Since late 2017 and the beginning of 2018, many investors and crypto enthusiasts are still waiting on the next bull run. Will we see prices climb in the next 24 hours? The next week? Will it be a few more months? Or maybe even a year or more? Clearly, there’s no way to tell for sure. We’ve seen price forecasters, financial analysts, and eternal bitcoin bulls predicting/hinting/hoping for the onset of the next bull run over the past 10 months. (Read: Arthur Hayes, Mati Greenspan, & Tim Draper for optimistic impressions.) However, we still haven’t gotten the real price boost most of us would like to see. Of course, there have been some short term appreciations in pricing, but those haven’t proven to be sustainable for a long run (consider XRP’s price suge last month and bitcoin’s 20% boost over the summer leading the currency above the $8,000 mark again—a price movement that would be greatly appreciated right now).
Now, we’re looking at some of the possibilities for more long term, sustainable cryptocurrency growth. Many may look at last year’s bull run as an incredibly unsustainable overreaction and “crypto mania” that led to overvalued all-time highs for many cryptocurrencies (and the people thinking that are likely correct, in this writer’s opinion). However, given the relative price stability of the majority of the high market capitalization coins in recent months, it looks like things are starting to cool down and normalize. Sure, we aren’t seeing crazy 80% increases in a three week time frame, but we’re also not seeing the collapse of crypto as we know it (bitcoin isn’t trading at $100). At its current price, bitcoin has still seen substantial growth from last year. If you’re still skeptical, or perhaps someone who FOMO’d in at all-time highs, or near all-time highs last year, considering the following:
Around this time last year, bitcoin (BTC) was trading at about $4,200. Compared to the current price (roughly $6,600 at time of writing), we’re still looking at just above a 56% gain in value over a 12 month period—a great return for any investor. To put things into perspective, over that same period, the S&P 500 saw an increase of just 13.51%. In fact, it’s even odd that I used the term “just” to describe a 13% gain for the S&P 500 (which is higher than the average annual increase of 9.8%). But when comparing anything else to crypto (save options, perhaps), the returns always feel smaller. This is all just to say that cryptocurrencies have not fallen to the wayside yet. Instead, we’re seeing a more reasonable amount of growth and there are some promising things in the future that may help the industry.
Robinhood and Crypto
Earlier this week, I noticed an important update in my newsfeed from Robinhood, the incredibly popular commission-free stock trading app. While there have already been many states in the US where Robinhood allowed crypto trading, my home state had not been on the list. That was until (very) recently. Now, everyone in my state with a Robinhood account will not only be able to trade cryptocurrencies, but will have them front and center on their screens whenever opening the app or website to commence trading.
At the current stage, people from only 24 out of the 50 states in the US have access to cryptocurrency trading on Robinhood. (Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Indiana, Iowa, Massachusetts, Michigan, Mississippi, Missouri, Montana, New Jersey, New Mexico, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia, and Wisconsin.) However, the Robinhood team has indicated that they’re currently working on adding support for more states soon. But why does this matter? After all, like Robinhood, Coinbase has a user-friendly interface, app, and website that’s great for newcomers. Well, let’s consider some things.
Robinhood started attracting a lot of attention in the financial world because of its ability to grab the attention of younger investors. Before Robinhood, there were already plenty of options for young investors to choose from. Between Scottrade, TD Ameritrade, eTrade (remember those commercials during the Superbowl?), Merrill Lynch, and many others, millenials have always had the ability to start investing and trading in the open markets, but there’s just always been a sort of barrier to entry. Perhaps a lack of knowledge, an intimidating user interface, or fees being added to each trade is what was holding back younger investors, but Robinhood was able to tap into the market.
Because the app is so popular with younger investors, the same demographic that is also more open to investing in cryptocurrencies, the addition of crypto to the platform (and subsequent roll out, which is intended to be nationwide in the future) is a massive plus for the crypto community. While it’s true that Coinbase is easy to use as well, there are a couple factors potentially holding it back.
Because Coinbase is strictly for cryptocurrencies, a lot people who may be interested in purchasing crypto may not necessarily trust the company. Though Coinbase maintains a good public image to a certain degree, they are a company focusing on crypto. That’s fine for those already interested in crypto and active in other marketplaces like Binance, but that won’t necessarily go as far when attracting new converts.
Robinhood, on the other hand, has already created a name for itself and its user base trusts their information with the company. When opening a brokerage account, no one really bats an eye at the idea of having to enter in some personal information. However, with crypto’s less-than-clear regulatory status, many may not feel the same way for Coinbase or another company dealing exclusively with cryptocurrencies. The other factor, which is also a big one in my opinion, is a lack of fees.
When there are no fees for trading, then there’s a certain amount of psychological barrier that’s removed (along with financial) because new users feel like they’re putting less on the line. Indeed, if you throw $100 into your account and mess around for a bit, the only loss you’ll see is if you make a bad trade. You don’t need to worry about making a reasonable trade just to have your profits eaten up by a commission on each trade. For new, likely smaller investors, having no fees is likely to attract the kind of attention necessary for another big run in crypto.
At the end of the day, Robinhood hasn’t even rolled out crypto trading to half of the US yet (though quite close). So while we all want to see the next crypto bull run, maybe one of the best chances for the next run and continued growth is Robinhood. There are still users all across the US that can’t access crypto on Robinhood yet, but as soon as it’s available in their state, suddenly the barriers to entry in the crypto world have been removed. Granted, Robinhood hasn’t been adding 20+ states to the list in one day, but gradual additions are being made. Consider the possibility that a growth in Robinhood user access could likewise lead to a growth in the value of the crypto industry; I’m certainly considering just that.