‘Crypto markets tumble with Bitcoin, Ethereum, losing 70% from their peaks!'
Have you seen news headline like these?
I bet you have.
Cryptos made headlines in 2021 when the price of Bitcoin along with many other altcoins skyrocketed to their all-time high.
It’s 2022 and cryptos are yet again making headlines. But this time around, it’s because of their sharp fall.
The sell-off in the crypto market and the digital asset space has escalated amid the global economic slowdown.
If you have invested in cryptos and are worried, here’s something that might give you some relief.
Take a look at the table below which shows how volatile the crypto markets can be.
Short History of Bitcoin Crashes
Year Peak Price (US$) Low Price (US$) Fall from peak (%) 2011 32 0.01 -100% 2012 260 45 -83% 2013 1,160 380 -67% 2017-18 20,089 3,380 -83% 2019 13,796 6,640 -52% 2021-22 68,789 21,229 -69%
Data Source: Equitymaster, Yahoo Finance
After all these crashes, bitcoin managed to hit an all-time high last year.
With that in mind, we thought it will be interesting to see what experts over the world have to say about cryptos and what’s their stance.
So we present to you, the top 4 craziest predictions about cryptos.
#1 ‘In the first place, it’s stupid because it’s still likely to go to zero.’
If you’re wondering who in the world gave such a crazy and bold statement on Bitcoin, hold your horses. The answer might surprise you.
The above words are from none other than legendary investor Charlie Munger.
If you follow the crypto markets and what’s happening, you know that Charlie Munger is no fan of bitcoin or any other crypto for that instance.
Not just him, but his long-time partner and the most successful investor Warren Buffett has also shied cryptos away. Both the investors have made hostile comments toward bitcoin in the past.
Buffett has even said bitcoin is “probably rat poison squared."
While here’s Munger in his own words:
In my life, I try and avoid things that are stupid and evil and make me look bad in comparison to somebody else – and bitcoin does all three.
In the first place, it’s stupid because it’s still likely to go to zero.
It’s evil because it undermines the Federal Reserve System.
And third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.
Agreed that both these investors have their investment ideology set, but aren’t they a bit harsh? Predicting that Bitcoin’s value may go to as low as zero?
Anyways…they have their reasons. Buffett invests only in things he understands. Cryptos, being out of his syllabus, justifies his reasoning of not dabbling in the highly speculative space.
For those out there who are like minded as Buffett, be proud to have so much in common with a man who has built a twelve-figure fortune by betting on the right horses.
Just because Buffett and Munger don’t believe in the future of cryptos does not necessarily mean you too should shun them.
There are experts out there who are so bullish on cryptos that they believe Bitcoin’s value can go as high as US$ 100,000.
That brings us to the second crazy prediction…
#2 ‘By taking over gold's role as a store of value, Bitcoin can reach a valuation of US$ 100,000 in the not-so-distant future.
This bullish call on Bitcoin is by Goldman Sachs.
At the start of 2022, Goldman Sachs predicted that Bitcoin could probably be the new gold and has the potential to cross the US$ 100,000 mark in coming years.
Goldman Sachs said...
Bitcoin may have applications beyond simply a "store of value".
Goldman Sachs’ analysts estimated that the proportion of bitcoin in a portfolio will only increase with time.
If Bitcoin is able to claim a 50% share of the 'store of value' allocation, the price would pretty much exceed US$ 100,000.
Analysts at Goldman Sachs claim that bitcoin should be considered a macro asset.
This is because it has "matured enough". This means that its behaviour now resembles that of other macro assets.
They also believe that bitcoin is going through a one-time social adoption phase. One that could make or break it in terms of returns.
By the way, Goldman’s bold call of US$ 100,000 is almost 5x the current price of a Bitcoin.
#3 "According to our estimates, the price of one bitcoin could exceed US$1 m by 2030."
US$ 1,000,000.
That’s how high the price of one bitcoin could go by 2030.
According to Cathie Wood’s Ark Invest, Bitcoin's price could exceed US$1 m by 2030 as investors remain focused on its long-term value.
The fund is all praise when it comes to bitcoin and believes it is the most compatible asset with ESG norms.
Our research suggests that bitcoin has the potential to transform monetary history by providing financial freedom and empowerment in a fair, global, and distributed way.
Cathie Wood, the chief executive of ARK Invest and manager of the popular ARK Innovation exchange-traded fund (ETF) has often praised cryptos.
Back in February 2021, the fund manager which took the world by storm said that a single bitcoin could be valued at US$ 200,000 more than its current price if more corporations added the cryptocurrency to their balance sheets.
#4 Stablecoins will become mainstream
This may seem like a highly speculative prediction for now. But it has a good probabilistic chance of becoming a reality than the three predictions mentioned earlier.
Stablecoins are always selling like hot potatoes.
As cryptocurrency prices tend to vary a huge amount in a short span of time, many don’t like the volatility.
Enter Stablecoins.
Stablecoins are cryptocurrencies without the volatility. They share a lot of the same powers as other cryptos, but their value is steady, more like a traditional currency, i.e. the US Dollar, Indian Rupee, etc.
Apart from investors involved in the crypto world, even the top regulators seem to be talking about stablecoins.
As things stand now, Japan has already taken the lead in regulating stablecoins.
The country’s parliament enacted a bill earlier this month clarifying the legal status of stablecoins, essentially establishing them as digital money.
This is definitely a sign that stablecoins might become mainstream in the coming years.
Expose your hard-earned money or stay away?
Over the past two years, what happened is governments and central banks all over the world fueled money printing and increased the liquidity.
As it’s in human nature to take risks and avoid the fear of mission out (FOMO), people gambled their money and put amounts in whatever meme coin or asset class which caught their fancy.
Most people ignored the danger of getting carried away as crypto markets were booming. They might have earned profits in the short term but would be having a reality check now.
While we don’t know where Bitcoin’s price will be a year from now or five years from now, we do know that cryptos and bitcoins are a rage. You can’t just ignore them.
We at Equitymaster are not against investing in Bitcoins at all.
However, an investment like a Bitcoin should not be where you park your maximum savings. They should be the high risk-high return part of your overall corpus.
Before you invest in cryptos, we recommend you take a look at Nithin Eapen’s CryptoMaster course. This should help you get started in the world of cryptos...
Equitymaster’s take on cryptos is simple.
We don't get cryptos. It's something that has caught our imagination, but we just can't figure out a way to value it. Fundamentally speaking.
Our "fundamental" take on cryptos is in line with the approach anyone should have when dabbling in a space one does not understand.
Invest only what you can afford to lose. Nothing more.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
