The bitcoin bulls respond
Thursday, 25 January 2018
By Bernd Struben
- Forget US$50,000…bitcoin’s heading for US$100,000
- Bitcoin is only just getting started
- In the mailbag
In yesterday’s Port Phillip Insider, I opened the door to debate on bitcoin’s future price.
As you know, it’s taken a tumble since peaking at close to US$20,000 on 16 December. In fact, it’s down about 43% since then.
That’s bad news if you bought on 16 December.
But have a look at the three-month chart below. At the current price of US$11,363, the only investors presently showing a loss are those who bought between 4 December and 16 January. (And anyone who bought at the highs on 20 January.)
Everyone else who’s ever bought bitcoin should be in the black.
If you bought at this time last year, when bitcoin was worth US$915, you’d still be up 1,142%.
The important question, though, isn’t what bitcoin was doing last year. It’s what bitcoin is going to do this year…and in the years ahead.
Yesterday I explained why I’m siding with the bulls in the medium term. Like investment company Riot Blockchain.
The company just invested another US$5.2 million into bitcoin for their clients. CEO John O’Rourke predicts bitcoin will head north of US$50,000 within the next 12–18 months.
(If you’re thinking about investing in bitcoin yourself, go here first.)
Longer term, say five years down the track, my outlook for bitcoin is decidedly more bearish. I see some serious hurdles ahead. Namely competition from yet-to-be developed cryptos and unforeseen tech advancements that may leapfrog blockchain. Or enable it to be hacked.
Unsurprisingly, I received a lengthy email reply from our in-house crypto guru Sam Volkering. Crypto expert Ryan Dinse also sounded off. As did a number of readers.
We’ll get to all that right after the markets…
Overnight, the Dow Jones Industrial Average closed up 41.31 points, or 0.16%.
The S&P 500 fell 1.59 points, or 0.06%.
In Europe, the Euro Stoxx 50 index finished down 29.07 points, or 0.79%. Meanwhile, the FTSE 100 fell 1.14%, and Germany’s DAX lost 144.96 points, or 1.07%.
In Asian markets, Japan’s Nikkei 225 is down 217.18 points, or 0.91%. China’s CSI 300 is down 0.54%.
In Australia, the S&P/ASX 200 is down 14.46 points, or 0.24%.
On the commodities markets, West Texas Intermediate crude oil is US$65.76 per barrel. Brent crude is US$70.53 per barrel.
Gold is trading for US$1,356.46 (AU$1,684.21) per troy ounce. Silver is US$17.53 (AU$21.76) per troy ounce.
One bitcoin is worth US$11,363.29.
The Aussie dollar is worth 80.54 US cents.
Forget US$50,000…bitcoin’s heading for US$100,000
I spoke to Ryan Dinse about my bitcoin predictions. So, I’ll paraphrase what he said.
Namely, he sees bitcoin remaining a dominant player in the crypto field for many years to come.
He reminded me that bitcoin has been around for nine years. And that its proven stability makes it the gold standard of the cryptocurrency world. There are plenty of more useful metals, he says, but only one gold.
Ryan is also confident that any tech leaps made by those trying to hack or counterfeit bitcoin will be outweighed by similar tech improvements by those intent on protecting it.
As for his price target, Ryan expects bitcoin to be worth over US$100,000. That is, if you have any desire to convert it back into fiat money.
That puts him in line with Eran Eyal, the CEO of tech firm Shopin.
From the Express:
‘Mr Eyal said it is important to separate bitcoin from other types of cryptocurrencies such as ethereum or Ripple. He said each cryptocurrency has its own “business model” to differentiate from one another.
‘Speaking on CNBC, Mr Eyal said: “I have no doubt that bitcoin is going to reach well-beyond $100,000. Have a look at how it has climbed over the past.”’
Bitcoin is only just getting started
With the time difference between the UK and Melbourne, I didn’t have a chance to catch up with Sam over the phone since writing yesterday’s Port Phillip Insider.
But he did send me the following email:
‘The very reason why bitcoin won’t fail or revert to a miniscule value or purchasing power can be seen “real-time” right now if you cast your eye over to a select group of the world’s elites gathering at Davos to figure out how they can make the traditional financial system work better — because it’s inherently broken. In doing so, these (typically old, white males) are really just trying to figure out how they can get richer.
‘Meanwhile, do you think there’s a proportional representation at Davos from somewhere like Nigeria, with a population of 185-odd million with around 70% of those under age 30? That’s 129 or so million young people (just in Nigeria) that have very little to look forward to in the way of wealth, employment or a lift in their living standards aren’t going to benefit from centralised government decisions about how the financial system can work better for everyone.
‘Banks and government don’t really give a s**t about everybody…just those who can in turn fill their grubby coffers. With bitcoin you’re looking at something that doesn’t have an agenda other than to provide a better system to the one we use that’s inherently flawed and controlled/manipulated by those who purport to represent the people…but don’t.
‘You can’t achieve financial inclusion with a system that’s full of friction, self interest and underhanded manipulation. Bitcoin can. Add to the mix that, much like the internet, it cannot simply disappear (unless every power grid on earth is destroyed, which would mean we’ve all got bigger problems).
‘Thus Bitcoin’s value is its ability to reach all those who cannot be reached by our existing system. When it starts to really get penetration — network effect — in these regions then its value will exponentially increase as well. It will do this because of never ending development and innovation — such as lightning networks which completely crushes the scaling debate.
‘Furthermore the “it’s too expensive to buy” argument is also moot because of the divisibility down to eight decimal places. While 1 BTC may be out of reach to a 20 year old from Lagos, 0.00001000BTC isn’t.
