I’ve heard it all.
– “Cryptocurrency isn’t real.”
– “Bitcoin is a ponzi scheme.”
– “Crypto has no tangible value and anybody who invests in it is an idiot.”
The negativity surrounding the crypto space has been present since day one even though the market has grown substantially.
There are always two sides to everything.
While I respect and appreciate the opinions of others, I remain bullish on crypto. I personally believe crypto and the technology behind it (i.e. blockchain) will play a major role in the future. There are clear signs that point to the continuing rise of crypto and I will explain all of them. Stick around to the end because I’ll go over a few bad things about crypto as well.
Before we begin I just have to get something off my chest. When I refer to crypto I’m not just talking about Bitcoin. I’m talking about the market as a whole which includes Bitcoin and the many altcoins.
These are all based on my personal opinion and nothing in this article should be considered financial advice.
Let’s dive in.
1. Traditional Finance is Highly Inefficient
Banks don’t let you use all of your money
A big problem with many banks is the fact that they have withdrawal restrictions. Normally you can only withdraw about $5,000-10,000 per day depending on the type of institution.
Banks don’t do this to intentionally be annoying, it really has to do with federal banking regulations. Anything over $10,000 requires a FinCen report to be filed which just adds to the complexity of the transaction. When making larger transactions with traditional financial institutions you have to plan in advance.
Even if it’s your hard-earned money that you want to use, you are faced with restrictions in traditional finance that can severely limit your transaction ability.
On the flip side, crypto has no such restrictions. If you want to move $100,000 between wallets then you can go ahead and do just that. Now, I’m not saying you are going to be making large transactions every day, but when the time comes crypto simply makes the experience easier and better.
Transaction Times are Extremely Slow
Regardless of how much money you move around, bank transactions generally take multiple days.
When you transfer cash from one bank to another it’s not uncommon for the transaction to be pending for 3 business days. Applications like Wise, Stripe, and Paypal have shortened this time significantly but those applications are for sending money to other people.
If you are simply moving money between your own accounts expect the 3 business day waiting period. Banks do this mainly to avoid fraudulent transactions which is good, but it’s just highly inconvenient.
Crypto has virtually no waiting time. When you send funds from one wallet to another or swap currencies on an exchange, the transactions happen instantly. As blockchains continue to improve and innovate, transaction speeds are getting much quicker.
Interest Rates Can’t Keep Up to Inflation
Traditional financial systems offer significantly low interest rates for holding money.
Starting with banks, the average interest rate for savings accounts is 0.06% annually in the USA. This means if you have $1,000 in your savings account you are earning 60 cents. You read that correctly, 60 cents.
Of course, you can use a higher yielding bank like Ally and get 0.50% but even then with $1,000 you yield about $5 annually.
When you consider the average inflation rate of 3% you are actually losing money. In order to purchase the same basket of goods year after year, you need to earn at least 3% interest which is impossible with banks.
Stocks are the next best investment vehicle because over the long run you can expect about 7-10% annual returns by following the S&P 500 index. Those returns are very good especially when compounded over the long term.
If you want to go one step further and dive into the crypto world, you’ll find out 7% is on the low end of the spectrum. A platform like Nexo.io allows you to deposit crypto and earn around 10% annually. Anchor Protocol generates yields of around 20%. Riskier crypto protocols offer yields between 100 to 300%.
The point is, keeping your money in banks is terrible if you plan on earning any sort of income. In fact, you are losing money due to inflation eating away at your savings account. If you have a high risk tolerance, returns in the crypto world hold the potential to generate serious wealth.
2. Crypto Has Utility
Many people consider crypto a scam because it’s a digital asset that is intangible. They think just because you can’t hold it in your hands that there is no real value.
Take a look at the software industry. Software is a digital asset that is intangible but it still provides tremendous value to billions of people.
Most of the top companies in the world with exponential growth provide software as their main product. Google, Adobe, Salesforce, Microsoft, Meta, Intuit are all examples of high-value software companies that dominate their respective industries.
I can’t hold Google in my hand but the value it provides is immense. The underlying value of Google stock is based on the software product it creates. The exact same is true for cryptocurrencies and their respective projects.
Each crypto project has a value proposition very much like a company you can invest in. Depending on the quality of the projects, the price of the cryptocurrency will change accordingly. Much like there are bad companies, there are bad crypto projects that don’t create real value. There are also many good projects that have real utility and some even provide hardware you can hold in your hand.
After reading about the inefficiencies of the traditional financial system, I hope you can see that crypto provides financial utility. Transactions are cheaper, faster, and easier to execute with crypto. Bitcoin and Ethereum are the most popular cryptocurrencies but other blockchains are much more efficient. Solana, Fantom, Cardano, and Avalanche are great ecosystems you should do deep research on to see how the technology works.
