These Technologies Will 'Reset' Finance – and Change the World
Editor's note: Banking is only the beginning...
As cryptocurrencies go mainstream, they're transforming how people send, receive, and invest their money. And according to Crypto Capital editor Eric Wade, far bigger changes are on the way...
In short, Eric says cryptos could become the next great store of value as the dollar declines. But they're also disrupting other industries – and one unique type of crypto could revolutionize how we interact with the world...
Today's Masters Series comes from a combination of the August 3, 2020 Digest and the November 2021 issue of Crypto Capital. In this essay, Eric explains why you should never fight the macro trend... details what makes crypto an ideal alternative to the dollar... and discusses an up-and-coming crypto technology that could change everything...
These Technologies Will 'Reset' Finance – and Change the World
I drank too much the night I found out we were selling Wallstreet.com...
This was back in 1999.
I took my wife out to dinner, and we bought steaks and ordered the sort of bottle of wine you'd buy on your engagement night or your 50th wedding anniversary.
We were celebrating properly. See, we were part of the biggest domain-name sale in history up to that point. Someone was buying the URL Wallstreet.com from us for more than $1 million. No domain name had ever sold for as much in a cash transaction.
I may have woken up with a hangover the next day. I don't remember. But I do know this... The sale of that domain supercharged me.
I'd been a stockbroker up to that point. And as much as I enjoyed picking stocks, I'd been bitten by the tech bug. I could tell the Internet was a colossal black hole that was just sucking every industry in the world into it.
Growth was happening on the Internet. And I didn't want to merely invest in these tech companies that I knew were going to change the world... I wanted to be a part of them.
So I started entertaining offers and pursuing a new career path...
I was young, aggressive, and certain that I could tackle the toughest problems... no matter how bad or how uphill they appeared. That's how I ended up working at a struggling advertising company.
This company was low-tech and old school. It delivered ads to homes that didn't subscribe to a daily newspaper. It gave businesses a way to reach people who they couldn't reach through the normal channels.
I was brought in because the CEO knew they needed to modernize, but he just didn't know how to "reset" his struggling company...
Print advertising, such as newspaper ads and circulars, was an effective way to reach consumers for well over a century. And over the years, the industry kept up with technological innovations.
Printing presses got faster, advertisements moved from black-and-white to color, and advertisers were able to target shoppers who lived near their stores and fit their demographics.
But all those innovations were incremental. They were improvements on an old, dying model.
See, in the early 2000s, the Internet was eating up the old ways of advertising. Younger, tech-savvy readers canceled their newspaper subscriptions and started getting their news online... for free.
You'd think that would have been a boon for us, since the number of non-subscribers to print media was growing. It should have meant more jobs, revenue, and profits for us. Instead, advertisers simply fled print in droves.
The patient didn't have a cut... He had no pulse.
For three years, I fought an uphill battle as advertisers fled... I "reset" everything I could. I found inefficiencies and used technology to eliminate them. I worked with developers to streamline our processes and gave customers ways to place orders online.
I went to bat against corporate behemoths like Walmart (WMT) – and won, getting more revenue at higher profit margins. I developed new products designed to appeal to younger customers.
In short, I improved everything I could. But I simply couldn't change the macro picture... Customer attention was shifting online.
People quite literally picked up our ads and carried them to the trash can. Sometimes, they didn't even bother doing that. I remember driving by houses and seeing weeks' worth of our ads turning white in the sun.
In the end, the company I worked for pivoted out of advertising altogether. And I learned one of the greatest lessons of my career...
You never, ever fight the macro trend.
Fighting this fight dooms businesses, traders, and entrepreneurs into obsolescence. It loses you money and wastes years of your life.
And most importantly, there's an opportunity cost to fighting the macro trend. You could be riding the waves, not swimming against them.
You could make 10 times, 20 times, 100 times your money... and not get stuck fighting over an extra 1% on your margins.
In my case, I could have avoided three years of fighting an unwinnable battle. But again, I learned valuable lessons.
I've carried those lessons with me for nearly 20 years. And today – right now – I'm seeing it all play out again...
I'm looking at one of biggest macro trends I've ever seen unfold before my very eyes today.
I'm talking about bitcoin and cryptocurrencies.
Although I've had an interest in cryptography for decades, as for cryptocurrencies... I've spent the last eight-plus years getting to know everything I can about them and relaying all the best information and analysis I can to readers.
In short, I've long thought bitcoin and cryptocurrencies represent the "reset" that our financial system needs to survive today.
And as the Federal Reserve and other central banks continue to just keep printing more and more money, a lot of other people are starting to understand the power and uses of cryptos, too...
