Sometimes it can pay off to follow the investment strategies of the financial markets elite.
So let’s look at the various reasons why three prominent personalities – Jack Dorsey, the founder of Twitter (TWTR 0.05%) and managing director of block (SQ -3.52%); Cathie Wood, the CEO of ARK Invest, and tech venture capitalist Mark Cuban – are such vocal advocates and investors in certain cryptocurrencies.
Jack Dorsey loves Bitcoin (BTC -1.22%), the most valuable cryptocurrency today. In his own words, he has dedicated more than “enough” of his $4.7 billion net worth to the original cryptocurrency.
He’s such a fan that he even went so far as to change the name of the digital payments company he runs from Square to Block in homage to blockchains and the future efforts Block will undertake. Rather than just staying in the payments industry, Block is integrating Bitcoin into its tools and products like mobile payments app CashApp and its newly acquired music streaming platform Tidal.
Dorsey envisions a future where, as he says, “the internet needs its own currency, and when you look at the entire ecosystem of technologies to fulfill that role, it’s clear that Bitcoin is the only candidate right now.” . His stance is probably why Block owns more than 8,000 Bitcoin.
Cathie Wood has grown in popularity in recent years due to the success of her technology-focused exchange trade funds (ETFs), particularly the ARK Innovation ETF (ARKK -2.47%). Wood and her team believe that by identifying disruptive technologies and trends early, they can seize opportunities and provide investors with long-term value.
Wood believes that cryptocurrencies are the way to go and that a diversified portfolio needs to have some exposure to the asset class. Even though bitcoin is one of ARK’s favorites, Wood thinks so ether (ETH -1.18%) has the greatest long-term potential.
Because of Ethereum’s programmable smart contracts, blockchain has gained popularity in a sector known as decentralized finance (or DeFi), a fledgling alternative to traditional financial institutions such as banks and lenders. In a report released earlier this year, ARK analysts predicted that “as financial services move on-chain, decentralized networks are likely to benefit from existing financial intermediaries.” And ARK Invest believes that Ethereum will be a beneficiary of this growing market.
The report also made a lofty prediction: by 2030, Ethereum could have a market cap of as much as $20 trillion, taking the price of an Ether token to more than $180,000, an increase of more than 13,000%. compared to today’s price.
A benefactor of Ethereum’s rise in popularity and price is polygon (MATIK -3.17%). This blockchain has caught the eye of some high-profile investors like tech guru Mark Cuban. Cuban took a stake in the blockchain back in May 2021, and while it’s unknown how big, the crypto enthusiast is aware of Polygon’s potential.
The crypto is unique as it does not seek to create an alternative to Ethereum, but instead offers a scaling solution to help the blockchain run more efficiently. Polygon processes Ethereum transactions outside of the main blockchain and then adds them at a later date. This lowers fees and increases speed, but most importantly, maintains compatibility with Ethereum.
Cuban’s website describes Polygon as the “first well-structured, easy-to-use platform for Ethereum scaling and infrastructure development.” And Cuban himself said, “I’ve been a Polygon user and I’m finding myself using it more and more.”
He’s just one person in a growing Polygon user base. Ethereum’s smart contracts (the building blocks for things like non-fungible tokens and DeFi apps) have made it the most popular blockchain network, but that has created congestion, often resulting in slow, expensive transactions. But with Polygon, users get the best of both worlds: fast speeds and low fees with the security and decentralization of Ethereum.
keep it simple
Each of these three investors has their own reasons for investing in cryptocurrencies, but there is an underlying logic that all of these individuals share: the realization that as the world goes more digital, cryptocurrencies will only become more useful.
Cuban might have best described the current state of cryptocurrencies when he compared blockchains to “the early days of the internet.” If cryptocurrencies follow a similar path, then investors have an inviting opportunity to make early claims on a truly disruptive and profitable technology.
RJ Fulton has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Block, Inc., Ethereum, Polygon, and Twitter. The Motley Fool has a disclosure policy.