Back in 2019 I thought that security token offerings would be all the craze and that S&P500 companies would be transitioning the stocks into tokenized stocks, being listed on crypto exchanges – boy was I wrong. I have since learned the nuances of the financial world.
We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.Bill Gates (1996)
With the speed that the cryptocurrency industry develops I am not insane enough to try and predict 10 years down the road… so here are some five year projections… and even these are loose, moving targets.
- Bitcoin Projection
- Stable Coin Projection
- Oracle Projection
- Lending and Debt Projection
- Crypto Insurance Projection
- Risk On Assets
Ten years ago you could have bought bitcoin around 1 dollar.
Five years ago it was 2016. Bitcoin had just broken its old ATH of around $1,200 USD/BTC. Bitcoin was transitioning from a payments/eGold narrative into a financial asset narrative. It grew from a paltry $10 Billion market capitalization to a giant $100 Billion market capitalization.
Today it is mid-February 2021, and last month bitcoin broke it’s old ATH and is now sitting at ~$32,800 USD/BTC.
The bitcoin narrative is transitioning from one of a financial asset to …. perhaps a reserve asset… but this new narrative is underdeveloped, and under-priced. Only time will tell what comes next. However, referring to Plan B’s S2FX model, he projects that bitcoin will actually jump in market cap from $100 Billion all the way up to $5-10 Trillion (plus and minus of course), skipping over the $1 Trillion Market cap range in this coming cycle (2020-2024).
Five years from now, early 2026, we will be past the 2024 halving and likely at the tail end of the post-2024 halving bull market. If we extrapolate Plan B’s S2FX model, bitcoin’s market capitalization will likely be in the range of $50 to $100 Trillion USD.
So early 2026 I predict the bitcoin narrative to be that of a financial reserve asset, better than gold and bonds combined, with a bitcoin market capitalization of ~$50 to $100 Trillion USD and a price per coin of ~$2.5 to $5 million USD/BTC. Along with this, there will be a bitcoin yield curve developing on the open, free markets. My guess is that a fully collateralized bitcoin loan/bond will yield ~5%, and under-collateralized/un-collateralized will yield much high, north of 10%, perhaps as high as 15-22% APY.
That is what hyper-bitcoinization looks like.
Stable Coin Projection
Stable coins. Fiat on the blockchain. Crypto fiat. DAI, Tether, USDC.
Call it whatever you want.
I did not initially realize the importance of stable coins. We had bitcoin, then we had Ethereum and all of the ICOs on Ethereum back in 2017/2018. I was certain that the next big thing would have been tokenized stocks. For sure. It seemed a no brainer.
I was wrong. I did not understand financial markets, nor financial ecosystems (as they should more accurately be called) as much as I do today.
For healthy, functional financial markets you need a reserve asset – something to back up value – i.e. gold. Or better yet, bitcoin.
Then you need a (short to medium term) stable unit of account – stable coins.
Stables coins today have a market cap of roughly $32 billion USD.
- USDT – $24 Billion
- USDC – $5.1 Billion
- DAI – $1.39 Billion
- BUSD – $1.15 Billion
- TUSD – $0.416 Billion
The stable coin market will need to at least encompass M2 money supply which is roughly $9 trillion USD. M2 monetary supply accounts for physical cash/coins, chequing and savings account deposits and other near-term cash equivalents.
I think that this is totally reasonable because of these factors:
- Explosive stable coin growth already in 2020,
- Push for Central Bank Digital Currencies (CBDCs) from governments,
- American banks are permitted to settle money transfers with stable coins on the Ethereum cryptocurrency blockchain (Forbes article)
So by 2026 I expect that there will be exponential growth in the stable coin markets, in the order of greater than $10 Trillion ($10,000,000,000,000) USD for daily use of citizens as well as international transactions, remittance, money sending.
Oracles are the data feeds into blockchain tech. Oracles (or at least mainstream/successful ones) only came into existence since roughly 2017.
We need oracles because blockchains exist in their own ecosystem and oracles input data onto blockchains.
In the next five years oracles will be huge. As the cryptocurrency financial ecosystem grows we need reliable, accurate, real time price and data feeds into smart contracts.
I honestly am no pro on oracles… I just know that they will be huge. The most popular/valuable oracle at the time of writing is Chainlink (LINK) followed by Band Protocol (BAND). There is definitely room for growth in the blockchain oracle space. In order to prevent collusion there will need to be a few trustworthy, independent oracles.
I also think that we will witness the first credit oracles, that allow people to develop healthy credit scores based off of readable cryptocurrency transactions, including income from employment/investments, credit history from cryptocurrency debt payment as well as oracle integrated data from mortgage and credit card payments, etc.
How is an oracle blockchain valued? That is TBD. So my oracle predictions for 2026 is non-specific, simply that they will be very large ventures and vital to the functioning of the global economy based on cryptocurrency technology.
Lending & Debt Projection
In order to get a loan you need a few prerequisites:
- Good Credit Score
- Income/revenue to pay off loan
You don’t always need all 3, but in order to get the best rates you typically do. Or else you have to be a person with wealthy connections.
The global debt was estimated to be $253 trillion at the end of 2017. We know it is larger now with the stimulus money printing due to COVID. Debt markets are HUGE, surpassed only by real estate and derivatives.
The cryptocurrency industry will create more equitable access to debt. By tokenizing assets and breaking them into smaller pieces it becomes easier for everyone to buy assets for collateral. And little by little the average citizen will be able to save in bitcoin, then use it as collateral for other good investments.
Once you can prove income and credit via your crypto wallet and credit oracles then lending and debt on the blockchain will likely explode.
The main lending DeFi platforms are:
- Compound (COMP)
- Aave (AAVE)
- Maker (MKR)
Cryptocurrency is a world of protocols… not companies. We will witness the rise of only a handful of successful lending protocols that everyone can use.
I believe that COMP and AAVE will see massive growth in the coming five years as lending on the blockchain becomes normal.
Maker is a protocol where you collateralize ETH (and a few other assets) in order to mint the DAI stable coin. It is a very specific form of lending as it contributes to the stable coin ecosystem specifically, and allows you to
Banks will offer loans through the back end of AAVE and COMP.
Crypto Insurance Projection
As more professional investors enter the cryptocurrency space they will want insurance for various reasons. Since the industry is new and has a long history of exit scams, code bugs, and faulty market game theory incentives, it is reasonable to want insurance to protect your assets as well as the assets someone might manage for a client.
Types of insurance:
- Code error insurance
- Custody insurance
- Game theoretic insurance
Most institutional clients are investing in the tried and true bitcoin and using regulated custodians and regulated cryptocurrency exchanges.
However, as institutional investors, wealthy individuals and small to medium sized corporations get a taste for the cryptocurrency gains they will want to invest in riskier coins such as Ethereum’s ERC20 gambit of coins and others like Cardano, EOS, Tezos, NEO etc.
Ethereum and the others are smart contract based and lower market caps that have many known and unknown vulnerabilities. Wealthy investors do not like to lose money and so will likely insure their investments.
The biggest insurance tokens out there are:
- Nexus mutual
- Cover protocol
- Bridge mutual
Risky alt-coins aside, there are many other use cases for insurance protocols. These insurance protocols can encompass everything from car insurance, health insurance and life insurance. With the transparency of the blockchain they will be easily auditable, and with the automated nature of protocols it will be relatively easy to implement and receive payment. Insurance will no longer be strongly profit driven, but rather a universal public good available via cryptocurrency.
In the next five years we will likely see many more insurance protocols and I think that they will grow massively in value.
Risk-On Assets ($%*! coins)
Risk-on assets include hundreds and thousands of altcoins and crypto-derivative products. Built for speculators to bet on. Most will fail.
Many speculators and uninformed retail investors will lose a lot of money for various reasons including but not limited to:
- Code errors
- Financial game theory holes
- Pumps and Dumps
- Illiquid markets
- Phishing attacks
People will lose money. People will get financially hurt. It will happen. It MUST happen.
The importance of this cannot be under-stated.
The developer and financial community can watch this play out and learn what types of smart contracts are in demand, what code repositories are trustworthy and which are not, which markets draw liquidity, etc.
The early risk-takers stand to win a lot of money, but also to lose a lot too.
This will help build out and harden the core cryptocurrency financial industry.
Markshire Crypto Conclusion
And so that is how I envision the next five years to play out. Can’t wait to see it happen… and the following five too.