Banking giant Wells Fargo recently published a special report on Bitcoin and cryptocurrencies. The document explores the adoption curve of this new asset class, and attempts to answer the question, it is too early or too late to invest in crypto?
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The banking institution classified Bitcoin and digital assets as a “viable investment”, but believes they are in their nascent phase and early stages in terms of investment maturity. The report concluded that BTC’s price alone has compounded at a 216% rate since 2010.
In contrast, the S&P 500 Index has compounded at a 16% over the same period. This performance on BTC’s price and other cryptocurrencies has benefited early investors in particular. Wells Fargo claims 2,755 of those that comprised Forbes 2021 World’s Billionaires List saw their wealth explode on crypto investments.
The report records a 53,823,775% cumulative return for Bitcoin since the first exchange for the BTC/USD pair took place in 2010. Wells Fargo claimed they “do not subscribe” to the “it’s too late to invest” in BTC.
The banking institution believes the current crypto market differs a lot from the early days of the crypto industry. At this time, speculators and short-term investors drove BTC’s price easily. Now, the market has moved to pass them, at least, to a point where this cryptocurrency has greatly reduced its volatility, as seen below.
The chart shows how BTC has become a more stable asset and possibly will continue on this path In addition, the report considers the fact that most cryptocurrencies start trading at less than $1 for their respective trading pairs with this currency. The report added:
Second, cryptocurrencies are still a relatively young investment space. The vast majority are, in fact, less than five years old.3 Even the oldest cryptocurrencies have much maturing to do. For example, bitcoin is the oldest and arguably one of the least volatile cryptocurrencies, but it is still roughly four times more volatile than gold.
Bitcoin, A Different Kind Of Investment
Unlike in the traditional finance sector, where a company attempts to receive coverage and eventually support from public investors, cryptocurrencies operate under their own scheme, according to Wells Fargo. Most crypto-based projects are launched from “personal computers” and lack the management structure of traditional companies.
In the DeFi sector, many projects operate via a Decentralized Autonomous Organization (DAO), and it’s the community that decides its management via a voting system. A lot of cryptocurrencies, see Cardano (ADA), XRP, Dogecoin (DOGE) have been driven to unforeseen price highs by retail investors.
Furthermore, adoption rates for Bitcoin and other cryptocurrencies have been following those on the internet. This supports the view that investing in this nascent asset class is still “early, but not too early”. Wells Fargo said:
(…) common to the early adoption years is that when the first-use cases emerged, consumers still needed time to figure out what the technology is, what it can do, and how it can benefit them. Conversations throughout 2021 revealed to us that many investors and consumers, new to the space, believe that cryptocurrencies remain in this early adoption stage, as they find the technology daunting and use cases unclear.
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Only about 3% of the world uses cryptocurrencies, leading to a wide margin for price appreciation as more users are onboard on the crypto ecosystem. As of press time, BTC’s price trades at $43,053 with a 2.4% loss in 24 hours.