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💎 Fidelity has sights on this crypto

💎 Fidelity has sights on this crypto

PLUS: MrBeast's NFT launch doesn't go as planned

Alex M.
September 06, 2023

GM everyone. This is 2036, the crypto newsletter that pays you.

Here’s what we’re serving up today 🍲: you’ve probably heard of Fidelity. They’re a financial firm with $4.5 TRILLION of assets under management. They’ve applied for a Bitcoin ETF. But they also have their eyes on another crypto…👀

Let’s dig in.

🥔 Today’s meat and potatoes

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Fidelity is part of the Big T club - companies with over a trillion dollars in assets under management (there are only 11 of them worldwide).

So when Fidelity speaks, the rest of finance pays attention 👀.

Last month, they released a new report detailing the investment case for our all-time favorite crypto ecosystem: Ethereum.

Ethereum is a technology platform that uses Ether as its currency.

Ethereum is different from bitcoin in many ways.

Bitcoin is a Swiss Bank account in the cloud. If you want to store money in the safest way possible - go for bitcoin.

Ethereum, on the other hand, is programmable money. Think of a vending machine:

IF I insert $2
AND click the right button
THEN I get a Coke delivered. It’s a series of ifs and thens (these “programs” are called smart contracts).

Ethereum is the name of the computer, and Ether (ETH) is the currency we use to pay for transactions on Ethereum.

You probably know you should own some ETH… but here’s what Fidelity had to say about it:

1/ The Ethereum network is designed so that the more people use Ethereum, the more valuable Ether becomes.

Ethereum burns a portion of all Ether used for transactions, which increases the value of all remaining Ether.

This is why Ethereum is deflationary - meaning it is programmed to go up in price. 📈

the supply of Ether falling over time

2/ There are two investment theses for holding Ether:

As an emerging form of money (i.e. a store of value and form of payment)
As an asset that generates yield (income)

a) Ethereum facilitates payments in ways that have never been explored before (e.g. the vending machine example above).

Real-world applications built on the Ethereum blockchain create demand for Ether.

That’s what happened when:

The first US house sold on the Ethereum blockchain as an NFT
The European Investment Bank issued bonds on the Ethereum blockchain
Franklin Templeton Investment Funds used Ethereum to record share ownership.

… and many more.

All of these are real, physical applications of the Ethereum blockchain.

They create demand for Ether and will only grow in popularity - driving the price of Ether up in the process.

b) Ether is the first true yield-bearing asset in crypto, meaning it acts like a bond that pays regular interest (∼4% today).

When institutions come looking for investment income, they’ll turn to Ethereum.

This makes it VERY different from bitcoin, which does not pay a yield.

(Here’s a step-by-step guide to earn a yield on your Ether.)

But Fidelity also sees some risk with Ether…

Ethereum is not finished and requires constant upgrades. This poses technical risks because each upgrade is a big unknown - which threatens Ether’s role as a store of value.

And when ETH is in demand, fees increase. And high fees are a barrier to large-scale adoption.

Granted, the Ethereum blockchain can process larger, more complex transactions requiring security and decentralization. Think of Ethereum as the upscale, premium blockchain.

Smaller transactions that need to be fast and cheap can be processed on blockchains like Solana (which announced a partnership with Visa yesterday).

So, for a lot of big institutional players, the upside of Ethereum relative to its downside is unparalleled.

It has: