure. As such it remains a hot topic.
“So the story has inspired young people and active people, and that’s what’s driving the market. It’s not fundamentals. It’s not like this is a fundamentally important thing, this bitcoin.”
Here to Stay?
Of course, whichever way you look at it the market is continuing to surpass most people’s expectations. Some might claim that it’s a speculative asset, but it can’t be ignored that it provides people with a means of living.
For millions of people who rely on remittance payments, knowing that the crypto market is a viable alternative may be the solution they’ve been searching for.
Not only that, but they can rest assured that they will receive the money sent without paying any hidden transaction fees.
Even though there are critics of the currency, as long as there is demand for it, it will remain. It’s just a matter of time before bitcoin becomes an asset that is part of investors portfolios.
Featured image from Shutterstock.