The Winklevoss Twins and Bitcoin: Could They Be Right?
At the end of 2017, bitcoin fell 70% from its peak. This fall, while steep was nothing new. Between 2013 and 2015, bitcoin lost 85% of its value. By January 25, the market cap of the apex cryptocurrency was $3,491,684,707 with its price at a (now) shockingly low $253.72.
“This year has been a pretty solid year for the digital currency Bitcoin. It has performed better than other long-term investments such as precious metals and also many sovereign currencies throughout 2015.”
It is interesting how quickly the pendulum swings, for better or for worse. Then again, the markets have not been able to escape the adage, “Buy the rumor, sell the news.”
Nevertheless, the history of the cryptocurrency may reveal a clearer story.
Enter Winklevoss Twins
In 2017, the Winklevoss twins, who received a $45 million settlement from Facebook stated that they wouldn’t sell bitcoin even when its market cap surpasses that of gold at $8 trillion or when its price surpasses $380,950.
The twins began purchasing bitcoin at $10, growing their holdings to over 120,000 bitcoin valued at $11 million. Their faith in the virtual asset was so much they stated it is better than gold because it is programmable, with advantages such as transportability, fungibility, security, divisibility.
Their belief in the long-term performance and technology developments of the cryptocurrency keep them HOLDING despite volatile markets.
The twins may have a point.
Yearly Lows Not Such a Bad Thing?
Yearly lows of bitcoin from 2011 to 2018 are as follows:
- 2011: $1
- 2012: $4
- 2013: $65
- 2014: $200
- 2015: $185
- 2016: $365
- 2017: $780
- 2018: $3,200
Drops in year-on-year volatility have followed the rising yearly lows of BTC:
- 2011: 16%
- 2012: 11%
- 2013: 14%
- 2014: 13%
- 2015: 8%
- 2016: 5%
- 2017: 6%
- 2018: 7%
Still, the Harvard graduates have taken steps to reduce the risks inherent in the markets. The twins built Gemini exchange which is U.S. based on compliance measures in place. They describe it as NASDAQ, E-Trade and DTC built into one.
Binance CZ Speaks on Bitcoin
The CEO of the world’s largest cryptocurrency exchange, Binance says a thousandfold return isn’t unrealistic. While a $200 trillion could seem unrealistic when one considers the dynamics of the traditional finance market, CZ believes it is not always wise to measure the potential of the crypto market based on the size of the traditional finance market. He firmly believes 1000x is possible. He says comparing traditional finance markets to cryptocurrency is like using taxi market size to estimate Uber’s potential.
Like the twins, CZ supports bitcoin’s utility as programmable money. Its programmable nature means that it is not limited to money.
The fear of missing out will never leave the markets. This makes it insanely difficult to rise above the noise and optimize risk in the face of a highly liquid but volatile market. While some believe in 1000x, others believe in venture capitalist Garry Tan believes it is possible but unlikely. The cryptocurrency markets have their chunk of retail investors that could drive value, but it also has its share of opposing competition and regulatory barriers, which although brittle, scare many potential investors who genuinely believe regulations equate to safety. Sadly, risk appetite is not as logical as it would appear.
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