Amazon.com Inc. (Nasdaq: AMZN) is an essential part of my life.
There’s an average of 1.3 Amazon Prime boxes a day at my doorstep.
My wife and I watch old movies on Prime streaming video.
And Alexa is always there to queue up the perfect Disney song to calm a frustrated toddler.
I remember using Amazon for the first time in 2002. This was a few years after it started selling items other than books.
I needed a bag of tennis balls for my loyal mutt. They arrived at my apartment in just a few days, saving me a trip to the nearest sporting goods store.
I thought Amazon was really on to something back then.
But when I looked at the company, it wasn’t making any money. Nor was it even expected to make any money for a few years.
It was shortly after the dot-com bubble had burst. The stock had dropped 90% from its high.
The bottom wasn’t easy to spot. The price would double or triple in a few months’ time, only to fall 50% in the next pullback.
So, I thought I would have a better chance to buy it sometime in the future when it was less volatile.
Boy, was I wrong. Amazon has increased 600-fold from its post-dot-com lows.
But I learned an invaluable lesson from this.
And there’s one specific sector I’m following that reminds me of Amazon back then.
The Hype Cycle
Every new technology follows the same “hype cycle.”
When a new innovation arrives, investors hype it up to inflated heights.
We saw this with dot-com in 2000, bitcoin in 2017 and electric vehicle stocks in 2021.
But then expectations sour, and the hype pendulum swings downward. Investors become disillusioned with this new technology.
At some point, investors start to realize that the technology isn’t going away.
Adoption rates start to increase, slowly at first.
It soon becomes an indispensable part of our daily lives.
Where the Biggest Gains Can Be Found
When I look around the market for investments, I’m always searching for the one that holds immense promise, but investors have cooled on its prospects.
That’s where the biggest gains can be found.
Right now, decentralized finance (DeFi) is in the trough of disillusionment.
This is the peer-to-peer financial services infrastructure that’s being built on top of crypto networks.
Last year, DeFi expectations were overly inflated. You couldn’t hear enough about how DeFi was about to replace the entire $100 trillion financial system.
The value of crypto in the DeFi space grew 100X, from under $1 billion to over $100 billion.
The prices of DeFi tokens that allowed for trading, lending and other financial activities surged.
It even graced the cover of Fortune in an issue titled “Crypto vs. Wall Street.”
Investors have since become disillusioned with DeFi’s future.
They’re concerned about the legacy banks forcing heavy-handed regulation from Congress and the SEC.
They’re fearful about a spate of recent hacks, which amounted to $1.3 billion lost in 2021.
They’re worried that DeFi will never go mainstream, reserved only for the techno literate among us.
Amazon faced similar concerns 20 years ago.
Investors worried about credit card theft, lost packages and a company that was far from making any money.
In hindsight, that was the time to buy.
Invest in the Amazons of the DeFi Space
If you look at DeFi, you can see what I call the “Next Gen Effect” at work.
What this means is that 2.0 is always bigger and better than 1.0.
We’ve had our current banking system for thousands of years. That’s 1.0.
And DeFi is 2.0. As a transformational technology, it holds the key to a better, more efficient way of doing business.
It will disrupt the $100 trillion financial system, similarly to how Amazon impacted the brick-and-mortar retailers.
DeFi is the 2.0 version of banking: It’s an innovative technology that holds the key to a better, more efficient way of doing business.
Crypto protocols like Aave, Uniswap and Balancer remove multiple middlemen out of financial transactions and allow for instant settlement.
Banking as we know it is about to change. And there’s one crypto in particular that’s set to disrupt the game in a major way.
DeFi will be a vital part of our lives. And I’m confident that we won’t have to wait 20 years to get there.
Editor, Strategic Fortunes
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