Where Bitcoin Goes When the Rich Buy…
All over the world, the letters and prayers going to Santa have the same Christmas wish: Make bitcoin double again!
It just might. I’m not kidding when I say ‘global’. News just in this morning says Indian demand for bitcoin is skyrocketing. They’re willing to pay a 30% premium to get their hands on it, too.
The scale of this market is quite something.
When you and I go to bed, 300 million Americans wake up, and can become potential buyers. And around the world it keeps going.
I can think of few assets that have global recognition and such ease of access. Global demand, but a limited supply…
Of course, any market contains sellers, profit takers and bears. Bitcoin is no different here. The same wave that can surge around the world can turn and go back the other way.
But the recent dips in bitcoin have been quickly brought back up. That looks very bullish to me…
Demand can come from any geopolitical turmoil the world over
I was chatting to my colleague, Nick Hubble, last week. We’ve known each other for years. I remember when Nick and I looked into the logistics of setting up a foreign bank account way back in 2012.
This was in the days when the European Union was racked with turmoil over Greece and the aftermath of the GFC. A collapse in China was widely feared.
Our readers at the time wanted to know how to have a backup store of cash out of reach of the government.
Setting up a foreign bank account was a giant hassle, riddled with red tape and all sorts of problems and thresholds.
Bitcoin solves this kind of thing in a heartbeat.
You don’t need a foreign bank account now.
We’re pretty lucky with financial management here in Australia.
But think a little wider…someone living in Venezuela, Zimbabwe or South Korea can get their money out with incredible ease compared to the ‘old’ days.
The demand from this alone can keep bitcoin going. But it offers so much more potential.
Bitcoin is currently trading just under its all-time high.
Part of that is thanks to the US regulator giving a thumbs-up last week to bitcoin futures with two major groups: The CME group and CBOE Global Markets.
This sets the scene for institutional money to come in a big way.
Plus, we have the retail investors pouring in as well. One of the big exchanges, Coinbase, is adding something like 300,000 accounts every week.
You can buy more than 1,000 cryptocurrencies. But everybody begins to test the water with bitcoin first.
This trend won’t stop.
You only have to do basic arithmetic here to see how high bitcoin could potentially go.
I’ve run some numbers on the American richest.
They only have to allocate 1% of their cash to bitcoin each to send it to US$1 million a coin.
That’s not to say it will do such a thing, only that the potential is there.
All trades and investments spin around the one equation: Risk versus reward.
There’s still more reward on the table relative to the downside, if you care to ask me.
But it won’t be a smooth ride!
I spoke to former hedge fund manager and venture capitalist James Altucher this morning. I met him over in Baltimore recently….
Don’t dismiss the crypto market as a fad
He was around for the rollout of the internet back in the 1990s.
James said back then that people were too quick to dismiss the technology and its staggering potential to reshape the world.
Think about it. Amazon listed on the stock market in 1997.
You could have bought it 18 years later and still tripled your money.
The same thing is happening with the crypto market.
Part of it is because, with anything new, there’s no direct history as a guide.
With something like gold, you can look at previous big bull and bear markets, and look for common factors.
You can’t do any of that with bitcoin or crypto. It’s also not easy to find out who has genuine insight and who is just trying to cash in on the current attention.
A buddy of mine pointed out over the weekend that bitcoin isn’t like a stock, where you can compare one to other companies in the same sector.
So, for the banks, you can say that if CBA trades on 18-times earnings, then the other ones won’t be too much higher or lower than this.
Bitcoin has no point of comparison like this.
That means feeling our way forward with less certainty, but more opportunity.
Because there’s more potential for bitcoin and other cryptos to be vastly undervalued relative to the potential market.
The most important thing you can do for your wealth, now and over 2018, is to understand this market as best you can.
Delay can potentially cost you thousands.
I’m not kidding about this. Setting up a crypto account and getting it funded can take about three to four days.
Bitcoin and the other cryptos can move 30-40% either way in this timeframe, and sometimes much more.
I’m speaking from experience here.
I wanted to buy more bitcoin in October. I wrote about it in The Daily Reckoning on the day. By the time the money hit my crypto account from my normal one, bitcoin was up another US$1,000.
Don’t hang around on this.
Editor, The Daily Reckoning Australia