Helium creates decentralized hotspots to boost wireless coverage all over the globe. Dish Network recently partnered with Helium to expand 5G coverage. People can order a Bobcat Miner, plug it in to set up the hotspot and passively earn Helium cryptocurrency. In addition to supporting wireless hotspots across the globe, you are passively earning Helium (HNT) tokens.
If you value security and speed, consider checking out decentralized browsers. Brave is a great example of a browser that is growing in popularity. Brave was created by the founders of Mozilla and features a built-in ad-blocker. Brave simply makes ads non-intrusive and you can even earn the native token (BAT) for simply using the browser.
Virtualized Private Servers (VPS) play a massive role for many companies around the world. Projects like Flux host Decentralized VPS and since it’s on the blockchain, if one server goes down another will keep things running. Flux is a scalable solution as applications grow in size and data. If you want to support the network, you can set up a node and earn Flux cryptocurrency every day.
Air Quality Sensing
If you were ever curious about the air quality around you, PlanetWatch is a really interesting project to check out. You set up one of their air sensors in your house and it measures the quality of the air in your city. The data is then monitored and local communities can improve their air quality. By setting up a sensor, you can passively earn PlanetWatch tokens.
These are just a few crypto projects that have actual utility. There are many other great projects that provide real value to the world we live in. While there are scam projects that exist, they are slowly being weeded out and the strong projects are filtering to the top. Before investing in any crypto projects it’s best to do your own extensive research and see if it’s a good fit for your portfolio.
3. Blockchain Technology Is Extremely Secure
Believe it or not, blockchain technology makes the crypto sector more secure than traditional finance.
Financial institutions are centralized meaning one company or even one person has full control over all the money and interest rates. If a collapse would happen to a centralized system, everything would be lost.
Crypto on the other hand primarily uses a decentralized ledger on the blockchain. I won’t dive deep into blockchain technology, but on a basic level, it puts users in charge and is virtually impossible to hack.
Blockchain works on a distributed ledger system where each transaction is recorded on a block. That block is then distributed to everybody else in the blockchain. In order to hack the system, you would need to control 51% of the hashing power.
If you want to learn blockchain and crypto basics, check out the Beginner’s Guide to Crypto.
4. Mass Adoption Is Underway
A large part of the success of crypto will be mass adoption. While the world isn’t fully there yet, it is slowly underway. The market cap is growing, large companies are integrating crypto into their operations, and branding has significantly increased.
Increasing market Cap
Let’s look at a visual representation of the crypto market.
Large Company Acceptance
What do Microsoft, Twitter, PayPal, and Starbucks all have in common?
They have opened their door to Bitcoin and other cryptocurrencies. Why would they integrate cryptocurrency into their business if it was just some scam?
These large companies have fostered innovation for the last 20 years and believe there is a valid use for crypto. Microsoft has been accepting Bitcoin for Xbox Live since 2014 and has most recently expanded its internal blockchain team.
Twitter now allows users to tip in Ethereum and Bitcoin. PayPal users can not only buy & sell crypto, they can check out with crypto which converts currencies like Bitcoin and Ethereum into fiat such as the USD.
Once more and more companies on the S&P 500 integrate crypto into their operations people will be more accepting of crypto. Apart from that, offering additional transaction methods only makes things easier for both companies and consumers.
Stocks & ETFs
It was big news when Coinbase went public and arguably bigger news when BITO, the first crypto ETF launched. When crypto is mixed into the stock market, a whole new audience has exposure to crypto.
Retail investors who are curious about crypto now have the ability to dip their toes in crypto without fully going in headfirst off the diving board. Companies that are traded on trusted exchanges like the NASDAQ just may be the gateway to crypto for many traditional retail investors.
Traditional Investing Platforms
Some of the best investing platforms on the market are now allowing investors to buy cryptocurrency.
Robinhood, Webull, and SoFi are just a few examples of traditional brokerages that initially sold stocks and bonds and have since added cryptocurrency.
The stock market has been around since the 1790s and has been the dominant investment vehicle since. It was only in 2018 when Robinhood introduced Bitcoin and Ethereum to their platform which opened the door for the millions of traditional retail investors. Even if investors choose not to invest, one would have to assume it piques their curiosity enough to do some research and obtain knowledge about the subject.
Currently, the market cap hovers around $2 trillion but has gotten as high as $3 trillion in 2021. At the end of 2015, the market cap was $7 billion. At the end of 2017, the market cap was $500 billion. Between 2019 and 2021 the market cap dipped to $200 billion but it never dropped to 2015 levels. The market is growing and it’s growing rapidly. There have been major peaks and valleys and the crypto market is undoubtedly volatile but the upward trend is evident. To me, this says more people are investing and better crypto projects are coming to fruition.
In the past few years, crypto branding has made its way to the masses.
Have you ever heard of the Los Angeles Lakers? Their home arena is now branded as the Crypto.com Arena as of December 2021 in a $700 million naming rights deal that will last for 20 years.
