Trends come and go. But the crypto megatrend is just getting started.
Businesses and governments simply can’t ignore it anymore.
Especially now that President Biden has decided to address digital and cryptocurrency trends by requesting further analysis, rather than dismissing them out of hand.
The world’s first cryptocurrency, Bitcoin, emerged in 2009. And it’s true, it has exhibited some growing pains since then.
If you’re skeptical of the crypto market, I understand. I was too, at first.
But I now know it would be a mistake to ignore it.
See, the crypto market has increased substantially in recent years. It’s no longer just a fad.
At the start of 2020, it was worth $191 billion. Last November, it was around $3 trillion.
300 million people worldwide own cryptos. Approximately one third of them own Bitcoin. And crypto.com forecasts the number of crypto users could reach 1 billion by the end of 2022.
So, there’s still plenty of room for growth in crypto ownership.
But since day one, regulatory uncertainty and legal challenges have plagued the cryptocurrency space.
This has slowed down mainstream adoption. And it has put short-term pressure on Bitcoin (and other crypto) prices on multiple occasions.
But President Biden did something last week that could mean a turning point for the crypto space.
It’s something that has been on the cards since last year… but the situation in Ukraine seems to have moved it up his list of priorities…
Setting the Stage for Regulatory Clarity
On the one hand, you have millions of dollars in cryptocurrency donations flowing into Ukraine to help those affected by the war.
On the other hand, you have worries that crypto provides a way for Russian oligarchs to evade sanctions.
Earlier this month, Democratic legislators sent a letter to Treasury Secretary Janet Yellen expressing concern about this. Among the legislators were Senators Elizabeth Warren and Senate Banking Committee Chairman Sherrod Brown.
Rumors spread that President Biden was about to issue an executive order on crypto. But fears of a regulatory crackdown mounted.
President Biden signed that crypto order last Wednesday. It marks the first time the White House has formally weighed in on cryptocurrencies.
But crucially, it did not announce new regulations for the industry… Nor did it lay out specific positions the administration wants agencies to adopt.
The order’s tone is set in the first two paragraphs of the text.
There, it acknowledges the “explosive growth” of digital assets. And it affirms that the U.S. “must maintain technological leadership in this rapidly growing space.”
The order tasks the U.S. Department of the Treasury and other federal agencies with developing a regulatory plan. It underscores key areas like consumer protection, national security, and illicit finance.
From Wild West to New Money Paradigm
Biden’s crypto executive order is as good as it gets for cryptos, for now.
It shows that the government acknowledges cryptocurrencies as a legitimate and important part of American society and the U.S. economy.
And it makes it clear that the U.S. believes cryptocurrencies are here to stay and wants to position itself as a leader in the space.
In short, it legitimizes cryptos.
This is a welcome change. Just last year, Securities and Exchange Commission (SEC) Chair Gary Gensler referred to the crypto market as the “Wild West.” He said it was “rife with fraud, scams, and abuse.”
He also made no secret about his intentions to push for stricter regulation in the crypto space.
As of today, no one regulatory watchdog oversees the cryptocurrency market. But Biden’s crypto order gives us hope for a regulatory framework that would allow crypto to flourish in the U.S. (and, by extension, around the world).
Government agencies are already falling in line to support Biden’s crypto order.
Treasury Secretary Janet Yellen wrote that she would work under the guidelines of the order to “promote a fairer, more inclusive, and more efficient financial system.”
And Gensler tweeted that he “looks forward to collaborating with colleagues across the government.”
Why Bitcoin’s Explosive Growth Is Just Getting Started
There are many reasons for the explosive growth mentioned in President Biden’s executive order… And why that growth will continue.
First, you have Bitcoin’s success as a store of value. As I explained earlier this year, this has to do with scarcity. Only 21 million Bitcoins can ever be produced. Roughly 19 million of those are already in existence.
But the halving I’ve written to you about means the number of new Bitcoins coming into existence is decreasing. That means each one will become more valuable.
And some companies have already pinned their colors to the Bitcoin mast. According to CoinGecko, 27 publicly traded companies currently own Bitcoin.
The company with the biggest Bitcoin holdings is MicroStrategy (MSTR). It started adding Bitcoin to its balance sheet in August 2020. Its holdings are now worth about $5 billion. This is more than its market cap of just under $4.5 billion.
Tesla (TSLA) is another big owner of Bitcoin. It holds about $1.9 billion worth of Bitcoin at the current market value.
I expect more and more companies to follow suit. Especially now that President Biden’s executive order paves the way for a regulatory framework for cryptos.
Then there’s Ethereum, the world’s second-largest crypto, and its pioneering work on smart contracts. A smart contract is a computer program. It cuts out the middleman, like a lawyer or real estate agent, from deals.
And there’s the thousands of alternative coins, or “altcoins.” At writing, there are more than 18,000.
All of this is shaping a new vision of money and value.
And this ties neatly into the New Money investment theme I’ve put on your radar. This is where cryptocurrencies such as Bitcoin and Ethereum will continue to challenge the established financial players and fiat monetary system.
Not Too Late to Get a Piece of the Action
Here’s the bottom line… Biden’s executive crypto order is ushering in an era of positive regulation in the space, where the government helps crypto instead of fighting it.
This will speed up mainstream adoption of digital assets and help them become a more vibrant market.
The impact of this order will be felt many years into the future.
Bitcoin rose 9.1% last week on the news. That was its largest percentage gain since February 28, when the U.S. Treasury Department imposed sanctions against Russia’s central bank.
Today, it trades around $40,000.
But as recently as November 2021, it was up around $69,000. The most popular crypto’s retreat means that it is currently on sale.
Bitcoin adoption is still in the early stages. It has only been around since 2009, remember, and it’s volatile. There is plenty of room for growth in the number of people buying Bitcoin.
And more corporations are likely to add Bitcoin to their balance sheets once a regulatory framework is in place.
I believe the Bitcoin story still has a long way to run.
So, if you haven’t yet, it’s not too late to buy Bitcoin.
There are many ways to do this. You can buy it on a crypto exchange such as Coinbase and store it in a crypto wallet.
But PayPal or Square’s Cash App may be more convenient options for someone buying Bitcoin for the first time. With both of these popular apps, you can start your crypto portfolio with as little as $1.
It’s a good solution if you only want to buy a small amount of Bitcoin.
Just remember that cryptocurrencies are speculative assets. So treat your investment in Bitcoin accordingly.
And please, never invest money – in any asset class – that you can’t afford to lose.
Happy investing, and I’ll be in touch again soon.
Editor, Inside Wall Street with Nomi Prins
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