Bitcoin to $50,000…or $10?

Wednesday, 24 January 2018
Melbourne, Australia
By Bernd Struben

  • A US$5.2 million bet on bitcoin
  • More bubble warnings…
  • What do you think Bernd?
  • Reminder…

Only a year ago, the vast majority of financial analysts freely admitted they knew nothing about bitcoin.

For that reason, they recommended steering clear.

If you don’t understand something, as the old investment adage goes, don’t put your money into it.

That’s sound advice. And yet it’s advice that would have seen their readers or clients miss out on gains of 2,000% or more.

It is, perhaps, with these missed opportunities in mind that a growing number of these same analysts now profess to have a handle on the crypto market. Claims you should take with a large grain of salt.

The only analysts I know who’ve been atop the crypto story since day one are Sam Volkering and Ryan Dinse.

Sam’s been writing about bitcoin since 2013. And he made Port Phillip Publishing’s first active crypto recommendation, to buy bitcoin, back in November 2016. The recommendation was made in Revolutionary Tech Investor. That was before Sam launched his entry level crypto service, Secret Crypto Network last July.

In November 2016, bitcoin was trading for around US$720. And Sam wrote that he expected it to hit US$20,000. Which we now know it did.

(You can stay up to date with all of Sam’s latest insights and recommendations in the crypto world here.)

We also know that it’s fallen around 47% since it peaked on 16 December.

At time of writing bitcoin is trading for US$10,791.67.

But for all the talk of a crash and bubble, it’s worth noting that bitcoin didn’t breach the US$10,000 mark until 1 December, 2017. Less than two months ago.

Meaning if you bought into bitcoin before 1 December you’re still in the black. Maybe by a few percent. Or perhaps by thousands of percent…depending on when you bought.

As with any market rally, it’s those who bought in right before the pullback who are nursing hefty losses today.

The big question then is, where to next for bitcoin?

More after the markets…

Markets

Overnight, the Dow Jones Industrial Average closed down 3.79 points, or 0.01%.

The S&P 500 gained 6.16 points, or 0.22%.

In Europe, the Euro Stoxx 50 index finished up 7.01 points, or 0.19%. Meanwhile, the FTSE 100 rose 0.21%, and Germany’s DAX climbed 95.91 points, or 0.71%.

In Asian markets, Japan’s Nikkei 225 is down 137.80 points, or 0.57%. China’s CSI 300 is down 0.06%.

In Australia, the S&P/ASX 200 is up 23.94 points, or 0.40%.

On the commodities markets, West Texas Intermediate crude oil is US$64.46 per barrel. Brent crude is US$69.96 per barrel.

Gold is trading for US$1,341.67 (AU$1,677.93) per troy ounce. Silver is US$17.05 (AU$21.32) per troy ounce.

One bitcoin is worth US$10,791.67.

The Aussie dollar is worth 79.96 US cents.

A US$5.2 million bet on bitcoin

To say bitcoin is volatile is a bit like saying the core of the sun is hot.

In fact, other cryptos aside, I can’t think of any asset subject to the same kinds of price swings.

Take gold, for example. An ounce of gold is currently selling for US$1,341.67. I can’t tell you what it will be worth this time next year. Though based on global politics I’d guess around US$1,500.

Of course, it could fall as low as US$900. Or go as high as US$2,000.

My point is that it’s highly unlikely gold will trade outside of this range over the next 12 months.

The same goes for oil, iron ore or wool, for that matter. The chance of seeing the price of any of these assets soar — or collapse — by 500% or more in the next 12 months is tiny.

But not bitcoin.

One bullish investment company is expecting it to hit US$50,000 in as little as 12 months. They just invested another US$5.2 million into bitcoin to back this claim too…having been outbid to buy any more.

Outbid?

From Bloomberg:

Riot Blockchain Inc. won 500 Bitcoins in an auction of property seized by the U.S. Marshals Service, a bet that the digital currency’s breath-taking run isn’t over.

Riot, which invests in cryptocurrency and blockchain startups, sought many more of the 3,813 Bitcoins in the auction Monday but was outbid, Chief Executive Officer John O’Rourke said in a phone interview. The company acquired the Bitcoins at about the market price at the time, he said. That works out to about $5.2 million, based on Monday’s closing price of $10,354.

“I believe we’ll be heading north of $50,000 market price within the next 12 to 18 months,” O’Rourke said. “Our strategy at Riot is to accumulate Bitcoin and to provide our investors as much direct exposure as we can, hence we decided to participate in the auction.”

