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Learn how the blockchain drives value in cryptocurrencies and the five best cryptocurrencies to buy right now!
Hedge fund billionaire John Paulson says cryptocurrencies are a worthless bubble and “there’s no intrinsic value other than a limited supply.” In this post, find out more on the intrinsic value of cryptocurrencies.
Now, I’m not sure why anyone would listen to Paulson anyway, a guy that hasn’t been right since 2007 and has lost so much money betting on gold and China that Bloomberg crowned him the biggest loser.
But is he right about bitcoin? It’s not a singular opinion but one also held by other famous investors like Warren Buffett and Nouriel Roubini. If they’re right, it would mean the 100 million people investing in cryptocurrencies globally could have a $2 trillion bad day over the horizon.
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Real Value in Cryptocurrencies and Why You Should Invest More Before Prices Climb
There is a source of value for cryptocurrencies though and I’m not talking about network effects, as a store of value or as digital gold or any of the other sources bitcoin investors cling to on the hope of drowning out that nagging little voice whispering…you’re about to lose all your money.
I’m talking about intrinsic value. A legitimate source of value for cryptocurrencies that could drive prices up another five- and ten-times the current price of coins like Ethereum, UniSwap and Matic. The real value of cryptocurrencies and why everyone should be investing before prices really start climbing.
In this video, I’ll show you how the blockchain drives value in cryptocurrencies. I’ll share how decentralized finance and other applications will continue to grow and create intrinsic demand for crypto and then reveal the five best cryptocurrencies to buy right now!
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Nation, there isn’t a more important question for crypto investors or those still trying to decide whether to invest or not. We’ve talked about the network value of bitcoin, using Metcalfe’s law, and that idea as a store of value but to be a credible, legitimate investment…cryptocurrencies need to have some intrinsic value from demand beyond just what the next investor will pay you for the tokens.
And I’ll admit, it took me a long time to wrap my head around this hidden value and I wasn’t always hot on the investment.
In my defense, that was December 2017 and…well, I was a moron.
But cryptocurrencies have legitimate intrinsic value and it comes from how the blockchain is changing the world we live in.
Think of the blockchain as an online spreadsheet, each row contains all the information from the applications, contracts and everything else using the technology. And each row has its own unique digital fingerprint telling you which row came before it and which is after.
Now that spreadsheet is shared with everyone on the network and for changes to be made, the same change has to be made to every single spreadsheet. And for each new row of information to get added, computers need to verify the change on all the spreadsheets, every one on the network. This is where blockchain gets its top-level security because it keeps this running spreadsheet and each addition has to be verified so it’s impossible to make a fraudulent change on just one or a few spreadsheets. You can’t just go back and change the information because that system of verification will catch it.
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Cryptocurrencies: Finding Its Intrinsic Value
This is where we get to that intrinsic value for cryptocurrencies. Verifying new rows on the spreadsheet and making changes to information stored on the blockchain takes a lot of computing power, like there are millions of computers verifying data for bitcoin alone. And to pay for this computer processing power, when a row is verified, that computer or miner is rewarded with cryptocurrency.
So you see, cryptocurrency is like the gas that makes the blockchain engine run. The more information that is stored on the blockchain, the more this technology is used, the more demand there is for crypto to pay for validation of each row of new information.
Nation, I know this is completely new to most of you half of you have probably gone cross-eyed after that explanation. Just understand, the blockchain technology is the next step in the digital revolution, a way to process and store information that is secure and at a fraction of the cost. This technology is only going to grow more widespread and the use is going to mean more demand for cryptocurrencies.
How Much are Cryptocurrencies Worth?
So this gives cryptocurrencies their value but then the question is, how much are they worth? I’ll reveal those five best cryptocurrencies in a minute but will we see the kind of growth in demand for verifying more information on the blockchain that is going to drive that value higher?
And this is the revolution in the blockchain technology. Because it is uniquely secure, you can store information on there that needs to be critically accurate like medical records and contracts. Because it’s frictionless, meaning you don’t have to pay for transaction costs like with a bank, it’s perfect for use in payment processing and transfers.
Decentralized Finance, or DeFi, is one of the best examples. Before now, everything from lending to payments, insurance and asset management has been the exclusive business of billion-dollar companies charging trillions in fees to process, record and store the information…who owes what, who is paying whom. It all had to go through these power-brokers of finance.
But now, with DeFi, this could all be done instantly and securely through applications that puts the information on the blockchain. It would be instantly recorded, more secure than any corporation’s records and done at a fraction of the cost.
Over the next ten years, the blockchain technology will touch every sector, from finance to healthcare and consumer goods. Anywhere records and transactions need to be processed and securely stored, it will be done on the blockchain. Demand to continuously verify all this information will boom and in that, demand for cryptocurrencies will send their prices to the moon!
So if cryptocurrencies derive their value from this revolutionary growth in decentralized finance, smart contracts and other applications, how fast is this part of the market growing and how will it affect prices?
Even with cryptocurrencies reaching $2 trillion in market cap, this phenomenon is still in its infancy when it comes to blockchain uses and growth.
Total Value Locked, or TVL, is really the best measure when we’re talking about growth in decentralized finance. It represents the value of funds users have locked in to support DeFi projects, so it’s cryptocurrency locked up to pay for those verifications in the application.
And that TVL has grown by 1000% in the last year alone to over $84 million in crypto and is up over 16,000% in the last two years. According to Messari data, trading volumes on decentralized exchanges were up 80-fold in the first quarter compared to last year with the number of users topping one million in April.
