The billionaires have discovered bitcoin. Or, at the very least, they’re only now telling the world about it.
Perhaps it was the 587% bitcoin price rise this year that did it. Or maybe it was the fact that major international stock exchanges are working out how to trade the technology that drives bitcoin.
‘The institutionalisation of this space is coming. It’s coming quick.’ That’s Mike Novogratz’s assessment of the crypto space. Some know Novogratz as the ‘legendary’ hedge fund manager of Fortress Investment Group.
Novogratz retired from Fortress having endured a rough couple of years. These days, he heads up Galaxy Investment Partners — a company making its coin betting on cryptos and other related businesses.
Novogratz isn’t just another billionaire championing the prospects of an industry he’s heavily involved in. If you think bitcoin is mainstream now, just wait until you see what the big boys of industry have in store.
UK fund management firm Man Group has its sights on cryptos as well. Man Group plans to look at bitcoin and its ilk more closely when there are tradable bitcoin futures. Which is handy, given that CME Group is about to ‘institutionalise’ bitcoin. The world’s largest futures and derivatives exchange announced that it would have a bitcoin futures by-product by the end of the year.
Bitcoin has gone from being a novelty in the dark corners of the web to a viable money freeing many from the tyranny of central banks.
Make no mistake, bitcoin and other cryptocurrencies are going to challenge the monetary system as we know it.
Of course, there’s still the odd banker not buying into the hype. JPMorgan CEO Jamie Dimon claims that bitcoin is fraudulent. At a recent conference, Dimon called it ‘worse than tulip bulbs’, saying that he would fire any employee trading bitcoin simply for being ‘so stupid’.
Since then, the bitcoin price has risen 65%. From US$4,148.27 (AU$5,467) to today’s US$6,849.79 (AU$9,028). I’m sure Dimon’s clients would’ve have liked that return in as little as two months. If Dimon isn’t careful, he’ll find himself left behind in the 20th Century.
Unlike Dimon, I’m a huge supporter of anything that gets your wealth out of the existing financial system.
Bitcoin may hog all the headlines. Insane price rises will do that. But there’s something far more important driving it.
Behind the gloss of a decentralised monetary system is a revolutionary piece of technology that is poised to drastically alter the way we share information.
Blockchain is more important than bitcoin
The big money may be falling over itself to get into bitcoin. Yet it’s not just because the value keeps skyrocketing. What the big players truly find important is the technology that makes all cryptocurrencies tick. And that’s the blockchain.
The blockchain is simply the process of moving one piece of information from one ‘block’ to another.
Each block moves along the chain, maintaining all stored data. When new data comes along, it creates a new block and stores it. The block then closes. This process repeats whenever there is new data to add to the blockchain.
Basically, the blockchain is simply a collection of information that moves in real-time. You can’t alter or tweak it, making it extremely secure.
It sounds simple, but it happens at incredible speeds. And it will completely shake up how companies analyse massive reams of data.
We are now witnessing the emergence of a very disruptive technology.
The blockchain is to the digital revolution what the steam engine was to the industrial revolution.
We are on the precipice of blockchain becoming the biggest tech disruptor so far this century. However, tracking the value of blockchain technology is difficult for an investor. You can’t see it. You can’t touch it. You merely know it’s working.
For this reason, the NASDAQ has buddied up with Reality Shares, which focuses on dividend growth investing. They plan on launching an index that tracks companies working with blockchain. Calling it the Reality Shares NASDAQ Blockchain Economy Index, it will comprise of internal and external research, as well as a propriety ‘blockchain score’ ranking system. Shortly after the launch of this index, Reality Shares will kick off an exchange-traded fund to track the index.
For the first time, investors will now have a tangible way to track the growth of blockchain.
Editor, Markets & Money