By Matt McCallMar 04, 2020
You may not have heard over the noise of the financial media lately, but cryptocurrencies continue to thrive.
After tumbling with the broader market in recent days, bitcoin rebounded 3.7% on Monday, while many of its “altcoin” peers climbed even higher.
The CIX100, which is a basket of the 100 largest coins that was created by Cryptoindex, is up 30% year-to-date.
I see this as the beginning of the next great surge as digital currencies like bitcoin and other altcoins are becoming more mainstream with each passing day.
It’s quite simple really. The more people use their networks, the more likely these cryptocurrencies rise to new heights.
The notion is described in what’s known as Metcalfe’s law. The idea is that the effect of a network — like those underlying bitcoin or other digital currencies — grows proportionally with the number of connected users. The more users, the more effects on the network.
Having better and easier access to buying or selling a cryptocurrency is one way to grow a network. And that’s exactly what’s been happening lately with users of Square’s (SQ) Cash App.
You could be forgiven for not immediately connecting this $34.5 billion cashless payments company to the cryptocurrency world.
But CEO Jack Dorsey, who also runs Twitter (TWTR), is a huge bitcoin fan. And that enthusiasm has been worth his while, as Square’s fourth-quarter earnings statement recently revealed.
Revenue from bitcoin transactions through the Cash App came in at $178 million, amounting to nearly half of the company’s $361 million total. Gross profits on bitcoin revenue totaled $3 million, up 50% over the prior two quarters.
For all of 2019, bitcoin transactions brought in $516 million of the $1.1 billion total – and a profit of $8 million.
On an investor’s call, Dorsey credited a Cash App redesign that made it more user-friendly.
In fact, the peer-to-peer transfers network became the company’s best customer acquisition channel, allowing users sending and receiving money to discover bitcoin and other products.
Square started bitcoin services on its Cash App in the U.S. in the summer of 2018 by buying and selling bitcoin for its customers. In June 2019, Square began letting customers deposit bitcoin into the app.
Bitcoin trading volume on Square’s Cash App actually grew at a faster clip in the fourth quarter than it did on crypto exchanges Coinbase, Gemini, and Kraken, according to an analysis by The Block.
The service fills a profitable niche for Square as many crypto exchanges don’t offer the ability to cross-sell into stocks or provide other traditional banking services like Square. Meanwhile, other retail brokerage apps don’t always let users buy or sell bitcoin.
The company also has a crypto team that says it’s building a software development kit to make it easier to integrate other wallets and apps into bitcoin’s lightning network.
The lightning network is built on top of bitcoin’s network to enable faster, easier payments for everyday transactions, like buying a cup of coffee. It doesn’t get much more mainstream than that.
Elsewhere, leading digital currency exchange Coinbase announced it has become the first pure-play crypto company to be approved by Visa (V) as a principal member.
Simply put, that step will make it easier for Coinbase users to spend their cryptocurrency like they would cash in a regular old bank account.
In 2019, Coinbase launched its Coinbase Card in the U.K., which is a Visa debit card that gives users the ability to spend crypto on any purchase – just like cash. The company has since expanded the card to users in Spain, Italy, and France.
The new Visa principal membership will allow Coinbase to offer more features to Coinbase Card members, including support in more markets.
I’m certainly hoping the card will come to the U.S. soon.
As you can see, businesses in the sector are making it easier for folks to get in and out of their digital currency positions. And they’re keen on integrating these services into the larger mainstream financial ecosystem, like traditional banking or securities trading.
Over time, these moves will help expand the networks of bitcoin and other cryptos, driving up demand. That, in turn, can push digital currencies’ prices higher and higher.
Another huge catalyst to higher prices is now less than three months away. In mid-May, bitcoin’s “halvening” – or “halving” – is set to take place.
The halvening is pre-programmed into bitcoin’s protocol. It mandates that roughly every four years, fewer new coins will be released onto the market. If demand remains strong as bitcoin continues its march into the mainstream, the “supply shock” will set the cryptocurrency market on fire.
Bitcoin has gone through two halvenings before, and each time resulted in explosive profits.
Starting three months prior to the first halvening in 2012, prices shot up more than 10,000% in just over a year. And beginning three months prior to bitcoin’s second halvening in July 2016, the cryptocurrency went on to surge 4,500% in just over 18 months’ time.
We’re about three months out from the third halvening… and we’re already seeing prices move.
But most investors I talk to don’t realize how much more profitable altcoins were around the previous two halvenings.
That’s why I handpicked six altcoins for my Ultimate Crypto portfolio. They’re up an average of 35% since January 7.
One of the altcoins is building a decentralized network of data sources that can be used to make smart contracts secure and highly reliable – and it’s already up an incredible 122% so far.
Another Ultimate Crypto recommendation is up 30%, and it is well-positioned to benefit from the booming smart contract market. It’s designed to be the platform of choice for the large-scale, mission-critical decentralized applications (or “dApps”) that will underpin the economy of the future.
With the bitcoin halvening on the horizon, bitcoin could very well soar past its all-time high near $20,000 set in 2017. That would represent a more than 100% increase from today’s price.
Altcoins could do even better. Year-to-date, some altcoins have seen gains well into the triple digits. The halvening could send them higher still.
P.S. The next halvening is getting closer, but it’s not too late to stake your claim in the burgeoning cryptocurrency market. This was the subject of my recent webinar event, the 2020 Crypto Millionaire Summit.
To make sure we’re ready, my team and I dedicated the past few months to crafting a 10-factor system for picking cryptocurrency investments.
Given the track record of explosive gains in cryptocurrencies, I’m here to tell you that people who invest modest stakes now could make millions of dollars.
Click here to listen to Matt McCall’s MoneyLine podcast! This week, Matt discusses the recent market volatility. Stocks endured one of their worst weeks since the 1930s as a result of fear surrounding the coronavirus. But this isn’t the first correction the market has experienced – and it certainly won’t be the last. In this podcast, Matt dives into the history of stock market corrections. What it tells us can help us create a strategy. The current weakness is providing buying opportunities, and Matt names a few stocks with potential. Plus, he interviews famous value investor Dan Ferris of Stansberry research.
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