Investors “Flying to Safety” With Cryptocurrency

Part of our investment thesis at Crypto Asset Strategies is that you need to invest in bitcoin as a hedge against the traditional fiat economy. And similarly, you need to invest in altcoins as a hedge against bitcoin.

Yes, bitcoin is the most dominant crypto right now. It has the biggest and best brand name and great security. But if the point of crypto is to diversify away from fiat, then logic dictates you should diversify your crypto portfolio as well and own some altcoins.

Plus, there are some really smart people working on these altcoins. A few of these coins are likely to rise up and succeed. The bulk of your crypto portfolio should still be in bitcoin. But there’s room for altcoins. And the real world proved that this week.

The global economy threw up all sorts of warning signs. The Chinese renminbi weakened. The United States designated China as a currency manipulator (this comes on the heels of the U.S. announcing new sanctions against China). Iran seized another oil tanker. The European economy slowed down. And global debt surpassed $246 trillion.

So how did bitcoin respond to the news? It surged. This week, bitcoin wasn’t just a hedge against the traditional economy. It was a flight to safety.

For investors, bitcoin (along with gold) was a “safe” investment in the midst of global economic turmoil. As I write this, bitcoin is trading at $11,767.02. A little more than a week ago, bitcoin was trading around $9,600.

Bitcoin acting as a flight to safety is just more evidence that crypto is beginning to go mainstream. And bitcoin has plenty of room to grow. Gold has an implied market cap of more than $7 trillion. Bitcoin’s market cap is a little more than $210 billion.

Bitcoin is gold for the digital age. As bitcoin matures and grows, more and more investors will turn to it as both a hedge and a flight to safety. That’s just going to bring more attention to the altcoin market. And just as it’s taken time for bitcoin to gain acceptance as a flight to safety, it will take time for the altcoin market to shake out. There will be winners and losers in altcoins. And we’ve constructed our altcoin portfolio so it will pass the test of time – much like bitcoin.

We’re still in the beginning phases of this journey. And we can’t wait to see what happens next.

Portfolio Update

Decred is making some progress this summer. Coinbase is considering listing it on its exchange. If that happens, look for decred’s price to move up. The liquidity and positive attention that a Coinbase listing brings usually drives prices higher.

Decred is also launching its own decentralized exchange. The exchange will utilize atomic swaps (technology that directly connects two blockchains) to enable peer-to-peer trading.

Draper Esprit portfolio company Revolut is launching its own version of Robinhood in Europe. The commission-free trading app will allow Europeans to trade U.S. stocks and buy fractional shares.

Revolut is eyeing the possibility of expanding into the U.S. And it has the potential to make Draper Esprit (and Draper Esprit stockholders) a lot of money.

Good investing,

Vin Narayanan

Senior Managing Editor, Crypto Asset Strategies