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Crypto: Crossing a Major Frontier

By Charles Sizemore, Chief Investment Strategist, The Freeport Society

Bitcoin is a fantastic store of value. Its algorithm limits the creation of new coins, making it a viable dollar hedge.

And subscribers to my Freeport Investor newsletter are benefitting. I recommended Bitcoin as one of our first investments when we launched in December 2023. It’s up over 150% since then.

But I would never have argued that Bitcoin is useful.

It’s slow and cumbersome as a payment platform. It doesn’t really “do” anything. It arguably has even less utility than gold. While most gold just sits inert in a vault, at least a little is used in electronics, jewelry, or even dentistry. Bitcoin has literally zero intrinsic value.

Still, bitcoin won’t change. That’s part of its appeal.

But change is coming quickly to the rest of the crypto space.

So today, I’ll dig into what the future of crypto will look like soon enough, why it’s changing, and how to position yourself to profit from the change unfolding before our eyes.

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The GENIUS Act Is Just the Start

Cryptocurrencies are actually becoming useful. They’re starting to have legitimate real-world uses beyond naked speculation and ridiculous internet memes. (No, a cute puppy-dog face on a coin does not infer intrinsic value. Sorry. Not sorry.)

As I wrote earlier this week in Freeport Navigator, Amazon and Walmart are looking to launch stablecoins, dollar-backed cryptos designed to be spent.

The GENIUS Act, which just passed the Senate and now awaits approval in the House of Representatives, creates the legal framework to make this doable.

This isn’t a gimmick or a publicity stunt.

It’s a real attempt to save billions of dollars in swipe fees retailers currently pay to MasterCard, Visa, and AMEX.

They’re looking to cut out the middleman, which will result in lower prices for you me… and fatter profits for the retailers.

It’s also an effective way for the two retail giants to get into the banking game.

Stablecoins own vast portfolios of interest-bearing securities like U.S. Treasury bills and notes. All of that interest stays in house, with the issuer, turning them into another revenue stream.

Stablecoins were enough to get me wildly excited.

Alternatives to credit cards have existed for decades, starting with Paypal and more recently including Venmo, Zelle, and even Apple Cash. But they never really caught on or went mass market. There was just no incentive to make it happen.

Now that incentive exists.

A Virtuous Cycle of Innovation

Stablecoins are about to disrupt the credit card business.

This doesn’t mean that Amazon and Walmart are saints doing this out of the goodness of their hearts. As Adam Smith put it in The Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

That’s the beauty of capitalism. In a competitive system, companies improve their service and lower their costs to boost their profits. As consumers, we all win.

But stablecoins are just the beginning. As they go mainstream, they open the floodgates to greater innovation.

The next step is widespread tokenization, which means converting ownership rights in a real-world asset — like real estate, stocks, art, commodities or your kid’s Pokemon cards — into a digital token that exists on a blockchain.

Think about what an expensive and cumbersome pain it is to sell a property. Real estate is illiquid. And it’s time consuming to verify a title.

Now let’s imagine another world in which property titles are on a public blockchain. There’s really no room for legal disputes when the entire ownership history of the property is in the blockchain for all to see.

Selling fractional ownership also becomes ridiculously easy.

A $10 million building could be tokenized into 10,000 tokens worth $1,000 each. Investors could then buy, sell, or trade their tokens on a secondary market, like a stock… without the need for a real estate agent as a middleman taking 5% off the top.

Title examiners… realtors… attorneys…

All of them are about to have their businesses disrupted.

They will fight it tooth and nail.

They will lose.

Techy capitalism will eliminate the need for their services resulting in better prices for buyer and seller alike.

We’re not quite there yet. We need more legal standards in place before I’m willing to buy or sell property on the blockchain.

But we’re getting close, and the GENIUS Act gets us one step closer.

To life, liberty, and the pursuit of wealth,

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On Wednesday, June 25 at 10 am E.T, he will unveil this new breakthrough software, show how it works, and demonstrate why it will be critical to your success in the markets through the rest of this year and beyond.

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