A Fidelity Investments fund known for its interest in blockchain technology and cryptocurrencies is still on the way to making cryptocurrency investment opportunities available to millions of U.S. workers through employee 401(k) savings and retirement plans.
Leading fund macro analyst Jurrien Timmer, in an interview with Raoul Paul on ‘Real Vision,’ compared Ethereum and Bitcoin to device and new technology giant Apple, and pointed out that Metcalfe’s Law will support the growth of both networks, whose competitive advantage increases as users of both blockchains grow. What exactly is Metcalfe’s law?
Metcalfe’s law
Not to get into deep analysis, the basis of Metcalfe’s law is the increasing value of a network as the number of its users grows. The basis of the law was built by George Gilder although the theory gained popularity thanks to Metcalf working on Ethernet. The more users (connections) on a network, the greater its value. In the case of cryptocurrencies, the determinants can be growing adoption, interest from investors, developers or institutions.
Although Metcalfe’s law sounds painfully logical, it has been repeatedly criticized. Critics have pointed out that:
The value of connections in the network can vary (depending on which users are connecting)
It is likely that the majority of those interested in the network join earlier, which slows down further adoption and does not determine its success
The second argument of those who criticize Metcalfe’s law is undermined by the well-studied theory of adoption cycles. At the beginning of a technology’s (in this case blockchain’s) existence, innovators and visionaries join and are in the minority. The majority (pragmatists) join only when the technology (network) is already properly regulated and widely used. Adoption, however, can still be ‘dormant’ until industry regulations emerge and blockchain technology becomes the foundation for financial settlement.
Why the comparison?
According to Timmer, of Fidelity when we look at Apple’s annual revenues we see that the more iPhones and other products are sold, the valuation of the stock also increases exponentially. you look at Apple’s annual revenues, then you see that the more iPhones and other things they sell, the valuation grows more exponentially. Timmer points out that at some point the manufacturer is at a point where even potentially competitors with better product will no longer be able to threaten it. According to Timmer, both Bitcoin and Ethereum have passed the ‘test of time’ and have become big enough to be taken very seriously. Almost 3,000 decentralized apllications have already been created on the Ethereum blockchain, and the number of daily users has exceeded 100,000 with which ETH dethrones all competition. However, the full potential of ‘global adoption’ is still far away.
Surveys conducted by Civic Science show that cryptocurrencies are taken exceptionally seriously by wealthy people. People with lower earnings were more likely to dump their digital assets during strong market declines than wealthier investors. The research was done among thousands of investors who had virtual currencies in their portfolios.
A generational bull market?
According to a Civic Science survey, cryptocurrencies are taken very more seriously by wealthy US citizens (with incomes above $150,000). According to the survey, only 28% of them would sell their reserves in 2022. At the same time, people with lower incomes abandoned their digital assets during strong market declines much more often than wealthier investors, 65% of whom made sales. This statistic should come as no surprise. Cryptocurrencies have shown over a dozen years that capital travels primarily from weak to strong hands.
Late last year, a CNBC survey indicated that 83% of the American ‘millennial’ generation held cryptocurrencies in their portfolio. Of the 44% of Americans who had never owned cryptocurrencies, 41.5%, or about 46 million, said they would make an investment in them, as early as next year (a June survey this year by The Ascent).
Trends among the new generations are particularly noteworthy because (although trends can be capricious) what the new generations are interested in and choose can provide an important clue to future cryptocurrency valuations. The popularity of cryptocurrencies among Generation X investors and so-called ‘Millenials’ continues to grow against the stock market.