We’re not talking about a small sports market like Milwaukee (no offense Milwaukee). Los Angeles is the second largest sports market in the US and sees visitors from all over the globe.
FTX inked a $135 million deal in Miami for a 19 year naming rights deal in the basketball arena. Crypto.com and FTX are two new centralized crypto exchanges that not only have the capital to secure valuable branding deals, but they are also in it for the long haul with multi-year contracts. You can even add SoFi Stadium in Los Angeles to the mix, the home of the 2022 Superbowl.
Spreading word to the masses will inevitably drive curiosity into the crypto market and grow education.
5. Government Acceptance
Depending on where you live, your government has a unique stance on crypto.
Some have banned it all together like China, but for the most part, governments are receptive to integrating crypto into their economy.
In late 2021, the USA had a congressional hearing in regards to crypto and the response was overall positive. Blockchain technology and crypto are very new and it seemed like when congress became more educated they could see the potential. They didn’t dismiss it right away.
Other governments like Singapore, Portugal, and Switzerland are the most crypto-friendly countries in the world. El Salvador has even adopted Bitcoin as its national currency.
Tax rules are still being implemented so depending on where you live, check your local government laws.
I believe as governments understand crypto better and become more accepting, the market will see a tremendous boost.
6. Educational Awareness
My last major point on crypto bullishness is the educational awareness that will inevitably take place.
Back when Bitcoin launched in 2009 there was very little news coverage about crypto. Many people wrote it off as a scam that had no value.
Fast forward to 2017 and the crypto market had a bull run where Bitcoin skyrocketed to $19,000. This is when people all over the world were put on notice, crypto had real value and people were willing to buy it.
An influx of new investors swarmed the market and in early 2021 another bull run took place. Bitcoin shot up over $60,000 and the crypto market cap amassed over $2.5 trillion in value. To put that in perspective, the US economy as a whole has a GDP of about $21 trillion.
People want to grow their wealth and don’t want to miss out on opportunities to do so. With the amazing growth of the crypto market in the past 5 years, investors are seeing crypto as a real wealth-building opportunity.
Combine the growth with the amazing educational resources all over the internet, it’s really easy for people to learn about crypto. A great YouTube channel helping the cause is Whiteboard Crypto, I highly recommend checking out some of their videos.
The Bad Things About Crypto
As bullish as I am on crypto and blockchain technology, it’s not all sunshine and roses. There are some negatives that have to be discussed if we want to move forward with the conversation.
Cryptocurrencies move up and down very quickly. You can go to bed with everything being normal and wake up the next morning to find out the crypto market has changed 15%. This level of volatility isn’t for the faint of heart and if you can’t stomach it you could end up making very bad investment decisions. There is always risk and volatility in any investment and right now crypto is the prime example.
Rug Pulls & Failed Projects
Unfortunately in the crypto space, there are many scam projects. The term for these are rug pulls.
Essentially this is when the developers stop working on the project and take all the invested funds. Since crypto is harder to trace than fiat money, it’s pretty easy for scammers to never get caught. This is why it’s a great idea to do extensive research before investing and only invest if you are willing to lose it all.
A few examples of recent rug pulls include Squid Game token and Anubis Dao. There is also the possibility of projects simply failing. A rug pull and failed project are two different things. Sometimes projects simply don’t get enough investors or have bad tokenomics that causes the price to crash. Starting a crypto project is no different from starting a business, 9/10 fail.
Crypto uses a lot of energy, but this is primarily aimed at Bitcoin.
Bitcoin uses a proof of work (PoW) consensus mechanism which means it requires hardware miners. Energy consumption for Bitcoin alone is greater than a few countries and there is definitely an argument for environmental protection.
The beauty of crypto is that many currencies use a proof of stake (PoS) consensus mechanism that doesn’t use mining. Ethereum expects to reduce energy consumption by 99.5% by transitioning from PoW to PoS in Ethereum 2.0.
Lack of Insurance
Decentralization is both a blessing and a curse for crypto.
Decentralization provides peer-to-peer transactions that are more efficient than traditional financial institutions. The downside is there is no protection if something goes wrong.
Should a hacker steal your funds or you send money to the wrong address, you can’t get it back. There is no FDIC insurance like there is with a US regulated bank.
My recommendation is to get a feel for how crypto works before investing large amounts. Set up a few wallets, move crypto back and forth and try investing a small amount in a project to see how everything works.
Security is a big issue for many crypto beginners.
When setting up a wallet it’s important to never share your private seed phrase or even keep it stored on an electronic device. It’s good practice to keep it on paper or even in a Ledger Steel capsule.
Speaking of Ledger, it’s a great idea to get a hardware wallet like a Ledger or Trezor. These require you to physically verify any outbound transactions.
Unfortunately, many people only use hot wallets and don’t implement proper cyber security principles to protect their money. Due to anonymity in crypto, there are many bad actors who try to steal your funds because they can get away with it. Please invest with care and do your best to protect your crypto.