Bitcoin buyers fall into two camps (primarily). People who trade the cryptocurrency and those who “stack Satoshis,” a term for stockpiling on Bitcoin as a means of building long-term wealth.
Stacking Satoshis may be the most successful tactic due to a few key iterations that Bitcoin will go through to ultimately strengthen its price and reputation as a solid investment choice. Many Bitcoin experts expect Bitcoin to be at the height of its development in 2025-2030.
There are key reasons as to why Bitcoin will make a solid long-term asset over the next five to ten years and may reach its peak as a new technology with mass adoption in seven to ten years. This 3-part series explores why strategically entering the Bitcoin market at a good entry price will make a solid investment for the future.
Bitcoin investment cycle
Bitcoin’s investment cycle is important to understand as the cryptocurrency has the potential for mass adoption as blockchain is built out. Although many are concerned with being too early to Bitcoin investments, it may be more important to not be too late in building a small position with an entry that can withstand volatility.
Technologies go through various phases of adoption as the customers become more open to using the technology and forming new habits. The volatility seen in Bitcoin is not uncommon for a startup venture; what is uncommon is that Bitcoin is an investment, and you can track the inflow and outflow of money, which causes more uncertainty than usual for the general population who doesn’t see the typical challenges that emerging technologies go through prior to reaching mass adoption.
In other words, Bitcoin’s volatility as it attempts to find product-market fit isn’t uncommon and will reduce over time.
We currently see similar volatility in autonomous vehicles and 5G supply and demand. Volatility is inherent in nascent technologies. The smartphone crawled before it could walk, with QWERTY Blackberry and Nokia phones leading to the evolution of touch screens and app stores.
Virtually every technology product on the market today has examples of volatility and early apathy towards the believability of its potential for scale. Relative to the disruption Bitcoin seeks to bring to ancient-old financial systems, and the volatility has been in-line with high risk/ high reward endeavors.
Bitcoin investments hinge on secure custody
Most people can imagine a world that runs on digital financial transactions as money today is exchanged digitally and cashless. For instance, China’s Ant Financial currently serves 5% of the world with a cashless application called AliPay. The United States has digital financial apps, such as the Apple Wallet, and Venmo is a popular method to exchange money between friends without fees.
One of the biggest hurdles for institutions, however, is not the idea of a world run on digital currencies, but rather the decentralization concept and the need for cryptocurrency storage. Institutional investors need to know the assets are secure, insured, and under the care of a trusted third party, per SEC rules, which requires advisers to keep client funds with a qualified custodian.
Custody solutions safeguard cryptocurrency and go beyond private keys or wallets, which are subject to hacks or the misplacement of hard disk storage. The word “custody” refers to a third-party provider of storage and security services for cryptocurrencies. These services are aimed at institutions and hedge funds and incorporate a combination of storage online for liquidity and storage that is disconnected from the internet.
Vault storage is a popular method which keeps the majority of the crypto in offline storage with a minority in online storage. Upcoming modifications to the Glacier Protocol will strengthen high-security offline storage for Bitcoin.
This year, many emerging custody solutions have been introduced to the market. In the first five months, six new custodians entered the market while a number of existing crypto custody providers have announced new features. There has been some M&A in the crypto custodian market, as well, and exchanges such as Coinbase, Gemini and itBit have launched custody solutions in an effort to push more institutional investors towards Bitcoin and digital assets.
Bitcoin futures to launch for institutions
Jeff Sprecher, the Chairman of Intercontinental Exchange (ICE) and Founder of the New York Stock Exchange (NYSE) and many other exchanges internationally, aims to create a federally regulated crypto ecosystem. The consortium includes Microsoft, Starbucks, and the Boston Consulting Group, who are working together to help leverage ICE’s trading infrastructure and to cater to retail investors, institutional investors, and consumers. This could help baby boomers put their 401K into Bitcoin and pave the way for Bitcoin-backed ETFs or mutual funds.