In recent months, bitcoin has surged above $69,000. It has since fallen around 42% from those highs to around $40,000 today. Here's why bitcoin and other cryptos are getting so much attention now...
What Alphabet (GOOGL) and Facebook – now Meta Platforms (FB) – did to my little advertising company is what bitcoin and cryptocurrencies are doing to banks...
They're decimating them. They're gutting them from the inside out. Some banks see the writing on the wall, and they're working hard to embrace this new technology.
Others have their heads so deep in the sand, they're going to go bankrupt. I can almost guarantee it.
The path from here to there will be rocky, but it will mint an entirely new class of millionaires – and likely billionaires, too.
Banking is changing, whether banks like it or not...
Here's just one example of how screwed up the banking industry is. More than a decade ago, the U.S. government passed a controversial new piece of legislation targeting the banking system.
It's called the Dodd-Frank Wall Street Reform and Consumer Protection Act after its sponsors, Senator Christopher J. Dodd and Representative Barney Frank.
If you were to print out the Dodd-Frank Act, you'd probably have to go to the paper store. It weighs in at more than 2,300 pages. Simply reading it would take the average American more than 40 hours.
Now, think about the fact that banks must comply with every page of documentation in the act. Imagine how many lawyers and compliance analysts they needed to hire.
These regulations are supposed to help Americans. Instead, all the red tape kills innovation by making it impossible for new companies to enter the banking space. So now we have enormous, slow-moving, too-big-to-fail banks.
Those were the consequences of the Great Financial Crisis...
That's part of the reason why former President Donald Trump signed a law in 2018 that rolled back huge chunks of these regulations.
But the Dodd-Frank Act is just a piece of the puzzle. Banking today is weighed down by so many regulations that it has banks slipping into irrelevance.
It's like the entire sector didn't notice the rise of the Internet...
Think about it – I can send an e-mail from Los Angeles to Tokyo any time of the day for free. But sending money around the world can take as long as five days and costs me $50 or more in fees. Why is that?
For that matter, why does the stock market shut down on nights and weekends? I can tell you one big reason... Because banks have to comply with so many regulations.
But what if we could automate those transactions entirely?
That's where cryptocurrencies come in.
As central banks around the world spin up their money printers, crypto will not just blow up the old model of banking... It's going to completely reset the entire financial system, starting with the U.S. dollar.
What exactly is the monetary policy for the dollar? I can tell you... It's a small committee of bankers who lick their fingers and lift them in the air to gauge the markets.
If things feel a little breezy, they crank up the money printer. If the wind's blowing in a different direction, maybe they slow the printer down.
The only thing they never do is stop the printer altogether. We live in a world where the dominant currency is engineered to bleed value.
That runs counter to the fundamental purpose of a currency. In the big picture, a currency is a way to value something over long periods of time.
Now, fiat currencies like the U.S. dollar aren't fundamentally flawed...
But the U.S. dollar and other fiat currencies are controlled by humans, and we all know humans are flawed... especially politically influenced central bankers.
Their weakness corrupts the value of the currency. They turn monetary policy into a political issue. And there's always political pressure to print more.
As we wrote in the July 27, 2020 Digest...
The U.S. dollar has lost 95% of its value since 1913, when Congress passed the Federal Reserve Act and "modern" central-bank policy began... and since then, the Fed has only increased its interventions over time.
What's more, the U.S. dollar has lost 64% of its value since 1984 alone... But the amount of money created since the financial crisis in 2008 makes the devaluation in previous decades look insignificant.
Since 2008, the dollar's purchasing power has plummeted nearly 25%...
And the Fed keeps printing money with seemingly no end in sight. Take a look at the assets of the Fed through the end of fourth-quarter 2021...
I've read all about Modern Monetary Theory ("MMT"), which the Fed is clearly a believer in. It's a cute theory... It basically says governments can print as much money as they want for as long as they want with no real repercussions.
Even a kindergartner could tell you that doesn't make sense. You can't create value out of nothing. You can't conjure it out of thin air.
Here's why I think MMT has held true since the Great Recession...
There has been no alternative to the dollar.
What about gold? Gold is great. I own enough to keep myself fed and housed if the global economy truly collapses. But as a currency, gold is simply too hard to use for everyday transactions.
It requires you to trust other people (either the people issuing gold-backed assets or the people holding it in vaults). And if that's the case, it's not that much better than the dollar.
This is where bitcoin has an advantage...
Bitcoin is a form of digital money that runs on independent computers all around the world. It's not controlled by any one person, organization, or government. And its monetary policy is set by computer code.
