Tuesday, 14th November 2017
The party might not have started yet….
Over the weekend gravity confirmed it still exists….
Bitcoin had a rough time – plunging 30% just days after hitting a record-high of $7495….
If bitcoin were a stock, trading would have been halted on Sunday….
Maybe the decision of key market players last week to suspend a planned ‘hard fork’ (that would have increased transaction speeds) created a case of the jitters and a sell off….
Maybe it was news that US Treasury secretary Steve Mnuchin is in discussions with foreign counterparts about bitcoin being used to facilitate transfer of criminal proceeds….
Whatever, the weekend was a reminder that bitcoin is volatile. The crypto has enjoyed unprecedented lift this year – but it can go the other way too….
- Hold your nerve….
This wasn’t the first-time bitcoin has suffered a brutal correction. Nor, I suspect, will it be the last….
But the cryptocurrency is already recovering. On Monday it rallied 11% in 12 hours – regaining $10 billion of value….
Nobody ever said you wouldn’t require nerves of steel for this ride….
And, if your nerves are jangling, remember who stands beside you in the trenches – bayonets fixed and ready to confront any challenge the cryptocurrency market issues….
Harry Redknapp, Floyd Mayweather and Paris Hilton all have skin in the game. At least that’s what they insinuate with their recent endorsements….
And if their presence doesn’t stop your knees knocking together, maybe Bjork can do the trick.
Last week, the singer demonstrated her faith in bitcoin by announcing fans could buy her new album with the cryptocurrency….
Clearly, Bjork doesn’t anticipate bitcoin reverting to zero anytime soon. So, why should you worry?
- A vision of the future….
If the endorsements of celebrities previously unheralded as financial experts fail to cut the mustard, maybe Tim Draper will….
Draper is a venture capitalist who made big money after buying 30,000 bitcoins in 2014 and selling as the price rocketed….
In a recent interview with Forbes he said this:
‘Bitcoin and other cryptocurrencies will be so relevant…. there will be no reason to have the fiat currencies.’
Draper’s vision of the future is one in which consumers are not confined to one currency. Instead they float between many….
‘My guess is that it will centralize around a [digital] wallet that you have and when you pay for that Starbucks your wallet will optimize to whichever currency has most value.’
At Money Truths we buy the idea that if you can dream it, you can do it. Draper may be on to something….
- Official and institutional acceptance….
Whatever shape the future takes, bitcoin will be part of it….
The current price owes much to a bubble of speculative activity. But that’s how it is with life-changing technologies. An explosion of interest sends values soaring….
Values might go higher than ever before – much higher. They might even out. But while the here-and-now price might grab the most headlines, it is not the be-all and end-all….
What happens around bitcoin, in terms of legitimacy, uptake, adoption and general usage, has as much, if not more, to tell us about the future as the price.
For example, the decision of Chicago-based CME, the world’s largest exchange operator, to offer bitcoin ‘futures contracts’ by the end of the year is a major step forward in legitimizing bitcoin and making it mainstream….
Futures contracts would enable bitcoin owners to hedge against risk. And that will only serve to encourage more traditional money managers to get involved with bitcoin….
Goldman Sachs is exploring ways in which it can help its clients trade digital currencies. Other big institutional money managers will be doing the same….
In the halls of government, bitcoin is drifting onto the legislative radar. Japan has already passed legislation that recognizes bitcoin as a legal payment method. Now the Russian government, after initial misgivings, has issued directives to start work on a legal framework….
These are the visible tip of the iceberg. A greater volume of developments remains hidden under the water.
The bottom line is that greater official and institutional involvement in bitcoin increases legitimacy and serves to ease fears that bitcoin is some passing fad that could suddenly crash to earth in a ball of flames – wiping out hundreds of millions of dollars-worth of investments in the process….
- Gaining traction with the public….
Governments and institutions aside, understanding, uptake, acceptance and adoption of bitcoin is an ever-strengthening trend across the board….
Last week Google revealed more people are now searching for ‘How to Buy Bitcoin’than ‘How to buy Gold’….
In America’s top schools, cryptocurrency classes are more popular than any other….
Dan Boneh, of Stanford Computer Security Lab, reports more than 1 million people signed up for an online class he’s running….
A recent survey conducted by venture capital firm Blockchain Capital found 30% percent of 18-to-34-year-olds would rather own $1000 worth of Bitcoin than $1000 of government bonds or stocks….
Much of this interest is yet to find its way into the market. But it will….
The collective market cap of cryptocurrencies recently surpassed $200 billion. But that’s nothing compared to what it will be as more people get educated about cryptocurrencies and buy into the concept….
Some experts suggest that bitcoin will grow into a $2-5 trillion market….
In other words, the party might not even have started yet. There is a mountain of money yet to find its way to the nascent sector….
- A long way to roll yet….
Bitcoin’s roots are sinking ever deeper into the earth – making it more resistance to temporary gusts of winds; making it harder to pull out of the ground; making it a taller, stronger and more robust plant that can still be producing blooms many years from now….
Much of the current price of bitcoin is a result of speculative activity – with investors buying today in the hope or expectation that they can sell at a bigger price tomorrow….
But, bitcoin is gaining traction as a means of payment and transfer and as an asset. Day-by-day it is gaining in legitimacy and forging an ever-deeper toe-hold in the financial system….
Standing outside the market and watching the narrative unfold, it is clear, even to my untrained eye, that bitcoin is going to roll for a long-time yet. Despite this year’s bitcoin breakout, it might well be early days….
Maybe Mike Novogratz has it right when he said: ‘This is going to be the largest bubble of our lifetime. Prices are going to get way ahead of where they should be. You can make a whole lot of money on the way up, and we plan on it.’
Maybe that is the way to profit from the cryptocurrency revolution. But maybe there are other ways too – for smaller stakes and a reduced downside….
There’s a lot to think about. And a lot to look at. More to come….
That’s how it looks from here….
All the best,