Alberto Gordo is the CEO of Protein Capital, an alternative manager from Luxembourg that provides services to Europe and Latin America for investing in cryptocurrencies. According to an interview for the Funds Society, the expert has a more realistic view of Bitcoin, estimating its value at $160,000 by 2024, and about $500,000 four years later.
But the interview is not only about the price, it expands our understanding of cryptocurrencies and our expectations for the future.
For Gordo, cryptocurrencies are like any other digital asset we can find, such as a website, video, or games. The difference lies in their function, in making financial transactions through cryptocurrency and blockchain.
“With the advent of digital assets, a new asset class is being created in the financial industry. Basically we have fixed income, stocks, commodities and currency… well, digital assets will become a new asset in high demand for alternative investments”, says Gordo.
Unlike traditional financial assets, the concept of “community” is becoming more important. Because the larger your community, the higher its convenience and value.
Two key aspects of crypto assets are users and the security they provide through blockchain and consensus methods.
Volatility is a key factor, but as it becomes more “mainstream”, it will decrease because the crypt will have clear regulation.
According to his estimates, by 2035 cryptocurrencies will have volatility similar to the S&P 500, that is, by the time they become commonplace among users.
How to properly evaluate digital assets
Cryptocurrencies have three types of analysis: fundamental, technical and network. The fact that they have no results or flows does not mean that they have no value, this characteristic is inherent in gold.
Remember that value is measured by users (usability), and the security they provide is measured by hashing speed.
Gordo estimates that the price of BTC will reach $160,000 in 2024 and $500,000 in 2028. This perspective is analyzed, as we said earlier, taking into account the number of users, security, cost margin and technical analysis.
“We believe that we are at the beginning of the new cycle, and this conclusion follows from our thesis on generational investment: in 2017 we are at a historic moment – the transition of leadership from generation X to millennials. Generation cycles usually last about 20 years, and the methodology is to invest in what the generation leading the cycle (in this case, millennials) consider innovative, and different from the previous generation.
In the case of generation X, it was the Internet, and in the case of millennials, we believe that it will be a blockchain, with which we can conclude that in 2021 we are still in the initial phase, since the end of the cycle will be around 2037”, explains Gordo.
If we analyze the point of view of generations, today the Baby Bommers generation has a lot of capital that will be transferred to millennials. It is they who will invest in assets completely different from their predecessors, such as cryptocurrencies. Realizing this, the price of Bitcoin is not determined by the influence of millennials, but it will grow as they have more money to invest.
“Depending on the profile of investors, we recommend investing from 2% to 10% of the portfolio in this type of assets and increasing it as the market matures, since we are in a new market, which will undoubtedly have a major restructuring”, the expert recommends.
Today it is impossible to determine this, since 95% of the current cryptocurrencies listed on Coinmarketrate.com, will simply disappear. That’s why it’s impossible to pinpoint any asset. But it can be determined that the market was divided into three large groups: digital property, digital platforms and decentralized applications. They all have a great future.
Retail Investors vs. Professional
Retailers invest through speculation, buying and selling quickly to make a profit, and professionals have a long-term horizon and use professional financial instruments. In addition, the latter have wider access to investing in specialized funds of the sector than small investors who do it on a regular exchange specializing in cryptocurrencies.
Although at first professionals did not want to invest in cryptocurrencies, today many have opened doors for users, such as BBVA (a shareholder of Coinbase and the first bank that allows the purchase / sale of bitcoins in Switzerland), JP Morgan (created its own token and crypto funds.), Fidelity (specializes in storing digital assets), Goldman Sachs (allows its accredited investors to invest in these assets and has its own trading platform) and others.
But the big difference between American and European investors is that the former see that the world will move towards cryptocurrencies and blockchain. There are still many obstacles in Europe to understand this concept.
For example, JP Morgan believes that the growth of Bitcoin in recent days was due to significant purchases by large investors.
According to Jordan Lyanchev from Crypto Potato, the BTC has soared by 35% in a few days, and the main reason is due to significant purchases by large investors.
The demand of large investors for cryptocurrencies appeared relatively recently, turning from “magic money on the Internet” into an investment tool to protect against inflation.
Institutional investors rushed to invest money in 2020, and this year they have already reached $650 billion.
Then there were reports that the institutionals reduced the furore regarding cryptocurrencies, ceasing to accumulate them in large portions. Some even made huge profits in a few months, and left the market. Coincides with a large Bitcoin correction of 65%.
According to the latest JP Morgan report, institutional investors have returned to the Cue Ball, considering it the best protection, surpassing even gold.
At current price levels since the beginning of 2021, the cost of military-technical equipment has recovered by 85%. Over the same period, gold has fallen by 7%.
In addition, according to the American bank, there are other reasons:
- Encouraging statements by the SEC and Fed
- The resurgence of fear of inflation and the use of Bitcoin as a defense against it.
- The Growth of the Lightning Network
The Tier 2 payment solution has recently become widespread in El Salvador and Twitter. Many people see this as a necessary improvement of the Bitcoin network, which can speed up the smallest transactions and help avoid congestion.
There are 840 funds in the world, of which 397 are hedge funds and only 30% of 397 actively manage cryptocurrencies.
Is regulation required?
This question can be answered depending on what stage we are at:
Stage 1. Demonstrate that new technologies improve what already exists
Stage 2. This technology should be regulated so that everyone has access
Phase 3. “Mainstream” when this technology is available to everyone.
Today we are in phase 2, where there will be a lot of volatility for a reason: regulators and Blockchain technicians will have to unite. Regulators do not know this technology correctly, and technicians should help understand how it works so that regulations do not hinder the development of this technology.
Regulation is vital for the introduction of digital assets, but it will take time, and in the process we will see these contradictions between regulators and technical specialists.
The introduction of Bitcoin as a legal tender in a Latin American country will help to increase usability.
“The first weeks after the adoption of the BTC were impressive in terms of the interest it aroused among the population of El Salvador. Do not forget that approximately 6.454 million residents, and 70% do not have access to bank accounts. In just one month, the Chivo wallet, which is the official wallet of the government, already has more than 2 million users, that is, currently more citizens have access to Bitcoins than to a bank account and a dollar,” the expert emphasizes.
And if Salvadorans increase their Bitcoin money transfers, they will eliminate the existing high banking fees. According to the World Bank, remittances account for 24% of GDP.
Well, the Chinese are a common practice that we have seen before. What China banned then underwent a strong reassessment, as it happened with the Internet. The expert believes that this is done in order to distract attention from more important problems, such as what is happening with Evergrande.
Another factor may be the release of its own CBDC next year.