Today's mission is very simple, I'm gonna help you figure out if you should buy
Bitcoin, Ethereum, or both. What is up everyone, my name is Ben
I'm a former JP Morgan investment banking analyst and welcome back to
rareliquid, the best channel for tech investing
Today's agenda starts off with crypto's long-term potential,
then the battle between Bitcoin and Ethereum, and lastly what I'm personally
doing And please remember I am not a financial
advisor so please treat all content as for education and entertainment purposes
only Also I post a lot of the data I use from
my videos in my Twitter which I recently started
and my Instagram so feel free to check those out if you're interested
Alright with that said, let me start off by projecting out crypto's long-term
potential If you're a loyal subscriber to this
channel, this graphic probably looks familiar from my Coinbase stock versus
crypto video I've updated the data from figures from
Friday April 23rd and we'll be focusing today on Ethereum, Bitcoin, the crypto
market, and gold. As you can see, the market caps
of crypto is still very small in comparison to the total amount of assets
in the world, and this is the data a lot of people use
to make the argument that crypto still has
a lot of room to run. In my opinion, the best argument for Bitcoin is the store a
value argument. Personally I don't believe that Bitcoin will become the
currency of the future because the fees are too high and other new crypto
projects are better at filling that niche
Instead, it makes a lot more sense to me that Bitcoin will increasingly be seen
as digital gold and this will be our foundational assumption for our analysis
today Let's take a look at some data. As of
April 23, 2021, the gold market was 11.3 trillion
dollars and the total crypto market was a 1.8 trillion dollars, which is 16%
of the gold market. At the time of the filming of this video Bitcoin has
recently dipped and trades at around $50,000
and with a market cap of 933 billion dollars, this represents around 51%
of the crypto market. Ethereum trades at around $2,300
and with a market cap of 266 billion this represents 14% of the crypto market
As I mentioned earlier, if we believe that bitcoin is digital gold, then given
how quickly the crypto market has grown over the past few years,
I think it stands within reason to believe that the crypto market can grow
anywhere from half to double the size of the gold market
today in the next five to ten years So today I'll be going over three
scenarios. First, a conservative case where the total crypto market grows to
half of the gold market Second, a base case where the crypto
market grows to the current size of the gold market, and lastly, an optimistic
case where crypto doubles the size of the gold market
With all of this as a backdrop, let's next chat about the battle between
Bitcoin and Ethereum Just to provide a little bit of context
Bitcoin is more like a store of value play while Ethereum
is known for its ability to facilitate smart contracts and provide a platform
for developers to build decentralized applications. Bitcoin and Ethereum each
serve completely different use cases, and so most people believe that they can
co-exist It's kind of like asking whether or not
apple and tesla can coexist- they're both tech companies but they
serve completely different industries and have completely different customers
and products, and so it's not really relevant asking
whether or not both can exist it's rather a question of which one is
the better investment. So that's what we'll be walking through next
but before we do I just wanted to ask if you could please
like this video and share it with your friends if you found it useful because I
spend a ton of times times I spend a ton of time making these
videos so would really appreciate it if you could like and subscribe
in order to help the Youtube algorithms to recommend my videos
Back to the topic at hand what I'll be doing is going through our three
scenarios and showing different returns based on Bitcoin and
Ethereum's dominance of the crypto markets
As you see from this chart, over the past few years, Bitcoin's dominance ranged
mostly from 30% to 70% while Ethereum's went as
low as a few percent to as high as 31% Keeping these figures in mind, what I've
basically done is for each scenario show Bitcoin's dominance from 30% to 70% of
the entire crypto market and Ethereum's dominance from 31% to 5%,
so we're only using numbers that have been achieved in the past
to make our projections realistic. Then, for each asset, we calculate the implied
market cap by multiplying the dominance percentage
by the total crypto market cap and divide by the existing number of supply
to get to the implied share price for each. From there, we calculate the total
implied return and the five and ten year annual return,
meaning that as long as you believe the entire crypto market can grow to the
market cap in each scenario at some point within the next five to ten years,
then these will be your annual returns Now just to warn you in advance, this
next part of the video I'm going to be going through a lot of numbers, which is
going to be a little bit dry but it sets up the context for what I personally
plan to do, so please keep watching. Starting off
with our conservative case if we believe that the crypto market can
become half of gold's current market cap, which is a three times jump from where
we are today, then we see that Bitcoin's total implied
return goes from 82% to 324%, which implies a 13% to 33%
