This week on Money Talks, Friday at 9 AM PDT (noon EDT)
- Bitcoin is skyrocketing. What’s going on?
- This will be our final episode of the “Back to the Basics” mini-series where we will discuss Altcoins, why they matter, and how to use them.
- We answer all your questions on crypto and investing.
- Don’t forget to leave us a comment on Twitter for a chance to win $200 in any cryptocurrency supported by Abra.
Note you may want to update or install your Abra app before the show starts to get a head start on the demos we’ll be doing!
Join us Friday at 9 AM PDT:https://youtu.be/N-m68XZlrc4
What a Week
As I write this Bitcoin is closing in on $16,000! Abra’s transaction volumes and deposit volumes are way up and the believers are starting to feel a little euphoric. Remember nothing goes straight up in price. For sure I’ve never been more bullish on Bitcoin than I am now but please invest wisely and do your homework.
By the way, there are plenty of experts you can follow online as well for crypto advice and insights:
Mike Novogratz of Galaxy Digital – formerly of Fortress
Raoul Pal – CEO of Real Vision and former hedge fund manager
Michael Saylor – CEO of MicroStrategy
Barry Silbert – CEO of DCG and founder of Second Market
Bitcoin chart from the Abra app (8:30 pm PT)
If you don’t remember why I’m so excited about Bitcoin at this very moment then you need to go scan through this newsletter from two weeks ago. It comes down to technicals, fundamentals, and sentiment!
Here is a brief reminder:
- Technicals – Since I wrote this Bitcoin has started a massive price breakout and is up over 10% already in November. The Bitcoin technicals have never been as bullish as they are now. Bitcoin’s stock to flow plus the current monthly chart for Bitcoin are all showing a likelihood of a massive run-up in the price of Bitcoin over the next few months.
- Fundamentals – There will never be more than 21 million Bitcoin. There will never be less fiat printed than there is now, it will only get worse. Cash is becoming more worthless by the day. Gold is good, Bitcoin is great. Those are the fundamentals, plain and simple.
- Sentiment – Consumer sentiment around Bitcoin is basically nonexistent. Everyone is paying attention to the US election, the pandemic, and the stock market. In the meantime, institutional investors are paying attention to Bitcoin and driving up the price. When retail investors start getting on the Bitcoin bandwagon then look out. There is simply no short term ceiling that I see on Bitcoin’s price.
The Greater Bitcoin Election Theory
The Greater Bitcoin Election Theory explains how Bitcoin’s future is influenced by political elections such as the one going on in the United States right now. The theory is complex but I’ll try to boil it down for you in simple terms here. Ready? It just doesn’t matter. Got it? That’s it. It just doesn’t matter. Bitcoin doesn’t care who’s President. It doesn’t care if the Supreme Court is stacked right or left and it doesn’t care if the government initiates quantitative easing 1, 2, 3 or infinity. Bitcoin doesn’t know anything about anything except Bitcoin.
- There will never be more than 21 million Bitcoin
- Bitcoin is divisible by 8 decimal places into units called Satoshis.
- There will never be more than 2 quadrillion, one hundred trillion Satoshis.
- Today a Satoshi is worth $.00016
- If Bitcoin goes to $1 million than 1 Satoshi will be worth about $.01
When 1 Satoshi is finally worth $.01 then I believe we’ll start to see people spending Bitcoin via payment services like Lightning Channels on everyday purchases, as well as big ticket items and Bitcoin will probably be the least volatile hard asset in the world. At that point, we’ll start seeing governments hoard Bitcoin as well.
If you invest $10,000 into Bitcoin today and Bitcoin goes to $1 million which I believe it will (not investment advice, just my opinion) then your $10k investment will be worth $640k.
The Greater Bitcoin Election Theory reminds us that Bitcoin is going to do what Bitcoin is going to do regardless of what anyone else (or any other government) does. This includes following a fairly predictable pattern of Bitcoin being hoarded given its deflationary traits.
Hoarding Bitcoin means that no one would want to spend it or sell it. That is clearly the case today. The volume of sellers has been muted for months. Bitcoin’s price is basically driven by institutional and retail (consumer) buy interest. The Austrian Theory of Money – which espouses hard money such as gold or bitcoin as the best money – states that any truly scarce asset will be hoarded until its value reaches such high levels that the original holders have no choice but to use it for spend/barter. In other words, if you believe the purchasing power of your money will go up you will hoard it. If you believe it will go down or stay flat you’re more likely to spend it. Bitcoin is playing this idea out perfectly. It’s actually astounding that the Austrian Economics rule book was written long before my Greater Bitcoin Election Theory. But there you have it!
So to recap the Greater Bitcoin Election Theory goes like this… “It just doesn’t matter. Bitcoin just is and that is enough!”
Back to Basics Part 4 – Altcoins and Why they Matter
Anyone who knows me knows that I’ll talk about Bitcoin, The Greater Bitcoin Election Theory, Austrian Economics, Finance, and anything in between for hours on end.
What about Altcoins? Why are so many people so excited about other cryptocurrencies that aren’t Bitcoin or Ethereum?
In the simplest terms, altcoins include any cryptocurrency tokens that are not Bitcoin and Ethereum. Altcoins are important because they provide competition to the technology and network of Bitcoin and Ethereum. The bigger Bitcoin and Ethereum get the less likely they are to change, adapt new technologies, or even scale to more users. The best solution to any potentially outdated business is competition. To be clear, Bitcoin is NOT outdated but given its massive and growing size it is going to be much slower to adopt new technologies in the future and its scalability to meet on chain demand is severely limited. The reason I’m ok with that is because there are lots of competitors to Bitcoin. Even if I don’t own them and even if I don’t believe they’ll survive they are very important.
Fungibility and privacy is another big problem for Bitcoin. Fungibility means that it’s impossible to distinguish one Bitcoin from another. Privacy generally means I have no way of tracing the source or destination of my cryptocurrency transaction. Neither of these concepts is easily achieved with Bitcoin today. Bitcoin’s lack of privacy and fungibility is what makes Bitcoin transactions easily traceable by the government. That was apparent this week via the news that the government recently seized Bitcoin used back in the days of Silk Road many years ago.
Altcoins such as Monero and Zcash attempt to solve these privacy problems with competing for technological approaches. As a result, users who demand that their transaction be private have gravitated towards these currencies.
Other altcoins such as Cardano, Tezos, Stellar offer competing views of the future of decentralization as a core component of Internet and computing technology. Abra has written an intro guide covering many of these cryptocurrency projects. I strongly recommend them as a great starting point. I’ve also had the pleasure of interviewing many of the leaders of these crypto projects and you can watch those videos here.
Tweet of the Week
When I look at #Bitcoin, I don’t see a call option on the future, or apocalypse insurance, or a non-correlated asset class. I see a new invention – pure monetary energy, and it reminds me of oil, antibiotics, & electricity. It’s like giving freezing investors the gift of fire.
— Michael Saylor (@michael_saylor) November 4, 2020
This week’s Tweet is from Michael Saylor, CEO of MicroStrategy, where he outlines his view of Bitcoin as not just an investment asset but rather something as fundamental an invention as oil, antibiotics, or electricity. Well said, Michael!
See you all tomorrow (Friday) on the next Money Talks. The Revolution has begun!
Peace and Love,
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