Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.
Today, I’ll do my best to answer them.
Before we turn to our questions, though, I’d like to put a very special upcoming event on readers’ calendars.
Over the last year, we’ve witnessed the exponential rise of non-fungible tokens, or NFTs.
As a refresher, NFTs are digital assets that are cryptographically secured and authenticated on a blockchain. We’ve discussed many use cases for NFTs here in these pages… They can be digital works of art or collectibles, play-to-earn video games, items in a metaverse, and much more.
I see immense potential for massive growth in the NFT space. But I’ve been waiting for a major inflection point in the market… the point at which NFTs finally hit the mainstream.
In 2020, NFTs saw a total sales volume of “merely” $340 million. In 2021, NFTs grew to more than $25 billion in sales.
And as we look ahead to 2022, I believe the mass adoption of NFTs is underway… This is creating a whole new opportunity for early investors to invest in these digital assets.
But rather than paying thousands for a digital trading card or artwork… I’ve found three NFT coins that could hand investors decades of tech gains in a matter of months.
And I want to make sure my Bleeding Edge readers don’t miss out on this opportunity.
That’s why next Wednesday, January 26, at 8 p.m. ET, I’m holding a special presentation called The NFT Moment.
There, I’ll show readers how to place an early stake in the NFT trend. And for the first time ever, attendees – on January 26 only – will have the chance to receive a free NFT of their own…
To learn how to claim your free NFT – and my top recommendations in this space – reserve your spot right here.
Let’s begin with a question on the recent drop in crypto prices:
Jeff, if so much capital is flowing into crypto, why is the bottom seemingly falling out of it?
– Al W.
Hi, Al, and thanks for sending in your question. This is a topic that has received a lot of attention recently. And you’re right, it seems kind of counterintuitive. If so much money is flowing into the cryptocurrency industry, shouldn’t prices be going up?
Since the start of the year, bitcoin (BTC) is down around 8.7%… and ether (ETH) has tumbled 14%. In line with these drops, the stock of crypto exchange Coinbase (COIN) has fallen 12% in 2022. In fact, the entire cryptocurrency market value has dropped 34% since last November.
So it’s no surprise some investors are wondering what is going on. As usual, context is very important in a situation like this.
We should keep in mind that bitcoin experienced an unbelievable run from October of 2020, when it was trading around $10,000, to early November – when it just about hit $68,000. That’s a 520% gain in just over a year… Most stocks don’t do that in two decades.
I’m not surprised to see it take a breather. Even where bitcoin is trading today, it is still up about 290% since October 2020.
Much of the recent volatility we’ve seen in the cryptocurrency market is tied to concerns about the U.S. Federal Reserve hiking interest rates. Speculation abounds over how much rates will rise in 2022 and how many times they’ll be raised.
Whenever the Fed raises rates, of course, it effectively makes money more costly. The higher rates ripple into the lending and credit markets. For example, growth stocks, which often depend on debt to fund their growth, suddenly see their margins eaten away.
As a result, when money isn’t as “cheap,” riskier assets tend to sell off.
This is why interest rates matter to cryptocurrency. Many investors view crypto as a riskier asset.
Yet this is a near-term effect. For one, I anticipate that the recent guidance about raising interest rates three times or more this year is just posturing. There will probably be a modest 25 basis point increase in the first half of the year, just to send a message… but I doubt we’ll see much else.
If we do, it would only be another 25 basis points. Combined, that’s really nothing. Interest rates would still be well below 1%… which is pretty much the same as free money.
In other words, the markets are overreacting to something that won’t be a significant threat. And once this sinks in, we’ll almost certainly see a rebound in the assets that have been beaten down.
And that brings me to one other point…
In the cryptocurrency markets, these volatile swings are fairly common… and they are temporary.
Since bitcoin broke its previous all-time high of $20,000 in late 2020, the entire cryptocurrency market cap has witnessed nine pullbacks greater than 20%. That’s a lot of peaks and valleys in a relatively short period.
It’s also worth noting that the cryptocurrency space is very different from the traditional stock market. Consider this: in the traditional stock market, a bear market is commonly defined as one in which stock prices fall 20% or more.
If we apply that same logic to cryptocurrencies, that would mean we’ve entered a crypto bear market nine separate times in about a year.
All cryptos experience huge fluctuations in their value from day to day. And because of this, we can’t think of cryptos in the same way we would equities. The logic we apply to the stock market cannot be applied to cryptocurrencies.
What is equally important is how fast the market rebounds even after the biggest drawdowns.
In 2021, the entire market dropped over 50%. Yet it then rebounded more than 140%. And it only took about a month and a half after that for the cryptocurrency market to surpass its previous highs.
