Bitcoin and cryptocurrency are still foreign languages to the masses. Despite the cryptocurrency sector hitting market capitalization of $300 billion not too long ago, you can argue that it’s the the most misunderstood asset class. You can assess this by simply listening to the “types” of questions acquaintances are asking you regarding digital asset markets.
Not too long ago, a friend of mine asked me how “Bitcoin stock” was doing. At the time, I didn’t really think much of it. Since I personally come from the financial space, the second you start calling Bitcoin a “stock” , things get weird real quick ( anybody else with both traditional market and cryptocurrency experience would totally agree ).
As time progressed, more and more of my acquaintances were referring to “Bitcoin Stock.” At this point, you take a step back and truly see what’s going on in the market. You have these well educated individuals ( some with professional finance designation ) totally misunderstanding Bitcoin infrastructure. This is so powerful, because it truly shows how early the industry still is. You can’t really think of any other asset class in history that has been so misunderstood after both – being around for 10+ years and growing at such a vertical rate. This stems from a couple different fundamentals:
Lack of mainstream media:
Many of the largest mainstream media outlets have lacked coverage in the space, and when they did it was mostly in a negative matter. Most of the coverage came when Bitcoin price was reaching all-time highs. At the time, you can argue many of the large media outlets lacked due diligence due to quick and rapid growth of Bitcoin price / network. As many predict Bitcoin price may retest the $20,000 highs, I think it’s justified that media coverage will be different a second time around. You have already seen a lot more involvement by larger financial institutions to both incorporate and study digital asset markets.
Lack of workforce education:
With all the various jobs that people take on each day, you would expect digital asset markets to be at least prevalent in the financial sector. From experience in the wealth management space, it wasn’t even relevant when I was around the industry. I took great interest in digital assets since college and when I tried to spark conversation in the workforce, people looked at me like I was crazy. The fact of the matter is most larger financial institutions try to shield risk at all cost which is understandable. Digital asset markets are completely different than stocks and these firms didn’t have the proper framework for understanding in place to offer solutions on the retail side. It’s unfortunate because when friends / family have questions about markets, they usually ask someone with finance backgrounds. In the scenario of cryptocurrency, it creates worldwide uncertainties since most of today’s financial minds still don’t understand it either.
Bitcoin Stock Does Not Exist
Bitcoin is not a stock whatsoever. Bitcoin is a form of “digital currency.” It’s created and held electronically. Unlike USD cash, you can’t hold physical Bitcoin – all Bitcoin is transferred peer to peer electronically. The value proposition to Bitcoin over the years is the “potential for it to grow in value” which has sparked investment. With a US dollar, there is essentially infinity amount as it can continuously be created ( printed ) by the federal reserve. This is why the value of the dollar goes down as years progress ( inflation ). On the flip side, there is only a certain amount of Bitcoin available globally. As demand for the asset increases, price can potentially go up based on simple economics.
Stocks Are Securities
When you purchase a stock such as Apple or Netflix, that stock is considered a “security” by the SEC since you technically have ownership in the company behind the stock. This is why the notion of “Bitcoin stock” makes literally no sense. There is no company behind Bitcoin, and the SEC even went as far as determining that Bitcoin is not a security.
A while back, SEC Chairman Jay Clayton publicly stated that Bitcoin was not classified as a security. He mentioned that “cryptocurrencies are replacements for sovereign currencies.. (they) replace the yen, the dollar, the euro with bitcoin. That type of currency is not a security.”
For the reasons mentioned above, Bitcoin is simply a form of currency that has the potential to either grow or decrease in value. The most interesting thing is that Bitcoin has the framework in place to make it operate differently than any currency we have seen in history. Bitcoin has grown exponentially in value since inception, outperforming pretty much any other asset class.
For the first time in history, a currency can be capped in supply which creates the ability to grow in value pending incoming demand. The exact use case for Bitcoin has not been determined just yet. Due to the powerful tech behind both Bitcoin and Blockchain, it creates all sorts of possibilities. Some people believe Bitcoin will take over the payments markets, while others compare Bitcoin to Gold in the form of a “store of value asset.”
Moral of the story, the next time you hear somebody reference Bitcoin Stock, you can simply explain why they are incorrect, or you can put your head down and just understand how early this space still is…
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