Should I Invest in Blockchain?

Here are my thoughts…

There is still a lot of hype around Bitcoin and there are reasons for it! It can either make you millionaire or just another loser in a single day!

From getting rich quick with mining to placing all your money into the new digital coins (and there are plenty of them), people will always be people and will fall into the get rich quick trap.

Unfortunately, a lot of people lost money with all this hype and could not handle the ups and downs of the digital currency. What is worth $3000 one day, can then explode to $20000 while you blink your eyes!

But there is always a but…

Something that is extremely volatile cannot be attached to something that can be easily valued. What is worth nothing for me is worth $20000 for you. Is a strange concept of investment that is not really easy to grasp.

Volatility is best friends with Bitcoin!

Another thing that got me scared is the lack of regulation. Meaning that is nothing stopping from bitcoin brokers to just vanish from one day to the other, which has been the case many times already…

Your bitcoins were suddenly stolen and you lost it all. Ups that must hurt!

So people are putting money in thousands of shady platforms that for some reason come up on your Instagram feed promising 4 digit returns in few months, located somewhere in the world and at the end, all you have is a digital asset that might even disappear tomorrow. That sounds appealing right…or not!

And people say the stock market is risky!

Personally, I’ve never invested in Bitcoin but I am considering taking a leap of faith in the underlying technology, Blockchain!

For some years, digital currencies have been heavily attacked by “the big money”. I get it! Anything that goes against the normal flow of things always causes aggressive reactions…

So from one day to the other, there is a proposal for a new financial system that is supposed to make money transfers safer, faster and cheaper. I do understand why all the banks and financial institutions rejected it the way they did.

A huge risk just came up on their radars!

So what about Blockchain?

The blockchain is the juice of the orange I would say! It provides the foundation for the crypto networks to operate, allowing the flow of transactions to be decentralized and secure.

Is a combination of software, databases, cryptography and distributed network architectures where the transactions are validated in microseconds and executed in a P2P fashion, avoiding the fixed intermediaries and centralized actors.

I will not go into the technicalities! Simply because there can be many interpretations of what really can be classified as Blockchain. Many of its bases, were existing concepts but for me, it just looks like someone decided to get them together and give it a fancy name.

However most important than what is Blockchain or not, is what the institutions are now doing.

First you fight it then you embrace it!

Companies such as Fidelity Investments have started to explore the benefits of such technology. It also provided last year an institutional trading platform for cryptocurrencies. This somehow validates the change in the overall sentiment over the crypto market.

Square, a digital payments firm, is also accepting cryptocurrencies as a payment method but more important than that is the fact that Square has patented its crypto network development.

So there are definitely developments being made in this world and is already reaching to the consumer, the intended beneficiary.

Square claims its crypto side of the business is growing rapidly and they are already processing transactions of millions just after a few months of operation. This is astonishing to me!

How to invest?

Investigating a little bit more, I found that there is an ETF tracking companies which are investing in the Blockchain world and would be a safe option f for diversification without being tied to one company one but still good enough be able to jump into the wagon.

The ETF trades with ticker BLOK and their top 5 holdings are GMO Internet, Overstock, Square, Digital Garage and SBI Holdings.

It opened up in early 2018 and has an expense ratio of 0.70%, which is not cheap compared to the majority of ETFs. However, if you want exposure to such a niche, it can be an acceptable price to pay.

I am willing to consider such an investment for the long-term. At the moment, some of the holdings of this ETF are just following the trend of bitcoin prices which is still in a downtrend from its highs.

So do not be surprised with the downside potential!

But thinking long term, it can potentially bring huge gains if Blockchain makes it mainstream.

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Disclaimer: I am not a financial advisor. Always do your own research when investing in stocks.