annual return in five years or a 6% to 16%
annual return in 10 years. For Ethereum, the total implied return is 6%
to 558% and this range is huge because Ethereum is trading at a much smaller
base right now, and currently is only 14% of the market
while Bitcoin is already at fifty percent
This gets us to a 1 percent to 46 percent five year annual return,
and a 1 percent to 21 percent ten year annual return
Let's next move on to the base case. If we believe that the crypto market can
grow to as large as gold's current market cap
in the next five ten years, which is a six times jump from today's
crypto market cap, then we see that Bitcoin's total implied
return goes from 263% to 747% and this implies a 29%
to 53% five-year annual return versus a 14%
to 24% 10-year annual return. For Ethereum, the total implied return ranges from 112%
percent to 1216% which implies a 16% to 67%
five-year annual return and an 8% to 29% 10-year
annual return Lastly, let's move on to the optimistic
case. If we believe that the crypto market can grow two times as large as
gold's current market cap in the next five ten years,
which is a 12 times jump from today, then we see that Bitcoin's total implied
return goes from 626% to 1,594% and this implies a 49%
to 76% five-year annual return and a 22%
to 33% 10-year annual return. Now before you think that these numbers are way too
optimistic and crazy, many believe that Bitcoins can surpass
gold's market cap and as you can see in this scenario,
if Bitcoin maintains its dominance at 50% and grows to 11.3 trillion which is
gold's market cap today, then this scenario is within the realm
of possibility For Ethereum, the total implied return
ranges from 325% to 2,532%, which implies a 34%
to 92% five year annual return
and a 16% to 39% ten-year annual return
Okay if you made it this far into the video and watched all of that you are a
trooper and hopefully you did find it
interesting to just see the crazy returns that crypto can give you
and that's why I do believe that crypto should be a part of almost everyone's
portfolio even if it's just a small percentage point because the
potential reward is so high so I've shown you a lot of numbers but
haven't really got into what it all means and so that leads to the next part
of the video, which is what I'm personally doing
I personally believe that the crypto market has a very reasonable chance of
reaching gold's current market cap today of 11.3 trillion
within the next five to ten years and so I'm going to use the base case scenario
for our analysis Now if that sounds crazy to you, just
remember that bitcoin was founded in 2009, so we're only
about a decade or so into the whole crypto market and it boomed from zero
dollars to two trillion in basically 12 years. I really think
we're in the early stages of the crypto market and
barring any really intense regulation that bans crypto from the major markets
or countries in the world, I think that more institutional
investors like hedge funds which really have a lot of the big money
companies with balance sheets that are really really
large and want to invest in something besides just cash
um like Tesla and Square have already doing by investing into bitcoin,
these kinds of things will just increase adoption more and more as time goes on
and just think about it as if we're in the
early stages of the internet back in the 2000s and of course there will be some
ups and downs with the market but point is basically I think we're in the
early stages, gold's current market cap today of 11 trillion I think
is pretty achievable. If you look at the data here it's clear that Ethereum has
way more upside, but of course, that also really depends if Ethereum is
able to improve its technology because as of now fees on Ethereum are way too
expensive and slow compared to other crypto projects out there
On the other hand, Bitcoin's use case as a store of value is very clear and
Bitcoin also has the strongest brand But anyway back to the data, I do believe
that Bitcoin and Ethereum has a good chance of falling within the
ranges of prices and market caps in this table,
and more specifically, I believe that Bitcoin will range from 40%
to 50% dominance as time goes on while Ethereum will range in 18%
to 25% dominance, and since there's a clearly higher return for Ethereum,
I personally would put something around 75% into Ethereum and 25%
into Bitcoin if i had to choose a ratio Of course all the numbers we went
through today will change kind of dramatically
as time goes on because crypto is so volatile and so
when Bitcoin and Ethereum's prices go up or down a lot, then the returns will look
different, but I'll be sure to post updated
information and data that I've shown today onto Twitter
regularly, so make sure to check that out if you're interested
or if you just want to download the model check out my Patreon in the
description below where you can also get my buy/sell alerts whenever I buy crypto
myself And to leave on a bit of a cliffhanger I
actually do believe that there's another crypto asset that I think has way more
potential than Bitcoin and Ethereum that I'll be posting next week,
so be sure to be on the lookout for that as well. The last thing I want to mention
is that I reply to every single comment so if you have a question or just want
to say something or think I missed anything,
then leave that in the comments below and I'll reply and with that said
thank you so much as always for watching hope to catch you in the next one thanks
and peace out [Music]