I haven’t heard the latest bitcoin price forecast from Sam Volkering or Ryan Dinse. Still catching up on my reading from my internet-free Western Australia holiday. But I imagine they’d say John O’Rourke’s not far off.

I’ll make sure to flag this issue of Port Phillip Insider for Sam and Ryan so we can give their thoughts. Tomorrow I’ll publish their replies here.

To share your own thoughts on where bitcoin is headed…and why…drop us a line at letters@portphillipinsider.com.au. Just put ‘bitcoin’ in the subject line so I’m sure to see it.

And if you’re concerned about privacy, don’t worry. If we publish your email, we’ll only use your first name.

More bubble warnings…

Of course, not everyone is a bitcoin bull. Far from it. That’s what makes this particular asset so interesting. And potentially profitable.

Goldman Sachs, for one, is calling it a historic bubble.

As CoinDesk reports:

Goldman Sachs has claimed that bitcoin is a bubble bigger than the dot-com era and the famous Dutch tulip mania…

The mania is surprising, the authors say, because the world’s largest cryptocurrency by market cap, bitcoin, does not fulfill the role it set out for itself.

The report states:

“We think the concept of a digital currency that leverages blockchain technology is viable given the benefits it could provide: ease of execution globally, lower transaction costs, reduction of corruption since all transactions could be traced, safety of ownership, and so on. But bitcoin does not provide any of these key advantages.”

So is bitcoin going to US$50,000 and beyond, or is it an epic bubble?

What do you think Bernd?

I’m so glad you asked.

Over the medium term (one to two years) the bulls have a strong case. And to date Sam and Ryan have been spot on with their own bullish forecasts — you can see for yourself here.

So even if you bought bitcoin near its 16 December highs, you’ll likely still walk away with a tidy profit…if you haven’t cut and run already.

Longer term, though, I have my doubts.

You’ll often hear that government regulations threaten bitcoin’s future. But I don’t see that as a major stumbling block. Some nations, like Japan, are already embracing bitcoin. And without instituting China-like firewall controls over the internet, other governments stand little chance of regulating bitcoin out of existence.

I do see three other factors which could bring the bitcoin price back to 2012 levels — around US$10 — in as little as five years.

The first is hacking. Not just stealing from an exchange. But using new technologies in new ways to counterfeit bitcoin.

Now those who truly understand the blockchain — I don’t — will tell you that’s not possible. But then the blockchain itself didn’t exist until 10 years ago. With the world of tech leaping forward at exponential rates, almost anything may be possible. And with the amount of money at stake for those who manage to properly hack bitcoin, I’d say even probable.

The second big risk to bitcoin’s ever higher prices is competition.

Already there are more than 1,300 other cryptos in virtual space. Bitcoin enjoys the privilege of being the oldest, largest, and most trusted. But others will emerge that serve the same purpose — only faster and cheaper. When that happens, why pay $50,000 for bitcoin if you can pay $10 for another digital token that does all the same things…better?

The third risk relates back to the increasing pace of technological advancements.

At the moment it takes tremendous energy to mine new bitcoins and verify transactions. Both human labour and the electrical kind to power the massive computer arrays currently needed.

But as technology races forward it’s possible you could easily mine new bitcoins from your spanking new laptop…or phone. Don’t laugh. Remember, the iPhone itself is only a decade old.

And who’s to say that AI won’t take over monitoring the world’s distributed ledgers? That would open the door to competition, hackers, and…

Well, you get my point.

In the medium-term bitcoin still looks to offer some tremendous potential gains, provided you buy at the right time and don’t sell on the dips. But by the time 2030 rolls around, it may well have gone the way of the Polaroid camera.

Stay tuned tomorrow, and I’ll share what Ryan and Sam think of this heresy!

Reminder…

If you signed up for Extreme Crypto Trader priority access list you should have received a detailed dossier on the service earlier this afternoon.

Make sure to check your inbox if you have not already.

But remember, this service is exclusively intended for serious crypto speculators. And no trial period or refunds apply.

Finally…don’t forget your daily dose of politically incorrect news.

In today’s Australian Tribune: ‘UK’s National Security Council to Tackle “Fake News”

Governments prefer to control their own propaganda. And historically they’ve been quite good at this.

They certainly don’t appreciate it when foreign governments step on their version of ‘real news’. Or when their own citizens spread misinformation.

But the rise of social media platforms, freely accessed by millions, is posing a dilemma for governments desperate to maintain a grip on what their citizens believe…’

The Australian Tribune is Port Phillip Publishing’s political newsletter and website.

If you’re fed up with reading sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd