When we started Crypto for Advisors, we made a conscious decision that we weren’t going to cover cryptocurrency prices like a horse race because the information was of little value to advisors, and I think we were right to do so.
The Fool’s Game Of Annual Crypto Price Predictions
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The price volatility of cryptocurrencies has been an issue investors have had to contend with over the past 14 months, and it doesn’t seem to be going away any time soon. That means clients active in or curious about cryptocurrencies have likely already encountered the wild world of annual cryptocurrency predictions.
Perhaps no headline better encapsulates the unpredictability of token prices than this one from CNBC on Monday: “The boldest bitcoin calls for 2023 are out — and a 1,400% rally or a 70% plunge may be on the cards.”
The most optimistic call. $250,000 by year-end 2023, was made by digital venture capitalist Tim Draper, according to the story, while the most pessimistic call, $5,000, was made by Standard Chartered. In rough estimates, that’s the difference between bitcoin having a $4.75 trillion or a $95 billion market capitalization.
Predictions for last year’s price performance did little better, with many skeptics guessing that bitcoin prices would plunge below $10,000, while optimists like Draper and Morgan Creek founder Anthony Pompliano guessed that they would breach the $250,000 mark in 2022. By comparison, Ark Investment’s Cathie Wood sounded relatively reasonable predicting that bitcoin would breach the $100,000 mark last year.
Of course, none of that happened. Prices steadily legged downward as central banks continued monetary tightening and a series of bad headlines dented investor sentiment, but they never reached the depths predicted by the most dire bears.
The failure of price predictions is true across asset classes, not just in crypto. But crypto prices, in particular, are so difficult to predict because cryptocurrencies operate on different fundamentals from traditional investments, and investor sentiment plays a much larger role in determining prices. Human sentiment is notoriously unpredictable and can be significantly impacted by unforeseen events.
Non-fungible tokens (NFT) have gone from a relatively obscure section of crypto to one of the most well-known in just a few years. If you asked an average person they’d probably explain that an NFT is a token that represents ownership of a unique digital artwork, and that’s certainly one kind of NFT.
As the NFT market has exploded into a multi-billion-dollar industry, the variety of NFTs has grown as well. In addition to proving ownership of physical or digital assets such as art, music, images and collectibles, NFTs are now popping up across an array of industries from fashion to play-to-earn (P2E) gaming that are forging real-world utility and building robust online communities.
Here are the different types of NFTs to be aware of and how they’re being used:
👉 PFP NFTs: Profile picture NFTs (PFP for short), are exactly what it sounds like: An NFT that is often used as a digital avatar for a person’s profile picture on social media sites, primarily on Twitter.
👉Music NFTs: Music NFTs can seem counterintuitive; why buy a music clip when I can stream or download the song from a music platform like Spotify or iTunes? The difference is purchasing a music NFT grants ownership of the file versus buying a license that allows you to listen.
👉Sports collectible NFTs: Sports collectible NFTs, with a reported current market valuation around $1.4 billion, have reimagined how fans buy, sell and trade sports memorabilia. This type of NFT includes transforming the traditional sports collectibles such as trading cards into NFTs, including NBA Top Shot Moments, videos that capture memorable plays during NBA games.
👉Play-to-earn gaming NFTs: Play-to-earn (P2E) gaming NFTs is also known as GameFi. Online gaming has historically offered in-game assets to enhance the experience like weapons and armor to be purchased from the game developer or platform.
👉Utility NFTs: Some NFTs are being used to link digital tokens to real-world rewards and experiences, aka Utility NFTs. There are NFTs that fall into one of the prior categories and also add utility, adding value like membership to a club, access to IRL experiences or attachment to physical goods.
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The software company also sold a small amount of the cryptocurrency for the first time.
Disclaimer: The information contained in this newsletter, and any information linked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital assets.
