Investment Strategies for Blockchain: A $2.5 Trillion Opportunity?
A Multi-Trillion Dollar Value Creation Opportunity: The emergence of Blockchain technology, cryptocurrencies and Blockchain tokens promises to fundamentally remake the innovation economy and the private capital market. While still early, Blockchain applications offer a large revenue opportunity and could significantly impact financial services, commerce, media, supply chain management, cybersecurity, and several other industries. The applications built on top of Blockchain technology focus on markets exceeding several trillion dollars. Blockchain startups need to work with incumbents and regulators and identify clear business use cases. Our upside scenario analysis of specific use-cases spanning 20 industry verticals suggests a value creation opportunity exceeding $2.5 trillion over the next ten years, a 15x growth potential over the estimated value of cryptocurrencies and Blockchain startups today.
With such potential, Blockchain technology could be increasingly important to individual and institutional investors over the next couple of years. We highlight four ways investors should approach markets impacted, either directly and indirectly, by Blockchain technology.
- Invest In Cryptocurrencies: If you bought $1,000 in Bitcoin in January 2010, your investment today would be worth $680,000, a compound annual growth rate (CAGR) of 8,400 percent. Theoretically, a fixed supply of cryptocurrencies combined with growing demand might partially explain these rising values. However, we believe investors have not yet fully explored the use cases of cryptocurrencies. As a reference guide to investing in cryptocurrencies, we compiled a list of top 100 cryptocurrencies and top 100 cryptocurrency exchanges.
- Invest in Publicly Traded Blockchain Proxies: We have witnessed launch of Exchange Traded Funds (ETFs) that exclusively invest in companies working on Blockchain technology. As a reference guide to investing in these assets, the report includes a sample list of publicly traded companies and ETFs that could provide investors exposure to Blockchain technology in their portfolio.
- Invest in Tokens via Initial Coin Offerings (ICOs): In 2017, the aggregate value of all tokens grew to $37.7 billion, a nearly 19,000 percent increase from the prior year. Current ICO capital raises suggest companies will raise $12 billion this year compared to $5.4 billion last year. By comparison, U.S. startups (i.e., seed and Series A) raised an estimated $8 billion in 2017 using traditional methods. We suggest accredited investors to conduct careful due diligence on companies that issue tokens and adopt a long term approach to these assets. We believe this emerging form of capital raising is clearly disrupting the traditional venture ecosystem. As a reference guide to investing in tokens, in this report, we have created a list of top 100 tokens and top 100 token exchanges.
- Invest In Blockchain Startups: Blockchain’s applications extend well beyond cryptocurrencies. Accredited investors can access Blockchain startups through the venture capital funds backing the companies or through the secondary market. The technology offers significant potential to improve inefficient markets hobbled by large numbers of people, especially “middlemen” or intermediaries that slow transaction times. Though new, companies and people are already putting Blockchain to good use beyond payments and digital currencies. As a reference guide to investing in Blockchain, in this report, we compiled a list of top five Blockchain leaders and emerging Blockchain startups.
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