In today’s Money Morning…I can’t say I’m surprised by this move…a bad case of déjà vu…ever-evolving ecosystems…and more…
Well, it has finally happened…
The Commonwealth Bank of Australia [ASX:CBA] has officially become the first Aussie bank to cater to crypto. Confirming that it will soon add the ability to buy, sell, and hold up to 10 curated crypto assets. Which of course includes the two preeminent tokens: Bitcoin [BTC] and Ethereum [ETH].
Personally, I can’t say I’m surprised by this move. It was bound to happen at some point, after all.
Cryptocurrencies have blown up way past the point where banks can afford to ignore them. Making it practically inevitable that the other big three banks will follow CBA’s lead soon enough.
As CBA’s own press release notes:
‘Research from CBA has found a large number of its customers want to access crypto assets as an investment class and are already buying, selling and holding crypto assets through a variety of crypto exchanges.’
They’re just hoping to get in on this action. Providing a bolted-on service that they can use to scrape some fees out of existing crypto investors.
And while I’m sure it will also provide confidence for some users to take their first plunge into crypto assets, I’ll be curious to see how hefty the cost is.
Nevertheless, though, this crypto pivot is certainly telling.
A bad case of déjà vu
Now, no matter how you look at this decision by the CBA, it reeks of desperation.
Whether it be a desperation not to miss out on a boom that has already unfolded over the course of this year, or a desperation to not be left stranded by the disruption that blockchain technology will deliver to traditional banking.
Sounds pretty similar to a situation that occurred over the course of 2020 as well, right?
Because as you may recall, in January of last year CBA launched Klarna in Australia too. The bank’s last-minute attempt to try and compete in the bustling ‘buy now, pay later’ boom. And I’m sure I don’t need to tell you how the rest of 2020 played out…
Suffice to say, CBA was far too late to capitalise on this trend. A theme that I expect will be eerily similar to this crypto plan.
And, in fact, with Square headed to Australia via its takeover of Afterpay, I wouldn’t be surprised if CBA decided to fast track their crypto offering.
Because not only has Square openly disclosed its investment in assets like bitcoin, it also is actively trying to build a decentralised finance (DeFi) business around them.
So is it another case of too little too late for Aussie banks?
Probably.
But in all honesty, I’m not sure the banks ever had any chance anyway. The entire point of crypto and DeFi is to rid ourselves of middlemen — like the bankers.
Granted, that doesn’t mean I expect banks will cease to exist entirely. I just suspect they may be reduced to simple deposit-taking institutions. Rather than playing the role of financial services arbiters, like they do now.
That is if projects like bitcoin and Ethereum can live up to expectations.
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Ever-evolving ecosystems
What investors should really be excited about, whether you’re already in crypto or not, is what’s on the horizon.
Bitcoin, for example, is expecting to implement its latest network upgrade later this month. Introducing a new protocol known as Taproot sometime around 16 November.
As a result, the bitcoin blockchain will gain some added security, efficiency, and scalability. Three areas that have long been the focus of bitcoin’s ongoing evolution.
However, it is Ethereum that I believe is the far more exciting project right now. Because while bitcoin is still the king of the crypto community, the second largest coin is closing the gap. And not just in terms of pure market cap value either…
Since June of this year, gas fees (the cost to transact on the Ethereum blockchain) have risen by 2,293%. Suggesting that usage and demand of the blockchain is soaring. A signal that is great for investors, but not exactly ideal for the multitude of DeFi projects or decentralised apps that have to pay these higher fees.
That is all set to change come Ethereum 2.0 though — a planned upgrade that will see the entire blockchain move from a proof-of-work basis to proof-of-stake. And if you have no idea what either of those mean, well then I’d urge you to check out our in-depth video on the matter.
Because while it can certainly be hard to wrap your head around this topic at times, it is worth it. Not just to stay informed for yourself, but to also stay ahead of the masses.
After all, if you only take one thing away from this article, it is that crypto is here to stay.
CBA’s commitment to provide users access to this new asset class is just the latest confirmation of that fact. Something that early adopters have known for quite some time now.
Which is precisely why you need to act now if you haven’t already.
The window of opportunity to get involved at the early stages of this crypto boom is still open, but it is closing fast. So don’t miss out before it is too late.
You can learn all you need to know on how to get started, right here.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here
