Bitcoin has earned its place as one of the defining technologies of the century. Every day, a new wave of people hear about it for the first time and the usual questions ensue: Am I too late to the party? How can I learn more about it? What’s the best way to buy and store my first coin?
Separating the signal from the noise can be challenging, particularly with so much information out there. So, we sat down with two of Kraken’s crypto experts, Pete Humiston, Manager of Kraken Intelligence, and Thomas Perfumo, Head of Business Operations and Strategy, to help those of you new to crypto to see the bigger picture around Bitcoin.
Why should someone consider investing in Bitcoin over the next ten years?
Pete: Everything we do today is done on a device or through a screen. Younger generations understand things like digital scarcity and are comfortable with money being transferred across devices and over the Internet.
As more folks learn about the existing monetary system and who controls it, I think they’ll gravitate towards Bitcoin – a shift catalyzed by their preference for all things digital. People want to be a part of this new, decentralized form of money.
Thomas: The most valuable investment opportunities in tech have traditionally been reserved for venture capital firms and early-stage private equity groups. This exclusive system benefits those with privileged access to the financial system and contributes towards the economic divide. Bitcoin broadens that access to individuals around the world with a compelling value proposition that can really swing the pendulum in favor of equality.
How will crypto change tech and finance going forward?
Pete: I definitely think Bitcoin and crypto are going to disrupt legacy traditional finance and fintech. These technologies enable new ways of sending, receiving and transacting value seamlessly without the need for permission, without interference, and at an incredibly low cost.
Crypto will continue to innovate and push the boundaries of what is possible – similar to what we saw during the early stages of the Internet. We all saw the potential, but the best ideas took time to evolve.
Thomas: I think crypto will play a role within the broader fintech ecosystem, where billions of people might access benefits they’ve historically been unable to enjoy. Fintech still relies on centuries-old financial infrastructure, which hasn’t evolved in many parts of the world.
Crypto is the only application layer that really changes the infrastructure in a way that’s completely different and globally accessible.
What are your thoughts on Bitcoin’s price volatility?
Pete: Put simply, we’re in an emerging industry that has a unique set of risks. The fundamental drivers of crypto prices are vastly different from those of legacy asset classes. Things are more volatile as markets attempt to accurately value nascent crypto projects. There’s a real risk of loss, but that also means that the upside potential is greater.
Thomas: It’s true of any investment that its value can increase or decrease – as Pete touched on, the crypto markets are very much in a price discovery stage, meaning that Bitcoin can sharply rise or drop in price within very short timeframes.
A logical framework (instead of an emotional one) is critical here. Coming up with a plan, and sticking to it in spite of market conditions, has worked for me. I’m a fan of dollar-cost averaging, which involves buying a fixed amount of BTC periodically. That way, I’m less worried about timing the market and can “smooth out” the volatility over time.
Where should individuals store their long-term crypto holdings?
Pete: I think holding your crypto on an exchange with proper account practices in place is wise. Kraken does an excellent job in advising users how to secure their accounts, and takes extraordinary measures to secure clients’ funds.
There are a number of hardware wallets on the market for those who want to hold for the long haul. Multisig wallets are something everyone should explore for extra security. Alternatively, if you’re holding large amounts of crypto, some custodial services can store and insure your funds.
Thomas: Your level of sophistication, appetite for risk, and the importance of your holdings to you will dictate where you choose to hold your crypto. Pete’s team recently published a really good note around how to manage wallets.
My advice has always been that if you feel unequipped to manage your funds yourself, then you should probably put them in an exchange that will do the heavy lifting for you. Pick an exchange with a reputation of putting clients first and that you can trust, like Kraken.