Now the thinkers out there are saying…HOLD UP! Cryptocurrencies have a market cap of $2 trillion but you just said there’s only $84 billion supporting DeFi projects. Something doesn’t add up here…how do you get from an intrinsic value of maybe a $100 billion to the total value of crypto prices in the trillions?
Factors in Cryptocurrency Prices
And you’re right. Right now, cryptocurrencies have a lot of other factors in the price, it’s not all this base intrinsic value. There’s the value of the network effect, the idea of digital gold…and yes, there’s just good ol’ fashioned speculation as well. I’m not going to lie to you and say there isn’t some of that get rich quick mentality supporting the price of bitcoin, Ethereum and the rest.
What I am saying is that as this DeFi market and all the other uses of the Blockchain develops, that intrinsic value is going to become a larger part of the price. DeFi has trillion-dollar market potential with futures and options exchanges next and this doesn’t even include growth in other uses like NFTs and smart contracts. The market for smart contracts is growing by 18% annually and NFTs could be a key component of exchange in the coming virtual world.
Now while all this is going to help support prices across the cryptocurrency market, because that validation of value will help bring more investors into crypto, the drivers of this, those smart contracts and other blockchain uses will benefit some tokens more than others.
Ethereum is still the big one when talking about that intrinsic value from blockchain applications and with a market cap of $397 billion, it’s nearly a fifth of all crypto demand. DeFi originated on the Ethereum blockchain and it’s where the biggest applications are still running. That total locked value on the Ethereum blockchain alone is more than $65 billion, more than two-thirds of the total and the token price has jumped over 600% just in the last year…that’s seven-times your money in a single year!
But there are other tokens specifically created for DeFi exchanges and returns on these have been well over the older Ethereum token.
You can get a sense of the strength in each of these from the table on DeFiPulse.com, showing total locked value in each coin and I’ll highlight some of the best crypto next. Aave and Compound were two of the first DeFi coins along with Uniswap with nearly $4.5 million locked in just the three tokens alone.
The Polygon MATIC token is one of my favorites with a market cap over $8.8 billion making it the 19th largest cryptocurrency.
Polygon’s MATIC helps to solve major problems in Ethereum of scalability and transaction fees. Polygon is a blockchain built on top of Ethereum, called a layer-2 blockchain, to process transactions faster. Besides the benefit in speed, transaction fees on MATIC are as low as one-thousand what they are on the larger blockchain.
As a result, hundreds of applications have been built on the chain and the token price has increased by over 5,000% over the last year.
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Aave is an open-source DeFi platform and one of the first, introduced in 2017 as a match-making system to connect lenders and borrowers.
Lending and borrowing is easily the most popular use in DeFi right now. Think about this, Wells Fargo alone made over $8.8 billion in just the last three months by paying 0.03% on your deposits then loaning the money out at an average 2% rate.
That doesn’t include all the other transaction fees and other costs the bank collects. As the leading DeFi exchange for lending, Aave is capitalizing on the transition and has produced a 592% return over the last year.
Created in 2018, Uniswap, the UNI, is the largest of the DeFi tokens with a market cap over $17.3 billion.
Uniswap is the king of decentralized exchanges, think about it in terms of a competitor to Coinbase which is a centralized exchange that monitors…and keeps records, on all transactions. Uniswap is the anonymity that crypto users are losing with other exchanges and they’re rewarding the token in popularity. The price of the token has climbed more than 5,800% over the last year, a 59-times return on your money.
And the weirdest name in DeFi cryptocurrencies but the highest return has been PancakeSwap with a $5 billion market cap, just above Aave.
The popularity of Uniswap has brought out imitators and one is PancakeSwap, created on the Binance smart chain in September of last year. PancakeSwap is a clone of Uniswap…in fact, Binance literally copied Uniswap’s code to create the exchange.
Of course, that’s the nature of open-source and nothing new to see cloned code. Pancake has still been hugely successful and the token has climbed over 10 million percent over the last year!
All you out there in the Nation know, I’ve become a bitcoin believer…that I’ve gone cuckoo for crypto-puffs but I don’t want you to think there aren’t risks to investing in cryptocurrency.
This ain’t all rainbows and unicorns and on any investment with the potential to triple your money or more in a few years, there are going to be risks.
The biggest risk here isn’t whether DeFi will grow and drive crypto prices higher but which tokens will thrive and which may barely survive. There are thousands of cryptocurrencies and hundreds specifically created on DeFi exchanges. That means even with exponential growth in applications and uses, not every token will see the demand it needs to drive prices higher.
Now most of the exchanges and applications are being built on the Ethereum blockchain so even though a lot of these other cryptocurrencies are growing faster, I still think Ethereum is your most certain bet and it’s where I have most of my investment.
Another risk, probably the most widely feared, is losing your cryptocurrency investments to hacking. While exchanges do get hacked, the majority of losses here have been on the user side where your smartphone or computer gets hacked and someone is able to steal your login to a crypto account. This is just the pick-pocket of the digital age and people need to get more aware of how thieves steal your information and assets. Things like never clicking on a link in an email from someone you don’t know or opening a file from an untrusted source. We have to get better at protecting our information if we’re going to live in a digital world.
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None of these risks should keep you from benefiting from the rise of cryptocurrencies as an investment or the revolution in digital finances. Growth in DeFi and other blockchain uses means cryptocurrencies like Ethereum and AAVE have real intrinsic value and that will drive these prices!
If you want to earn free cryptocurrency, I recently highlighted a way to do exactly that with the new BlockFi rewards card, a great way to get cash back and grow your bitcoin investment, so I’ll leave a link to that in the video description below.
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