The concept of investing has become more democratized than at any point in history. Like most significant advancements of this millennium, the internet plays an important part. Information sharing is at an all-time high, and people are no longer reliant on the same talking heads for investment advice day in and day out.
Without the internet, we’d still have paper share certificates. We’d still rely on adrenaline-fuelled phone calls to brokers and traders. In essence, Wall Street and markets worldwide would still be as inaccessible to the everyday retail investor as they had been for decades before.
New trading opportunities pushed for change. It’s no longer all about old money and massive institutions. Brands like Robin Hood and eToro have made investing mainstream. With a few taps and under $100 in starting capital, anyone can get in on the market. That’s precisely what they’re doing, and they’re doing so in their droves.
So what of Bitcoin?
Naturally, the rise of the world’s premier cryptocurrency would also have been impossible without the internet. Likewise, Crypto as a concept wouldn’t exist without global connectivity.
It’s also the rags to riches tale that can inspire entire generations of investors. Had you bought a solitary Bitcoin on July 22, 2013, you’d have paid slightly less than $100 for the privilege. Sell that same Bitcoin on April 14, 2021, and you gleefully receive in excess of $63,000.
In most years since 2013, Bitcoin has outperformed every other asset class.
It also bears all the hallmarks of something that catches the attention of millennials and Gen Z. While somewhat harsh and impossible to apply to every one of these generations, they’re assumed to seek instant gratification. They’re also happy to take more significant risks for heightened rewards. More politely, they’re the generations that grew up with the internet, and they’re known for financial shrewdness.
Something like Bitcoin, and the ecosystem surrounding it, check every box. Buying and selling are as simple as opening an app. Bitcoin has no intrinsic value. Instead, it’s priced based on buying and selling pressure, together with a healthy dose of speculation.
Single tweets can cause swings of multiple percentage points, as can attempted regulatory intervention.
It’s also as close as we currently have to “internet money,” and the results speak for themselves.
The economy has changed alongside the rise of the internet. 71% of millennials worry they’ll never get on the property ladder. Rents have risen faster than income in virtually every state since 2001.
The idea of turning $100 into $60,000 in eight years is bound to appeal to the technically literate, economically stunted generations.
The Great Wealth Transfer
If Bitcoin truly represents the most significant wealth transfer in history, it won’t necessarily be between the wealthy elite and the less well-off. Major institutional investors like BlackRock may have taken their time to come to terms with the viability of cryptocurrency. However, they’re now very much involved via long positions in Bitcoin and other major cryptocurrencies. As values rise, so do their assets.
Instead, the transfer, should it happen, is much simpler. It takes place between the old and the young. Bitcoin has already made plenty of young millionaires. Should the cryptocurrency continue to reach new heights, it will undoubtedly make many more.
Eventually, those millionaires cash out and start spending their newfound wealth. They buy homes and cars. They join the one percent and spend accordingly. Slowly but surely, they contribute to inflation. However, they do so slowly enough that it’s impossible to notice.
That’s not all. Two generations of tech-savvy risk-takers are backing cryptocurrency at a time where more mature investors are often uninformed. They remain happy with traditional currencies and consider cryptocurrencies a bubble waiting to burst at best and a Ponzi scheme at worst. They might yet be right – only time will tell.
One prominent commentator is bullish on a single Bitcoin becoming worth at least $1 million by 2025. Rothko Research named Bitcoin the story of the next decade in 2020 while also predicting that the cryptocurrency would take several percentage points out of the gold market.
If it comes off, cryptocurrency investments clearly suit the attitudes and investment strategies of younger generations.
A Push for Social Mobility
Diverse attitudes partially drive the potential for a great wealth transfer. As noted, many older investors are inherently skeptical of cryptocurrency. Younger generations do not necessarily feel that Bitcoin represents a safe bet, but they’re far more inclined to trust it than what they believe to be a corrupt Wall Street system.
It is the older generations that control that system that represent the target of their ire. They believe the rich get richer, and money makes money. Bitcoin represents a way to escape the established protocols of becoming wealthy. An unregulated, decentralized currency clearly represents a risk, but one that people are willing to take if it means avoiding playing with a deck that’s stacked against them.
In a world of high risk and uncertainty, there’s a surprising number of consistencies. Part of the appeal stems from the fact that some investors are unconcerned with the dollar value of one Bitcoin. Between 1971 and 2020, the dollar lost 85% of its purchasing power.
Meanwhile, one Bitcoin is always worth one in 21 million. There cannot and will never be more than 21 million Bitcoins in circulation. They cannot be counterfeited or duplicated, and banks cannot merely print more when supplies run low.
Demand will rise, and supply will dwindle, culminating in the predicted mining completion of 2040. Every Bitcoin that can ever exist will exist. Rarity often equals value, and if demand continues at the pace some predict, that value will reside firmly in the hands of younger retail investors.
Could the Transfer Take Place?
There is every chance that we may be on the cusp of the greatest wealth transfer in history. However, as with most aspects of investing, nothing is guaranteed. Bitcoin reached higher than $60,000 in April 2021. Then, it sank below $30,000 in the following July. That’s the kind of short-term volatility that can scare off so-called ‘boomer’ investors. It’s also the kind of high-risk rollercoaster on which some young investors thrive.
Should million-dollar price targets come to fruition, we’ll witness a surge in relatively young millionaires. We may also see the most significant alteration to the entire concept of investing the world has ever seen. Tradition and heritage may be forcibly replaced by transparency and fairness.
Bitcoin is one of several potential catalysts, but risk-averse investors that are immovably set in their ways might well be the ones to miss out.