I’ll start with the obvious. In the wake of Trump’s tariff threats easing, global monetary expansion and weakening dollar, bitcoin surged to touch $111.8k in May. I’ll not belabor this point as there are much more interesting things to discuss but I do want to say that this is exactly what we were expecting on our way to $200K this year. For followers of this blog this should be no surprise, but it did surprise many of the doom and gloom naysayers who were convinced this run was over. Friends, the next (and possibly best) leg is in front of us. Importantly, bitcoin as first-mover appears to be clearing the way for an alt-rally which is also lining up (again, as expected.)
Now, with that out of the way, let’s take a look at what else has been happening as this historic run continues. It’s not just because of price action, but because blockchain technology is finally starting to take its place in the general business world.
Acceptance not Adoption
From my vantage point, we are operating in a Goldilocks period right now where we have acceptance but not adoption of bitcoin as an investible asset. That may sound like an oxymoron but let me explain. What I mean by that is the biggest asset managers in the world have embraced bitcoin, with BlackRock and Fidelity leading the U.S.-based Bitcoin ETF charge. Bitcoin ETFs overall now have $133 Billion in assets under management (aum).
The U.S. government is also now holding bitcoin and has provisions to allow the purchase of more. Eleven other countries are in various stages of this process as well. Locally it gets better as thirty U.S. states have initiatives to stack digital assets in various stages of legal review while, surprisingly, New Hampshire and Arizona are both moving forward and have laws passed to allow such stacking. Specifically, over the past month New Hampshire signed HB302 into law, creating the legal framework for a strategic reserve. The new law allows the state treasurer to purchase digital assets with a market cap of over $500 billion, (which currently only Bitcoin meets.) Not to be outdone, Arizona passed HB2749, the “Arizona Strategic Bitcoin Reserve Act,” which proposes allocating up to 10% of public funds to Bitcoin and other cryptocurrencies. Not to be left behind, Texas passed a similar well which is just waiting for the Governor’s signature to go into effect. As if that’s not enough, in the “you can’t make this stuff up” category, the town of Roswell, New Mexico, beloved UFO and alien mecca of the USA, is the first city in the union that is also stacking. (It’s just comedically perfect considering when I began this journey some seven years ago many looked at me as if I was an alien when presenting this topic. And yet, here we are…. Thank you, Roswell!) Meanwhile, new companies such as Cantor Fitzgerald’s 21 Pump are seeking to capitalize on Michael Saylor’s stacking strategy and many other companies are adding bitcoin to their treasury. And as icing on the cake we have a new interpretive letter from the OCC which affirms that national banks can, finally, directly engage with crypto. Of course, I would expect the first asset would be bitcoin, with others not far behind.
So, it’s pretty clear acceptance of bitcoin is here. And yet for all of this enthusiasm I meet individuals, family offices, RIAs and even institutional investors every day who have only a fledgling understanding of this space, still don’t “trust” bitcoin and are not holding bitcoin or any other any digital assets in their portfolio. This presents a paradox. The facts are that this space is cemented into history and is moving at a very good clip. And yet most of the people on the planet are still skeptical and haven’t jumped in yet. While Larry Fink screams from the top of the mountain, RIAs everywhere are only now starting to look up. Heck, Vanguard still won’t allow their clients to participate in a regulated Bitcoin ETF. Which brings me to the top of the page. Bitcoin at the highest levels is accepted… but is not widely adopted. Because of this, I believe this is the very best risk/reward opportunity that will exist and now is a fantastic time to participate. This period of acceptance with minor adoption won’t last forever and it won’t be long before I believe bitcoin/crypto is going to be a mandatory part of everyone’s portfolio. You heard it here first, folks…
Ripples make Waves
I spend a lot of time discussing bitcoin because bitcoin is the big dog, but what about the rest of the blockchain/crypto space? Well, as a short follow up on the “acceptance” rant above, it won’t be long before we start to see real acceptance other assets in the space as well. The stage has already been set as there is already an alternative asset ETF (Ethereum) with other ETF applications on the table, and the US, New Hampshire and Arizona acts noted above specifically allow for stacking of other crypto assets. However, it should be noted acceptance of such asses should be for different reasons. Bitcoin is a financial instrument. Everything else that will have value, and which will be accepted, will be because it is production capital. More specifically, it is technology that empowers industry. We don’t talk about this enough, so I’m going to be dedicating more time to exploring these technologies and specifically where we have real world implementations and blockchain projects functionally coming into their own. These are projects that are solving real world needs at scale, and some are poised to become the next foundations of industry. To that end, let’s talk a little bit about RippleNet, an enterprise blockchain offered by Ripple, who’s native token is XRP. This technology is indeed making waves…
Let me start by coming clean here and admitting that I have not been a fan of XRP in the past. In fact, I’ve at times been flat out against it because it lacks a lot of the things that I want to see and which are generally accepted in truly decentralized public blockchains. To be specific, RippleNet is built, controlled and managed by Ripple, a private for-profit company.
