Thanksgiving (Crypto) Question of the Year: Is it too late to get into Cryptos?
I get this question quite a bit, from family, friends & random people at parties. You will probably be asked this at some point during your Thanksgiving Holiday. In fact, a Google search for “Is it too late to invest in Bitcoin?” reveals 1,990,000 different search items.
Asking if it is too late to invest in Cryptos is like asking,
Is it too late to invest in XYZ [Facebook, Classic Cars, Art, Augmented Reality, Diamonds, Airline Loyalty Points]?
You don’t hear questions like these today, so why are we asking if it is too late to invest in Cryptos?
The question itself is amusing once you start putting things into perspective and compare it to other investments people make. What some people want to know is if they can make a quick $Millions by getting in the game right now. If you are looking for a gamble, I can’t help you. But if you are actually curious about the space, read on.
Still some people ask this question, because in the end of the day, they do not believe Cryptos & Bitcoin are here to stay. This is another misconception.
The first Bitcoin was mined in 2009, that is more than 7 years ago. Only today you hear about Bitcoin everywhere, because of the high prices; however, it has been around for a while. Virtual currencies have been around for much longer. Thinking that Cryptocurrencies or Bitcoin will disappear overnight is just wrong.
Similar to how Uber is disrupting the Taxi market, AirBnB disrupting the hospitality market, Amazon & Alibaba disrupting almost every retail market, Facebook the content market, Cryptocurrencies & Bitcoin are disrupting the financial markets.
Now let’s dig in to see how it is NOT too late to get into Cryptocurrencies.
Let us first start by looking at some historical data on certain Cryptos, then by comparing Cryptos to other investment assets, and finally comparing Cryptos to other random things in the universe.
On 11/20/2017 Bitcoin’s price was $8,244.69
If you bought 1 Bitcoin,
3 months ago: $4,066.60 / 103% return
6 months ago: $2,040.18 / 304% return
12 months ago: $728.51 / 1032% return
As of 11/20/2017 Ethereum’s price was $367.71
If you bought 1 Ethereum,
3 months ago: $298.20 / 23% return
6 months ago: $123.06 / 199% return
12 months ago: $9.57 / 3742% return
As of, 11/20/2017 Litecoin’s price was $72.38,
If you bought 1 Litecoin,
3 months ago: $45.81 / 58% return
6 months ago: $27.42 / 164% return
12 months ago: $3.88 / 1765% return
Now, I’m not saying that these trends will continue (and not saying that they will not), the point is that the further you delay the more you are going to wish you got in yesterday. If you are asking “Is it too late to get into Cryptos?” Even if you got in 3 months ago, you would still be making great returns. So “No,” it is not too late to get into Cryptos today.
Market Cap By Country Stock Markets vs. Crypto Market
Next let’s compare the Cryptocurrency Market Cap to other Country Stock Market Caps.
Cryptocurrency Market Cap: $240,365,000,000 (11/20/17) — $240 Bn
Bitcoin Market Cap: $135,151,000,000 (11/20/17) — $135 Bn
A couple of interesting things from this chart. The US Stock Market Cap is 167x the size of the Bitcoin market cap and 94x the size of the Crypto market cap. China’s Stock market cap is 54x the size of the Bitcoin market and 31x the size of the Crypto market.
The reason I am pointing this out, is because tied to the question “Is it too late to invest in Cryptos?” is the question, “Are Cryptocurrencies in a Bubble?” When you look at the Cryptocurrency market as a fraction of the US stock market, you start to see that this may not be as big of a “Bubble” as you think it is. Quite a few people think that because of the size of the Crypto market ($240 Bn market cap) and its quick rise over this year, that Cryptos are overvalued; however, the market cap is not as large as other markets that exist today.
Cryptos today are just a fraction of the activity that goes on with stock exchanges across the globe.
M1 Money Supply in USD vs. Crypto Market
Comparing Cryptos to other currencies is a better comparison than the one above, because in the end of the day Cryptos are currencies. More interestingly enough, Cryptos are a global currency meaning anyone with an internet connection can leverage the Crypto network, theoretically. This means that the TAM (total addressable market) of people using Cryptos is 3,885,567,619 people across the globe. The Crypto and Bitcoin market caps are a fraction of the sizes of other currencies. The US Dollar is 15x the size of the Crypto market and 26x the size of the Bitcoin market. The Chinese Yuan is 33x the size of the Crypto market and 58x the size of the Bitcoin market cap. The Euro Market is 38x the size of the Crypto market and 67x the size of the bitcoin market cap.
Comparing Cryptos & Bitcoin to the daily Forex trading markets, $5 Trillion gets traded on average each and every day in Forex market across the globe.
The fact that Cryptos are a drop in the bucket compared to other currencies should help you answer the question whether or not it is too late for you to get into the Crypto market.
Market Size of Natural Resources vs Crypto Market
Comparing the Crypto market to various resources may not make sense to a lot of people, but Bitcoin is also known as “Digital Gold.” Like gold, Bitcoin is fixed in supply (limited supply — 21 million), mined (via online miners), and for some used as a hedge against other markets. Gold is 29x the size of the Crypto market and 52x the size of the Bitcoin market. The Silver market is estimated to be $5 trillion dollars, and also 21x the size of the crypto market and 37x the size of the bitcoin market!
Diamonds, having a market size of $80Bn, are smaller than both the Crypto and Bitcoin market, but diamonds are forever.
The Oil & Gas market for 2017, is also 8x the size of the whole Crypto market and 15x the size of the Bitcoin market.
Again, is it too late to jump into Cryptos? No. Will Cryptos disappear over night? No.
Market Size of Random Markets vs Crypto Market
This is a fun exercise, but it is meant to drive home a point. Markets such as Autonomous Vehicles, Virtual Reality, Augmented Reality , even the Internet of Things have not come fully to fruition, yet they have bigger market sizes than the whole Crytpo market and Bitcoin market. I would argue that Cryptos and Bitcoin are further along than many of these newer industries. The Bitcoin genesis (first) block was mined on January 3, 2009 and the concept of digital currencies has been around since the 1980s. Why is this interesting?
You often don’t hear people say,
“Is it too late to invest in the Autonomous Vehicle Market?”
“Is it too late to invest in the Virtual / Augmented Reality Market?”
“Is it too late to invest in the IOT Market?”
Or that these categories are in a bubble and over-valued even though the current estimates are greater than or in line with the current Crypto market size.
Additionally, if things like Loyalty Points ($653Bn - including coupons, gift cards, and loyalty points) have a larger market value than both the crypto market and bitcoin market, it doesn’t seem too likely that the latter two markets are overvalued.
Lastly, one important fact you should consider is that as of today most of the larger players including hedgefunds, CME, investment banks, pension funds, asset managers — have not even started investing in the Crypto market. Just imagine what will happen when they start coming in…
When it comes down to it, before asking is it too late to invest in Cryptos or asking if Cryptos are in a Bubble — it helps to put things into perspective.
DISCLAIMER: This post is not investment advice. Please don’t make investment decisions based on the information provided here.
If you enjoyed this post and are feeling generous :)