On Thursday, bitcoin hit a new all-time high of $18,197.
While the price has since retreated a bit to around $16,000, the recent moves have been nothing short of spectacular.
The world is wondering, what’s driving prices higher?
If you regularly read Early Investing, you should already have a good idea.
This could be cryptocurrency going mainstream. The idea of independent, cryptographically secured currency may be catching on.
In today’s chaotic world, it’s an incredibly attractive proposition. Something that’s not attached to tainted governments and banks and that will appreciate in value if the network grows.
It’s a form of money selected by the people, not forced on them.
And for the foreseeable future, bitcoin will continue to be the king of this market. It’s the reserve currency of the cryptocurrency world. It has the biggest network, the most liquidity and, importantly, the best brand.
The limited number of bitcoins available, combined with the incredibly fast rate of adoption, has led to the feeding frenzy we’re seeing today.
Here’s how I described it back in July.
There are only 21 million bitcoins that can exist. Fifteen million already exist today, and the rest will be mined over the coming decades.
It’s not a lot of coins to go around, is it?
Each coin costs around $2,600 today. If bitcoin goes mainstream, the price will go orders of magnitude higher.
So far, this thesis is playing out.
As I’ve described here many times, bitcoin has rapid viral organic growth. That’s the engine.
Viral simply means it spreads naturally among networks of people, like a rebellion, virus or new technology.
Organic means there’s no advertising budget. People desire it and tell their friends about it.
And right now, people want a financial asset that’s not connected to the traditional financial system… one that’s technologically advanced and that offers a real alternative.
Viral organic growth is one of the most powerful forces on the planet. And that’s what’s fueling the growth of cryptocurrency.
This force needs to be powerful in order for bitcoin to succeed, because the establishment doesn’t like cryptocurrency.
We’ll need to fight for it and demand fair treatment for cryptocurrencies from government. I hope newcomers realize this is not just a speculative asset.
Cryptocurrencies are critical to the movement to build a decentralized new financial system.
It’s the biggest market in the world. The stakes are high, and there will be pushback.
Altcoin Growth Cycles
As more people get involved in bitcoin and make money off it, a portion of them will start dabbling in alternative cryptocurrencies, often called “altcoins.”
The largest U.S. exchange, Coinbase, now offers three cryptocurrencies. (Until last year, it offered only bitcoin.) Those three are…
- Bitcoin
- Litecoin
- And Ethereum.
And while bitcoin is grabbing all the headlines, the altcoin market is doing even better.
There are now 15 coins with market caps of more than $1 billion. A year ago, there was just a single coin valued in the billions, and that was bitcoin – it was valued at $768 per coin with a market cap of $12 billion.
The price of Litecoin has risen from $3.92 to more than $96.
In the last year, Ethereum has soared from around $7 to more than $428. It’s now the second-largest coin by market capitalization (total value of all coins).
A year ago, the total value of all cryptocurrencies was around $14 billion, with bitcoin making up $12 billion of that. Today the overall cryptocurrency market is worth $426 billion, with bitcoin accounting for $302 billion of that.
Do the math… Altcoins are rising much faster than bitcoin alone.
As I often say, there’s room for dozens, if not hundreds, of long-term winners in this space. Remember, we’re talking about building an entirely new financial ecosystem here.
Now hundreds of teams are racing to build the next big coin. Competition can do wonders in a market this large and fast-growing.
Many of the best coders on the planet have been attracted to the cryptocurrency space by the world-changing mission (and the money).
It’s all happening. Right now.
And no, it’s not too late to get involved. We are still so, so early. If you’re worried about buying at an all-time high, I recommend “averaging in.” By that I mean buy the same amount of cryptocurrencies at regular intervals over time. Just keep in mind that bitcoin has always had sharp corrections.
Good investing,
Adam Sharp
Co-Founder, Early Investing