Author's column Crypto-Analysis Crypto-News Expert opinion Market focus by Crypto Insider 15.11.2021
What cryptocurrencies are doing to the investment industry you could almost call mockery. This new asset class shows returns on investment many times superior to any traditional assets.
Thirteen years ago, Bitcoin was created as a completely independent form of money, i.e., a means of payment. However, over time, it suffered the same fate as many other means of payment in human history – it increasingly became a store of value and then a target for investment. In other words, it became an asset.
Likewise, gold had also been a means of payment for a long time but eventually turned into a store of value, and then an investment asset. It was later replaced by more practical and widespread silver and copper coins and, finally, coins from special alloys and paper bills. Doesn’t it remind you a lot of the crypto world? Here, the introduction of bitcoin was followed by other emerging coins, with their own independent technological and economic models. Then, we had tokens on other blockchains, which further diversified the financial landscape of cryptocurrencies.
Following the path of gold, silver, and platinum, Bitcoin, Litecoin, Ether, and others also went from means of payment to stores of value and ultimately became investment assets. Moreover, cryptocurrencies were always both settlement methods and objects of investment.
It’s increasingly common to hear in recent years from all sorts of people: “Oh, if only I had thought of buying Bitcoin in 2016!” or “I wish I had realized that I need to invest in ETH back then, in 2017, when everybody was talking about it!”
On the other hand, many people – even among quite serious analysts – continue to disregard blockchain-generated digital assets. They some arguments on their side: they consider fiat currencies “state-backed”, gold (and precious metals in general) – the most stable assets, and industrial stocks – backed by “real production”.
Whether you agree or have reasons to disagree, one thing is certain: any amount of money put into cryptocurrencies some time ago (even quite recently by investment standards) would bring much greater profit today than investments in gold or industrial assets.
Today, traditional assets allow you to earn just a little over the inflation rate, or sometimes only to break even. And these are not some unfounded claims, we have made calculations to prove our point. Namely, we looked at what a thousand dollars invested in various assets in November 2015 would turn into today. Not that long ago; only a short while by the standards of classical investing. So, what would that thousand dollars turn into six years later?
In November 2015, Bitcoin was worth $ 327.56 per token. The $ 1,000 invested in BTC then would turn into $ 193,784 today. Ethereum’s value* was $ 10.39, so the same investment in ETH would bring in $ 444,545. Litecoin – “digital silver” as it is often called – was priced at $ 3.20 per LTC in November 2015. It means that a $ 1000 then would earn you $ 78,128 now.
The numbers are even more impressive compared to classic investment assets. A $ 1000 invested in gold in November 2015 would give you a $ 1721 return today; for silver, it would be $ 1800.
Of course, there are also stocks. If in November 2015, we had bought $ 1000 worth of Apple shares, today we could sell them for $ 1277. The same amount in Microsoft shares would turn into $ 6738 over the same time. And a $ 1000 in McDonald’s shares would now be worth $ 2406.
Worst of all would be $ 1000 in shares of the oil giant Exxon Mobile Corporation – by today, it would have “shrunk” to $ 805.
You may not want to invest in stocks of specific companies but rather in funds linked to stock indices – essentially, in the aggregate of the most successful companies’ shares.
This investment technology, called simply “index investing”, is actually well-known and practiced worldwide.
Had we invested $ 1,000 in the S&P 500 index (the 500 largest publicly traded companies with the highest capitalization) in November 2015, we would have $ 2,247 on our hands today.
Investing in the Nasdaq 100 Index (100 most prominent companies with shares traded on the NASDAQ stock exchange) would have earned you $ 3456.
And if we had invested in the Euro Stoxx 50 (the index of the 50 biggest companies in Europe), we would now get $ 1242.
Finally, a thousand dollars in the Nikkei 225 index (225 of the most actively traded companies on the Tokyo Stock Exchange) would turn into $ 1499 today.
As you can see, none of the traditional investment methods even come close to crypto in profitability. Yes, all traditional assets are more stable in the short term – the volatility of cryptocurrency rates can drive an inexperienced broker crazy. But it’s about “smart”, not “fast”, money – that is, medium-term investments. And as the figures above show, if you want to make money, invest in cryptocurrencies.
One final qualifier: This article is by no means a recommendation on how to invest your money. We’re just demonstrating the big picture. And always remember, any business area always has no fewer stories of terrible ruin than tales of fabulous success.
* – Ethereum did not exist in 2015, so assume that we invested $ 1000 a year later – in November 2016.