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Why crypto currencies are still the buy opportunity of a lifetime
We have seen tremendous growth figures in the Bitcoin rate during its first few years. The rate went up from thousandths of a cent up to a recent high of $266. As a matter of fact, the Bitcoin rate has already exceeded this all time high today. As a rough calculation, one could state that Bitcoin has grown these years with 0.64%, on average. That's about a factor 10 each year…
But also other crypto currencies have shown tremendous growth potential. Litecoin (LTC), for instance, will have experienced a growth factor over 2013 of more than 22 if the price ends on $2.6 by the end of this year. And 2 months before year end we are pushing against $3/LTC. Similar cases apply to Peercoin (PPC) and other crypto currencies.
The potential for crypto currencies is high, very high. Once one gets the full implications of this phenomenon, it is easy to grasp the tremendous consequences and reach of this 'invention'. The 'Internet of money' has arrived. Banks either join the party or be left in the dust . A great explanation of the truly astonishing value of Bitcoin can be found in the works of Falkvinge .
Even today with Bitcoin at some $260, the possible growth ahead is still mind boggling if Falkvinge is even remotely right with his projections. When working with the lower bound of his estimate ($100,000), the factor left is 500. So the Bitcoin value could grow from $200 to $100,000 per Bitcoin. For the sake of argument, lets assume this $100,000 per Bitcoin as end goal of our journey.
The case for Altcoins
This growth potential is equally available for alternative crypto currencies. I genuinely think that there will be room for alternative crypto currencies in the future. Today, the world knows a myriad of fiat currencies and there is no reason to assume that this will not be the case for crypto currencies. As long as an alt coin has a functioning network and a certain threshold of users, it can be used to make payments and hold value similar to Bitcoin. Yes, Bitcoin may also the the leading crypto currency in the future but it is quite possible that Litecoin will be a second best. Money for the people or whatever. If we only need one type of car because it does the job, we would not have thousands of cars and - as a matter of fact - tons of other products on the market, all doing basically the same. It will be very easy to incorporate an altcoin in a system if Bitcoin has already been incorporated.
The value of Litecoin
Let's consider the case for growth of Litecoin. We use a factor of 500 to reach the targeted end value. With a LTC price of $2, the end price would be $1,000. We can consider a few time periods for reaching that end price. A calculation for periods of 3, 5 and 7 years gives us annual factors that must, on average, be reached to reach this end goal during the given time period. These factors are 7.94 (3 years), 3.47 (5 years) and 2.43 (7 years).
These factors show us how much potential is still there. Just consider the fact that inventions take some time to firmly establish themselves in society. 10 years from early adapters to first commercial use and the next 20 years for full adoption and saturation (your mom starting to use it). Although the Internet has sped up adoption (think of Facebook and Youtube), the concept of digital money will probably take the normal full inning for total absorption in daily life. Most people do not part easy with their known form of money.
The reason why I state that these factors prove the potential is their low number. 2013's factor will probably be around 22 for Litecoin. How hard will it be to reach relatively modest factors of growth for the next few years? Look at the potential. Will growth suddenly stop and crypto currency be forgotten (while the big USD crash is still forthcoming)? I don't think so and neither should you.
Litecoin's hidden rocket
There is even an extra factor possible with Litecoin. The total number of coins for Bitcoin is 21 million. The total for Litecoin is 84 million. When the market for crypto currencies reaches a point of saturation, it is logical that market participants will attach more value to the scarceness of a coin. Litecoin would then have an implied value of 0.25 LTC/BTC. The current price is approximately 0.012 LTC/BTC, showing a possible extra factor 20. Realisation of this factor, however, will probably take years to play out.
Investing in crypto currency is still the opportunity of a life time. This is even the case when investing a modest amount like $1,000. Crypto currency will either totally win (as Falkvinge describes) or utterly fail. So basically, you bet $1,000 with enormous potential for a Big Win, and have a risk that you will only lose a grand. The best asymmetric bet you will ever take.
Maybe you missed the Internet boom of the '90s. Are you willing to miss the next boom as well?