Sometimes, following the investing strategies of the financial market elites can pay off.
So let's consider the various reasons that three prominent figures -- Jack Dorsey, the founder of Twitter (TWTR) and chief executive officer of Block (SQ -2.28%); Cathie Wood, the CEO of ARK Invest, and tech venture capitalist Mark Cuban -- are such vocal proponents of and investors in certain cryptocurrencies.
1. Bitcoin
Jack Dorsey loves Bitcoin (BTC 1.14%), 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 endeavors that Block will undertake. Rather than remaining only in the payments industry, Block is integrating Bitcoin into its tools and products like mobile payment app CashApp and its newly acquired music streaming platform Tidal.
Dorsey envisions a future where, he says, the "internet requires a currency native to itself, and in looking at the entire ecosystem of technologies to fill this role, it's clear that Bitcoin is currently the only candidate." His stance is likely the reason Block owns more than 8,000 bitcoin.
2. Ethereum
Cathie Wood has found herself in the spotlight in recent years because of the success of her tech-focused exchange-trade funds (ETFs), particularly the ARK Innovation ETF (ARKK -2.12%). Wood and her team believe that by identifying disruptive technology and trends early, they can capitalize on opportunities and provide long-term value to investors.
Wood thinks that cryptocurrencies fit the bill and that a diversified portfolio needs to have some exposure to the asset class. Although Bitcoin is one of ARK's favorites, Wood thinks that Ethereum (ETH 0.38%) has the most long-term potential.
Because of Ethereum's programmable smart contracts, the blockchain has risen in popularity in a sector known as decentralized finance (or DeFi), a fledgling alternative to traditional financial institutions like banks and lenders. In a report published this year, ARK analysts predicted that "as financial services move on-chain, decentralized networks are likely to take share from existing financial intermediaries." And ARK Invest believes Ethereum will be a beneficiary of this growing market.
The report also threw out a lofty prediction: By 2030, Ethereum could have a market cap of as much as $20 trillion, which would raise the price of one ether token to more than $180,000, a gain of more than 13,000% from today's price.
3. Polygon
One benefactor of Ethereum's rise in popularity and price is Polygon (MATIC 0.14%). This blockchain has caught the eye of some high-profile investors such as the tech guru Mark Cuban. Back in May 2021, Cuban took a stake in the blockchain, and although it's not known how large, the crypto enthusiast is well aware of Polygon's potential.
The crypto is unique because instead of trying to create an alternative to Ethereum, it offers a scaling solution to help the blockchain work more efficiently. Polygon processes Ethereum transactions off the main blockchain and then adds them at a later date. This lowers fees and increases speeds, 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 was a Polygon user and find 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 led to 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 have their own reasons for investing in cryptocurrencies, but there is an underlying rationale shared among all these individuals: the realization that cryptocurrencies continue to increase in utility as the world becomes more digital.
Cuban might have described the current state of cryptocurrencies best when he compared blockchains to "the early days of the internet." If a similar trajectory is followed by cryptocurrencies, then investors have an inviting opportunity to make an early claim on a truly disruptive and profitable technology.