This kind of price action is common in crypto… And as investors, we need to be prepared to deal with these daily fluctuations in value.
So I’m not worried about the recent drop in cryptocurrency prices. I fully expect to see the volatility swing back in our favor in the coming months.
Next, a reader wants to know more about technology applied to housing:
Possible new idea to research and eventually recommend: 3D printed homes. Looks to me like it will be successful! Building homes in a short time for very affordable prices. Huge applications!
– Ronald J.
Hi, Ronald, and thanks for writing in. This is certainly an area of interest for many people.
Affordable housing has become scarcer in recent years – and that trend has been put into overdrive during the pandemic. The supply chain crunch limited materials for new houses, and many people relocated due to working remotely. As a result, housing prices rose about 19% in 2021 alone.
That’s motivating some creative solutions to the problem…
I wrote last September about Boxabl, an early stage company building “unfolding” houses.
Boxabl’s Casita
Source: Boxabl
As we can see, this is an innovative take on affordable housing. The 375-square-foot house itself costs just under $50,000. It contains a kitchen, a bathroom, a shower, a living area, and a full bed. All these houses are highly functional and very easy to heat and cool.
And every “Casita” can be erected in about a day, which makes it an excellent solution for meeting our housing needs. There’s clearly demand for this option as well. The company already has 70,000 names on its waitlist as of the start of this year.
And you’re absolutely correct that 3D printing is another option we’re seeing develop. Early stage company Alquist 3D has begun working alongside Habitat for Humanity to construct 3D housing here in the U.S.
Alquist 3D Home
Source: Alquist 3D
The printer uses traditional concrete to put down the preprogrammed architectural design. And according to CEO Zachary Mannheimer, the method offers construction savings of 10–15% compared to stick-built homes. He also expects savings to increase to 30% over the next two years.
And like Boxabl, these 3D-printed homes can be assembled in less than 24 hours.
Even more importantly, these alternative methods of construction require less labor. Alquist 3D says it takes only three or four workers to operate its printer.
Given the labor shortage we’re experiencing, we’re going to see increased interest in these kinds of solutions to meet our housing demand. And I’ll keep my eye on the space this year to see if any potential investment opportunities arise as a result.
Let’s conclude with a comment about tractor tech:
Great question and answer on EV (electric vehicle) tractors (I agree that it matters where the electricity comes from). However, the biggest leap in productivity will occur with self-driving tractors.
This will free people from the monotonous, repetitive task of driving a tractor up and down the fields to plow, plant, cultivate, fertilize, and harvest.
In addition, if this is combined with a little robotics technology that can easily change the tractor’s battery, the tractor can run 24/7.
Then add in a self-test capability where the tractor can test itself if it has a problem (and maybe a robotic capability to actually swap boards and/or fix the problem), and you have a crop farm that practically runs itself. I can’t wait to see this!
– Greg M.
Hi, Greg, and thanks for sending in your comments. The applications for technology in the agricultural industry are game-changing. And I like the way that you are thinking.
By extrapolating two or three more steps, we can build a picture of what the future looks like. This is a technique that I use all the time in developing an investment thesis. The key is being able to see around the corner ahead of the rest of the market.
As you mentioned, I wrote at the end of last year about combining electric vehicle technology with tractors. And I shared several companies working on breakthrough electric designs that could potentially run 24/7 and improve the functionality of these machines.
And yes, just this week, I reported on John Deere’s upcoming release of a fully autonomous tractor.
8R Tractor
Source: John Deere
The tractor comes loaded with advanced artificial intelligence (AI). The AI connects to the steering system and multiple cameras to give it a 360-degree view. It’s also fitted with a GPS guidance system. Farmers can “geofence” their fields, which shows the AI exactly where the tractor needs to operate.
You’re absolutely right that this will be a transformation for agriculture.
Farmers will be able to remotely monitor these tractors, and they’ll receive an alert if the machine runs into trouble. This will free up their time for other responsibilities and make running a farm much more efficient.
And I don’t doubt that John Deere’s self-driving tractor will be followed by other companies hot on its heels.
Like I mentioned above, there’s an incredible demand for labor right now due to the “Great Resignation.” This has spurred the rapid adoption of automation in many different industries. (To learn more, simply go right here for the full story.)
That’s why I’ll continue to keep my eye on the agricultural space. Soon, all the food we eat might be planted, tended, and harvested without the touch of a single human hand.
And if that becomes the case, then we can be sure that there will be plenty of related investment opportunities.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Jeff Brown
Editor, The Bleeding Edge
Like what you’re reading? Send your thoughts to feedback@brownstoneresearch.com.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
