Mind The Gap!
Estimated Time To Read: 3 minute(s) 18 seconds
Imagine that we lived in the time when they invented the train track. It was a game changer in the industrial revolution! You could now move large numbers of people regularly and safely. You could also now transport previously unimaginable amounts of heavy goods. It was a tumultuous time. At the time, no one could even conceive how it was going to help to develop and grow many other businesses.
Many businesses set themselves up around the train lines. It was easier for employees and clients to get to them. It was also easier to move the goods to or closer to the market where they could be sold. Trains and train lines made it a ‘better’ and more efficient world. Simultaneously, the coach drivers, blacksmiths, coach builders and the small hotels that serviced the horse-drawn trade soon lost market share to the new invention.
We’re sharing this story because young people today are consumed with creating disruption. Maybe it is a backlash to their baby boomer parents who tore up so many rule books themselves. But the amount of brain power and laser focus going into these potential disruptions is set to get some of it over the line. A major underlying driver for this generation of disrupters is their need to rid themselves of authority and being told what to do.
One of the most important disruptions, but least understood, is Blockchain. To many of us it is like the invention of the train track. Its capacity is remarkable and will continue to rapidly increase. It is safer than traditional methods of doing the same thing. It is more secure, and, some would argue, absolutely secure. It can be used in so many different ways. A few months ago, Veritas Wealth hosted a podcast on this with Hugo Van Veen, who has immersed himself in the area for a number of years. If you missed it, it is worth watching by clicking on the word podcast above to get a better understanding of the dynamics involved. Hugo did a great job in keeping it simple and giving us a good start in understanding this new world.
The most famous users of Blockchain are crypto c-Currencies, the most famous and oldest being Bitcoin. Many young people believe that it will take over from the US Dollar. They are trading the currencies heavily and because of sheer demand on a very limited supply, they have all made enormous returns. Volatile yes, but they have still given exceptional returns.
Government, regulators, professional money managers, let’s call them the establishment, are all scratching their heads trying to understand the technology and how to deal with this market. To date it is unregulated and newly-formed financial conduct authorities are warning investors that they are unregulated and that they (the authorities) have no power over them. Slowly authorities are managing to get these new companies to conform to some of the established laws around FICA, etc. but again the wheels are turning very slowly and again, investors are not protected.
When they invented the train, they also established train stations. We all know from travelling that getting through a train station can also be a risky part of the journey, with scammers and criminals lurking in the vicinity looking for opportunities. Then there’s part of stepping from the platform to the train itself and as the famous announcement at London train stations bellow … “Mind the Gap!” But once on the train and in your seat you feel a lot safer and can relax as you travel to your next destination.
In recent months there have been a number of big scandals reported in crypto exchanges (‘train stations’), where peoples’ money or accounts have been stolen. (Admittedly, many of these media reports have been woefully exaggerated).
We believe Blockchain is here to stay. Crypto will probably be brought into the mainstream. There are now 4,000 crypto currencies out there. Multiple new currencies are created every month. It appears that Bitcoin probably will not replace the USD because it does not have the capacity to deal with it and costs too much. In Hugo’s podcast he explains that it is like being around in the early 90s when the internet or cell phones came out. No one could imagine what change and opportunities they were about to bring about. Blockchain will disrupt other industries and functions like FICA, deeds offices, currency trading, stock trading, how digital art is used and paid for, and there will be many other disruptions and wonderful ideas to come.
Today it seems like a herd or crowd are driving the prices up. Some are doing it to disrupt, but most are now attracted by the returns already made. We do not say we know what will happen, but currently we cannot advise clients to invest in these instruments. If you do invest privately, you must go in with your eyes open and be prepared to lose everything that you have invested.