In my last article, we discussed about how Bitcoin futures will affect the dynamics of crypto space. According to latest news, the world second largest exchange, Nasdaq, will soon start trading Bitcoin futures. This clearly indicates that the American Government is pro Bitcoin in nature and regulations are on its way. From a virtually unregulated market environment, Bitcoin is moving to a regulated zone which brings more legitimacy and professional investment approaches. This would attract more seasoned and shied away heavy investors to look for investment opportunities in Bitcoin space.
“We are operational ready. Commission staff held rigorous discussions with CME over the course of six weeks, CFE over the course of four months, and had numerous calls with Cantor. CME, CFE and Cantor agreed to significant enhancements to contract design and settlement, and CME to margining, at the request of Commission staff.”~Press release, CBOE.
Let us discuss some interesting points here
How Bitcoin Futures Will Handle Hard Forks?
Hard forks occur when miners agree to changes in the blockchain network that underpins the crypto currency, creating a new coin which has the same transaction history of Bitcoin. This can be initiated by developers and miners community. Recent examples are Bitcoin Cash and Bitcoin Gold. I presume that Bitcoin future products of these exchanges would have the provision to reinvest proceeds from the spin-off back into the original bitcoin. This is similar to the traditional approach of buying more stocks from the dividend received. But we are yet to hear officially on this.
Bitcoin Adoption Cycle – Are We at Tipping Point?
Tipping point is defined as the point at which a series of small changes or incidents becomes significant enough to cause a larger, more important change. It is the critical point in a situation, process, or system beyond which a significant and often unstoppable effect or change takes place.
2009-2011 can be considered as innovators period were Bitcoin was little known to public and had teething problems. Then, in 2011-2016 period it moved early adopters stage were more tech savvy investors, technologists and bitcoin extremists got into the wagon. Now we are at the early majority stage in which Bitcoin is getting converted to a mainstream, tradable asset class.
Let me try to align above diagram with price movement. The major chunk of price movement happens during the late “early adopters stage” and early “early Majority stage”. It is also worth noting that Bitcoin price is following a logarithmic graph pattern. Below graph is plotted by Tuur Demeester, way back in 2014. Surprisingly, the price has mostly followed this logarithmic regression network effect pattern until this date.
What Should be the Approach for Early Adopters?
I came to Bitcoin space in the last leg of early adopters. Apparently, I was one among the first seeking alpha writers who wrote article about Bitcoin here in July 2017. Since then price become 5X and thus the popularity as well. I am sure, many investors who do not have any technology background entered in early 2017. My advice to them is to hold on their position for next few years as the mass adoption period is nearing and we may see exponential growth in coming days.
Let me put on some interesting statistics as a concluding note
- According to Wikipedia, there are approximately 13m millionaires in the United States and about 12m HNWIs ($30m+ net worth) in the world. In other words, if every HNWI in the world wanted to own an entire bitcoin as a ‘risk-free asset’, then they could not. This is because of the fact that there is only 16.5m Bitcoins mined till now and approximately 4m is already lost and 3-4m is already with innovators and early adopters.
- Trace Mayer has put down an interesting assumption on how much fresh money is pouring into crypto space on a daily basis. Under the assumption that Coinbase accounts for 8% of new global Bitcoin users who purchase at least $100 of bitcoins, approximately $21,875,000 of new capital coming into Crypto space every single day just from retail demand from 218,750 total new accounts.
- According to the logarithmic regression graph, Bitcoin should reach 100,000 USD by July 2021.
As always, my two cents of advise. If you are still not invested but getting convinced about Bitcoin, invest a small amount (1%-2% of your portfolio) and sit tight. Your investment belongs to Bitcoin blockchain and profit belongs to you. Happy investing!!
Disclosure: I am/we are long BITCOIN.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.