But I have to admit that it is foundationally built on blockchain principles and may be the first non-bitcoin network to make its production footprint in the world. This is largely because it has combined this new technology with something critical, which is the goal of solving a business problem (what a novel concept!). In this case, Ripple went after international bank-to-bank remittance which is currently inefficient and expensive. Case in point, SWIFT takes 3-5 days to conduct bank transfers. RippleNet on the other hand can do the messaging in seconds and, with the XRP token, currencies can be exchanged and converted across borders also in seconds and virtually frictionless. This avoids the challenges of foreign currency conversion, eliminates the need to have funded correspondent banks in foreign countries, and so much more.
Sounds like a dream, right? Well, the dream was not always obvious as, for the company, they’ve been living a nightmare since 2021 when the SEC went to war with them. The SEC spent the past four years doing everything they could to shut parent company Ripple down. They failed. Ripple quietly won battle after battle and then, the war, as the SEC dropped its case with prejudice. Meanwhile, quietly like a good magician, while everyone was looking at the legal troubles and predicting armageddon for the company Ripple was slowly becoming the most important new network in the banking world. Major banks, including Santander, Amex, BofA, RBC and others around the world have been quietly integrating RippleNet into their back office and/or exploring how this new technology can enhance their cross-border transactions.
Notably in an apparent move to become the early adopters, it also looks like that 80% of Japanese banks are set to integrate XRP into their systems this year. In addition, Ripple has also just acquired Hidden Road for $1.25 billion which expands the company into prime broker status. And it’s just the start. Love it or hate it, now that the regulatory road has been cleared, this certainly seems to be the technology that is going to take over the world of institutional remittance. That is why Ripple as a company will have value, and that is why XRP, as a tool for on-demand liquidity, will have value as a crypto asset.
Now look I want to be clear – this is not intended to be an endorsement and is certainly not investment advice (do your own homework). This is, however, a snapshot of a technology that has been quietly working its way around the world, and which seems poised to be “the one” that banks turn to. Why? Because Ripple focused on something many blockchains to date have not. They are solving a business problem, and solving it well. I think this is just the beginning, and we’re going to have more and more examples of practical uses of blockchain technology and crypto assets. Such technologies will engage in free market battles, the cream will rise to the top, the best will prevail and blockchain will ultimately be the goto technology that the world is built on over the coming decades.
blockchAIn
Ok, let’s shift to a new topic. Clearly you can’t spell blockchain without “AI” (I couldn’t resist). But I think it’s more accurate to say we need blockchain for real AI advancement in the physical world. I had the privilege of providing a keynote at the IT Masters Forum last week in Mexico, exploring this topic with about 100 CIOs of industry at the event and it became clear to me that we aren’t talking enough about this. AI and blockchain go together like Forrest Gump’s peas and carrots. Just as we reviewed the functional prowess of RippleNet, it’s time we stepped back and took a bigger view of where we are going inside of the Age of Autonomy™ and how these technologies will play together. Everyone currently marvels at what AI can do and it’s true – its ability to digest, assimilate and compile information and generate images and content is staggering. This however is just part of where it’s going. We look at what AI can do. But we don’t look at how AI will functionally operate in the machine age. This will be via blockchain and crypto. Blockchain and crypto will be the necessary technology to empower the machine economy, will help us keep AI balanced and egalitarian as a public system and, importantly, will be required to help us weed out what is real from what is fake. This will take more than one, two or even six blogs to discuss, but I wanted to open up the door so you start thinking about this because it will happen faster than you think, and faster than any of us are ready for. Consider this a trailer and we’ll dive in more in future missives.
In Closing
We have a Goldilocks period for Bitcoin. We have budding blockchain adoption in the world of business. We have technology advancing, governments embracing, laws cementing and… still lots of skepticism. I suppose that’s just the way the world is. People are always skeptical of something new but, let’s face it, progress continually… progresses. We are living in historic times where everything is advancing at a faster and faster pace. It is hard to keep up. In fact, I argue it may be impossible to keep up. But I encourage everyone to look around not just at what is here today, but where we are going. Like anyone at the receiving end of a pass from the GOAT of world soccer, Lionel Messi, we need to run not to where the ball is. Rather, we need to run to where it is going to be.
That’s all for now. Until next time be well, stay safe, and I’ll keep Decrypting Crypto for you!