Now, you might be wondering... Isn't bitcoin created out of thin air, too?
Here's a simple, unequivocal answer for you... no.
The only way new bitcoin enters the world is by "mining" it – running high-powered computers that contribute computing power to the bitcoin network. It's estimated that bitcoin miners expend more energy creating new bitcoin than the mining industry does digging fresh gold out of the ground.
Bitcoin simply cannot be created out of thin air... It's built into its computer code. The most bitcoin that can ever be created is 21 million. And the amount of new bitcoin that's created is currently growing at 1.8%, far below the 8.5% of the U.S. Consumer Price Index – making bitcoin less inflationary than the U.S. dollar.
This is because the powerful computers used to secure the bitcoin network (called miners) receive new bitcoin as a reward for verifying blocks of transactions. Currently, the rewards being paid out are calculated to increase the supply of bitcoin by only 1.8% per year...
So bitcoin is scarce. It takes control of the money supply out of the hands of a cabal of politically influenced bankers and entrusts it to the inalienable laws of mathematics.
Remember, the whole idea of bitcoin was born in the heart of the financial crisis as a response to bankers' terrible actions...
Bitcoin can't be stretched, watered-down, or manipulated. Bitcoin is transparent, predictable, divisible, and unstoppable.
In other words, bitcoin is the ultimate backstop for when the dollar blows up.
We believe we'll see one of two things happen in the years ahead – either the world adopts bitcoin as a global reserve currency, or it adopts a basket of currencies that will eventually include bitcoin.
But bitcoin isn't the only world-changing crypto innovation that's gaining popularity...
On July 20, 1969, Neil Armstrong made history as the first man to walk on the moon.
People around the world collectively held their breath as he deboarded the Apollo 11 at 10:56 p.m. Eastern time and uttered the famous words, "That's one small step for [a] man, one giant leap for mankind."
Fast-forward to today, and that small step has led to everything from memory foam (used in items ranging from mattresses to shoes) to baby formula, scratch-resistant lenses, selfie cameras, civilian spaceflight, and much more – even though we haven't been back to the moon since 1972.
And this other technology is another "small step" changing the world... I'm talking about non-fungible tokens ("NFTs").
You've likely seen them in the news. They've caught the attention of investors because of the incredible returns creators are making on their artwork and graphics.
Here's an example...
Whether colorful squiggles meet your definition of art or not, the last time this NFT changed hands on September 21, the value was 922.5 ETH (or $2,546,284.50).
You might think that millionaires trading whimsical images for ridiculous sums of money are what NFTs are all about... But like the first manned moonshot, there's much more to them than the initial hype.
What makes NFTs so desirable is their uniqueness. Each NFT is different from any other NFT out there. Even two NFTs with pictures of the exact same rock are different from each other.
This is an attractive prospect for artists, creators, and consumers because it allows them to irrefutably prove their ownership over something they've bought or sold through the blockchain.
And that's just the beginning...
Over time, I believe NFTs will completely change the way we identify ourselves, consume products and media, build the economy, and interact with digital and physical communities.
Imagine you decide to buy a new car. You look online and find the perfect model. Instead of going to a dealership and haggling with a salesperson, you can just pay for it at a set price on your phone in crypto. The sale becomes a permanent and direct transaction on the blockchain, and you automatically receive an NFT of the car title in return.
Even setting up insurance can be automated in a smart contract – making it the easiest and most secure car purchase you've ever made.
Or think about a concert you've been dying to go to. It can use NFTs as tickets, so no one can use a fake ticket. Your favorite wine can be reserved as an NFT so you can own it before it's released (and at a favorable price to you).
Even your driver's license or passport can be made into an NFT so no one can steal your identity.
In a few years, I believe this disruptive technology will appeal to a wide range of uses and users. And I predict the industry will go from around $41 billion today to as much as $410 billion, or worth around 10 million bitcoin. That's 10 times larger than it is now. And as we'll explain below, it all starts with a big event in January.
NFT projects will offer some of the best technologies, platforms, and solutions that the world soon won't be able to do without. I believe 10 times returns are possible on some of these opportunities. And those who get in now stand to earn massive gains as this trend goes mainstream.
Good investing,
Eric Wade
Editor's note: If you're looking for more details about NFTs... what's happening in the NFT market today... or the right and wrong way to invest in this powerful new type of crypto... be sure to check out Eric's latest presentation.
In short, he provides a complete top-to-bottom overview of all things NFT – including his little-known "cheat code" for spotting big winners. Plus, he gives away one of his favorite ways to play this space... that he believes could return 1,000% long-term gains. Click here to get started.