Bakkt plans to launch its physically-settled Bitcoin futures products for testing, according to the company’s blog post. At the core of Bakkt is the custody of digital assets for institutional clients. The first solution will be physical-delivery Bitcoin futures traded on a federally regulated exchange and clearinghouse.
The trades will happen on ICE Futures US (IFUS) and will be cleared on ICE Clear US (ICUS). Bakkt will provide regulated custody as the company has filed with the New York Department of Financial Services for approval to become a trust company and to serve as a Qualified Custodian for digital assets.
Bakkt Bitcoin investment
The partnership with Starbucks is a core component for success as Starbucks’ mobile app has more users than Google Pay or Apple Pay.
Bakkt will use both warm (online) and cold (offline) wallet architecture to secure customer funds. The majority of assets are stored offline in air-gapped cold wallets and are insured with a $100,000,000 policy underwritten by global insurance carriers.
Bakkt will use FIPS 140-2 level 3 or higher hardware security modules (HSM) to manage and secure its warm wallet cryptographic keys. The cryptographic systems will be secured in bank-grade vaults and data centers that are protected with physical security.
Security is one area where the NYSE has already gained trust from institutions. Therefore, the barrier to entry is lower for Bakkt, and institutions are likely to enter crypto futures with Bakkt being built on the same system as the NYSE.
Read more: The History of Bitcoin
Bitcoin investments will get a boost from fidelity investments
In May, Fidelity Investments announced plans to launch a cryptocurrency trading service. The Fidelity Digital Assets platform was created in October of 2018 with select hedge funds and family offices testing the platform for cryptocurrency custody and trade execution over the last few months.
Fireblocks, a platform for securing digital assets in transit, announced a $16 million Series A funding round from investors including the proprietary investment arm of Fidelity, Eight Roads. The startup helps to safeguard the transmission of digital assets across exchanges by building a cloud-based security platform as the current process of moving digital assets is susceptible to cyber-attacks and human errors.
Fidelity interviewed 450 institutions and found that 22 percent already own cryptocurrency and those that own crypto plan to double their allocation over the next five years. The long-term interest from institutions stems from the asset being seen as an uncorrelated risk during an economic crisis.
Forty-seven percent of institutions believe digital assets are worth investing in, according to the survey released by Fidelity on May 2nd. Fidelity will only serve institutions for now while Robinhood and E*Trade serve retailers.
The acceptance of Bitcoin increases
Irrespective of which heights the Bitcoin shoots to during the next run: The still enormous market capitalization of the coin of over 60 billion euros speaks for itself. The investor base does not intend to say goodbye to Bitcoin as soon as possible. Many people continue to believe that the Bitcoin Market is still unfolding its potential and that the market is still at its beginning.
Good time for Bitcoin investing?
Investing in Bitcoin can pay off extraordinarily right now because the general skepticism towards BTC Investing is excellent. With a little luck, those who invest now will be among those who got on board before the next big hype — and will be happy about big profits after a while.
The advantages of blockchain technology cannot be denied: Bitcoin is a decentralized, digital currency that passes over the middleman (financial institutions and banks) and makes it possible to participate in trade worldwide even without a bank account of one’s own: a democratic currency model in the best sense of the word that can hardly be stopped.
Because it’s not considered possible to manipulate the Bitcoin network with a hack using the current technical means. Bans can still become seriously dangerous for Bitcoin: As long as only a single computer mint the Bitcoin, it remains tradable.
What you know of Bitcoin today as an investment choice will change rapidly over the next 5-10 years with a few key phases of adoption and iterations that will strengthen its price and prospect as a good investment. Today, Bitcoin’s price is based on retail traders and crypto enthusiasts. To not believe Bitcoin will saturate other markets would require acute, bearish incredulousness.
Investors in Bitcoin today need a few things to happen for the currency to achieve price stability and to reach its long-term potential as a good investment for buy and hold portfolios. If you want to swim with the stream, then look for a great entry price where you can hold the cryptocurrency long term until these phases are built out.
Get started with NordikCoin today; one of the easiest, cheapest, and safest places to go for all your Bitcoin needs.