‘Now yes, some governments can go and ban it. But somewhere else will decide that’s not a good idea, and will allow it, and they’ll start getting all the trade and economic development. Because of the beauty of free markets and competition that allows even governments to compete with each other.
‘We’re already seeing this in regions like Gibraltar and Isle of Man, Dubai, and Singapore — a more open approach to crypto such as bitcoin because of the benefits it can produce. Hence, while a universal coordinated government ban on bitcoin could happen in theory, name once in history when every nation all together at once agreed on anything financially related.
‘Over the coming years as mass adoption really takes hold, I envisage that we’ll be talking about mBTC (the divisible smaller amounts) and that whole bitcoins will be significantly north of US$100,000 (if you were dying to convert them back to fiat money). But of course you won’t have to because, as was Satoshi’s vision, with the upcoming developments it will truly become a medium-of-exchange and also the world’s reserve currency. Which really means 1BTC with the equivalent of US$10,000 of purchasing power will have at least 10X more purchasing power, in my view.
‘The era of bitcoin and crypto is only just starting. All this noise is just early days of people trying to figure it all out. Old rich white men in powerful positions don’t get it, and don’t want to really think about what it could do in a good way for the world — and their hubris will be their downfall.’
Having attended the Precious Metals Symposium in Melbourne with Sam back in November, I saw some of that hubris at play firsthand.
Sam was a keynote speaker at the event. It marked the first time bitcoin was ever discussed at the annual symposium of gold bugs.
While many attendees were interested in and open to the idea of bitcoin, some (yes, rich old white men) appeared intent to not understand it. ‘It’s a fad.’ ‘It’s rubbish.’ ‘If you can’t hold it in your hand, what good is it?’
And that indeed may be their downfall.
In the mailbag
I received a number of reader replies as to the outlook for bitcoin as well. I can’t publish them all today. But thanks to everyone who took the time to write in.
This first one is from reader Brian:
‘As a subscriber to Ryan Dinse’s newsletter I have just made my first purchase of a crypto ie ripple. It has taken 2 months to set up various accounts.
‘I am thinking that bitcoin may have reached a peak and now has so many other cryptos competing for attention those cryptos with more traditional links and less anonymity will be favoured and will flourish in the longer term. Bitcoin was a ground breaker and the blockchain (distributive ledger) behind it I believe will endure and either threaten existing bank services or be acquired by current financial institutions.’
Thanks Brian. I believe your thoughts on blockchain are spot-on. The disruptive and massive potential of blockchain also forms the basis of Ryan’s new small-cap investment service, Exponential Stock Investor. You can check that out here.
But has bitcoin already reached its peak? Well, I’m with Sam and Ryan on that one. At least over the next few years, I reckon we’ll see it shoot higher. Though not without some serious pullbacks along the way.
The next email was sent by reader Rob:
‘I have been in the Bitcoin (BTC) space for about 10 months so my buy-in prices on BTC and other cryptos are pretty good. However, I will say that the value of my portfolio is strictly theoretical as I am a holder (HODL).
‘Going forward, I have considerable confidence that BTC will achieve greater value and estimate it will achieve $30,000+ by December 2018 and $50,000+ by December 2019.
‘Having said that, I also think that BTC will be a victim of its own success and that we are already in the beginning year(s) of the altcoin. Specifically, whilst futures trading, wealthy investors and future institutional investment will push the BTC price higher, I expect the rate of increase will slow as time passes. Why? I expect the “average punter” will baulk at paying, say, $30,000 for a Bitcoin and receiving 0.50 Bitcoins for their $15,000 investment. Although only a perception, half a Bitcoin won’t seem like very much when they have handed over $15,000 in fiat currency! Worse still, those with less money to invest will receive tiny amounts of Bitcoin.
‘For those who do their research, several of the altcoins offer potentially greater % upside than BTC, and coupled with a much lower buy-in price, I expect buyers will turn their attention to those coins — all of which diverts new money away from BTC. In my opinion, the perception and confidence by the buyer in holding, say, 50 Litecoins rather than 0.5 Bitcoin will be strong.
‘Notwithstanding the current price slump of cryptos (and the discounted buy-in opportunity that presents), I estimate there are probably 15-20 altcoins on the market that are genuinely worthy of investment and that offer significant potential returns. Beyond that, there are another 20-40 coins that are worth “a punt” if you have some lazy $$’s — risk is higher but your money is probably safe. And beyond that, there are dozens (hundreds) of coins that could bring a windfall if you’re lucky.
‘I have complete confidence in the crypto market but over the next couple of years, I expect to see a levelling of BTC price with corresponding rallies in altcoin prices as they attract disaffected BTC investors.’
It sounds like you’ve done your homework Rob. Good on you.
And good on you for getting into bitcoin back in March. I’m guessing that puts your buy-in price in the range of US$1,200. If bitcoin hits US$50,000 by December 2019 as you predict, you’ll be laughing.
If it tops US$100,000 as Sam and Ryan expect, you’ll really be laughing.
We’ll leave it there for today.
But before logging off, if you haven’t signed up for your free daily dose of politically incorrect news yet…why not?
In today’s Australian Tribune: ‘Trump Set to Shake Up Davos’
‘All seven of the co-chairs at the World Economic Forum in Davos, Switzerland are women this year.
‘And co-chair Sharon Burrow, for one, is not looking forward to US President Donald Trump’s attendance.
‘Stating that “progress for women has stagnated”, she bemoans the fact Trump “won’t be championing values”.
‘That’s almost certainly true. At least not Burrow’s values. Yet Trump’s attendance marks the first by a sitting US president in 20 years. And his keynote address at the normally staid and politically correct Forum promises to be one to remember.’
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