The Case for Bitcoin
In March of 2017, eight years after it was brought "online", a friend mentioned Bitcoin. I knew nothing. So, I bought $50 worth. By then, there were already multiple millionaires in existence from it's rise. At that time, just 9 months ago, BTC (Bitcoin) was $900. Today, December 11, 2017, it is at $16,600. Needles to say, I regret not being more aggressive. Is it a bubble now? Why would it be now? They've been saying that off and on for 8 years. Keep in mind that those previous 8 years were BEFORE CBOE or CME even mentioned offering futures contracts. IF you've already read my articles; "What is the Blockchain?" and "What is Bitcoin?" - then you have a greater understanding that what we are facing here isn't about Bitcoin alone. If you haven't, then you'll likely finish this article just as apprehensive and confused as you might be already (assuming you are new to this subject). I've attached links to the articles at the bottom of this one. There's not enough space to repeat everything here, so I'm going to condense the important points. Your questions about hacking; EMP's; not being backed were already answered in the other articles. I think if I draw parallels between blockchain/internet; and cryptocurrencies/domain names - you'll get the idea.
Why the focus on BTC? It is simply because it was the FIRST blockchain-associated currency mined and put into use (2009). It is NOT controlled by any government or single entity. Today, there are over 1,000 various blockchain tokens & coins available. Some are absolutely pointless and worthless - while others are going to revolutionize currency exchange, data storage, records transmission and security. IF you know what the blockchain is - then you know that it is the real value. It is further streamlining, securing, and bringing another level of data and currency utility to the world. All of the cryptocurrencies and tokens are the equivalent of what domain names & websites where to the internet when it was introduced. Without the internet, there would be no domains or websites. So, the blockchain could be thought of as "Internet 2.0". Many scoffed at the internet when it was becoming semi-mainstream in the late 80's. The first domain name was registered in 1985. The first commercial ISP (internet service provider) was formed in 1989. It was dial-up. Look at us now…
If you are familiar with the dot-com bubble of 2000-2002, you've got a big red flag going up in your head while watching the meteoric rise in BTC. If you bought into the internet investments when they came out (early 90's), you likely bought domain names, internet stocks, online shopping stocks, etc. Internet stocks bubbled and burst by 2003. So, from 1990-2000 (ten years) was the adaptation phase of the internet. Then the mainstream investment interest was 2000-2002. Those at the end of the rally (13 years after internet intro) lost big. I was one of them. I bought Microsoft when I thought it couldn't go any lower. I did the same thing with oil in 2009. There's no doubt in my mind there will be a few mini-bubbles in BTC. There might also be a big bubble at some point that will burst. Nobody can guess when it will be. Me personally, I expect a plateau - not a bubble. Irregardless, the stage is set right now. Bitcoin, altcoins, tokens, and the blockchain is just now BECOMING mainstream. It's on the news. It's just started trading in futures (12/10/17). What should be envisioned next? All the research, listening, watching the big banks & the chatter points me to some conclusions and expectations of my own. Could I be wrong? Yes. But I try to use logic, because I got in early enough to where I don't feel like I have much risk.
Futures trading just started. The thing with futures is that you don't have to own anything to place an order. While it spreads awareness of BTC, it doesn't neccessarily infuse a ton of investment market share. As a comparison, gold has about a 7 Trillion USD market share vs. BTC's 70 Billion USD. Lot's of room to grow. Not only that, I'd be willing to bet most futures traders are betting on a rise - not a fall in price. Here's something that I DO think will help BTC's stability and momentum at the same time: both VanEck and REX have each filed for introduction of a BTC ETF. That is big news. An ETF doesn't "short" a property. Futures can short a property. So, here we have another injection of "mainstream" into BTC. If you own BTC, you know that there are all sorts of pitfalls associated with wallets, buying it, and tax concerns. The ETF takes all the headache out of it. I believe that the futures and ETF markets will spread awareness, bring in investors, increase demand and raise the price. You may not know this - but the banking industry is implementing blockchain tokens as we speak. Those tokens are the little guys - not worth much... yet.
What about regulation? One word... TAX. The countries that are on-board will have a tax windfall on the gains. The IRS is already digging into the exchanges to reveal investors from the last two years. They also have their talons into the miners - calling BTC a taxable income - even though the SEC won't all it a currency. They want their piece. It's like marijuana. It's going to be a huge tax revenue base when it's all legalized and regulated at the federal level. There's no reason for Washington to try to hide the dollar signs in their eyes... Score another reason for BTC's support.
Bitcoin's algorithm (SHA-256) has a built in cap of 21 million coins. As mainstream investors, especially the wealthy who want a "whole" bitcoin or more, put in demand - the price goes up. It's like gold - but you can't hold it. Did I mention that the dollar isn't backed by ANYTHING? The discussion on intrinsic value is written in another article. Can't they change the cap? Yes, but the economic majority (who hold coins) would have to collectively agree to it. Why would you? You want it to go down? No. A hard fork has happened - but all it did was create an offshoot coin with a different symbol. It didn't change the cap on the original BTC. Also, those who held BTC were GIVEN some free portion of the new forked coins.
After the rush is over (hopefully not a bubble) - where does BTC go from here? To that, I direct your attention to the other tokens, coins, and cryptocurrencies out there. Let's say BTC plateaus in value after all the ETF's have been around for a couple years and everyone has a piece. What will all the little altcoins do? If you have been watching the charts of all the less-known-but-useful alt's out there - you'll see they all tracked BTC for the most part. They didn't gain as much - but they all went UP. Over these next couple years, I expect that people will take notice of the alt's and want them in the ETF's and futures as well. Some of these altcoins and tokens are worth just 5 cents right now. Needless to say, there's room to grow. Not likely they will be as meteoric as BTC - but nonetheless, still a good way to diversify and get some gains. Amazon has purchased several cryptocurrency-related domain names. Well, that's about all I have to say at this point. I just wanted to point out some thoughts. However, there are at least 20 other reasons that support the usefulness (hence value) of this "new thing" they call the blockchain & it's associated parts that give us a new opportunity to beat the stock market. Not investing advice here - just my opinion for my personal investing. Talk to a tax advisor, certified investment advisor, and do your own due diligence - don't take my word for it. I'm not a financial advisor.
Good Luck!
