This week saw a slew of new articles pertaining to events surrounding the crypto-sphere that are showing how this asset class is moving into an entirely different light.
The progress is amazing and this is something that might not slow down for a while. In fact, it could accelerate.
It took a very long time for the market cap of cryptocurrency to reach $1 trillion. This happened in January of this year. Over the next couple weeks, it is possible for us to see $2 trillion, less than 3 months later.
Coingecko.com
So what is inciting this run? It looks like we are nearing the time when there is a lot of mainstream, institutional acceptance.
First, we see another technology firm, Meitu purchased $49 million worth of Bitcoin and Ethereum. This is an ongoing trend that we see across the world and the Chinese companies see it no different than here in the United States. Placing some of a firm's reserves in Bitcoin (and others) makes sense.
This comes after Morgan Stanley became the first major bank to offer access to Bitcoin funds to its major clients. This is a remarkable turnaround from a few years ago when the banks were bashing Bitcoin at ever turn. The FUD at that time was fierce, probably assisting in the "Crypto-Winter" the market suffered through.
Grayscale decided to launch 5 more crypto products as the SEC is confronted with another Bitcoin ETF application. BNY Mellon got into the game with more than $133 million in funding for a crypto-security firm.
Finally, the legislature in the State of Kentucky passed a bill, sending it to the Governor for signature, which would provide tax breaks to crypto mining companies in an effort to attract them to the state.
These were just some of the headlines that appeared in the last 24 hours. That is how quickly things are moving.
The threshold of $2 trillion for the market cap could be an important one. We are to the point where cryptocurrency is roughly 25% the total market of gold. This is moving it towards a time when we see the appeal expand greatly.
It is a fact that was not lost on the aforementioned Morgan Stanley. An investor note states that it still considers Bitcoin to be a speculative investment yet it could be getting close to being an investible class.
This is a major shift from even 6 months ago and should open the door to a much wider array of investors. If the major banks start to promote it to their clients, a wave of new money will flow in.
Growth of the asset class is vital since each layer up attracts different levels of investors. This is something often overlooked yet it is why, even though the market as a whole gets larger, the pace of acceleration actually increases.
When a market is small, it does not take a lot of money, relatively speaking, to move it. At that time, however, the investors are the speculators in the truest sense of the word. They want to be in the game long before everyone else. The risk/reward ratio is extremely high with a chance of total loss. It is akin to the wildcatters in the oil industry.
These people enjoy the Wild West atmosphere. This does not appeal to most groups of investors, especially institutions.
As the market grows, more investors with different degrees of risk tolerance are draw in. We saw that happen over the past year as companies such as Microstrategy, Square, and Tesla all got involved. Yet we still see the major banks, insurance companies, and pension funds on the sidelines.
The investor note points out that this is still considered very speculative but it does open the door to another group of investors. Portfolio allocation might mean that some firms decide to put .5%-1% of their reserves into cryptoassets.
For many of these firms, even half a percent is a very big number.
At the end of the day, it still all comes down to development. The money flowing in is forecasting future moves in the markets. However, that will be short lived if there is not the activity to substantiate what is taking place.
We are dealing with technology and the technological hype cycle is well known to many. New ideas often capture the imagination of investors, attracting large sums of money. This can lead to speculation about entirely new industries forming, only to find the hype die down when the results do not match up.
It is likely that cryptocurrency and blockchain are passed this point. We went through that a few years ago. Nevertheless, projects still need to be rolled out to attract the users, kicking off the Network Effect.
This is a different time we are living in. Through tokenization, coupled with the fact that coding knowledge is spread so wide, we are seeing innovation coming from across the planet. This is going to provide the breakthrough applications that are required to substantiate what is taking place in the financial realm.
All this mainstream money is a double-edged sword. Are we getting into bed with the Devil as they say? It is just a natural progression. Wall Street is not going to disappear overnight. However, it is vital to be mindful of mainstream, traditional finance. They have motives that are not conducive to freedom and growth.
Nevertheless, the funds flowing in will stimulate a lot more development. It also will enrich those who are at the core of all this, assisting in their efforts. This will make it very difficult for the big money players to come in an assert control. As the Steem conflict from a year ago, communities of developers and users do have options.
The traditional money game is changing. Wall Street knows something it up, just not exactly what it is. For them, it is business as usual.
There is nothing usual, however, about what is taking place.
We are embarking upon an entirely new arena that is going to change everything.
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