As a trader and investor, there are times when you come across unique opportunities. Bitcoin and cryptocurrencies are just that, let me try and explain why.
But before I jump in, I must mention that this post isn’t going to tell you how Bitcoin works, what is is or what the Blockchain is. If you wish to learn about these things, or are a total Bitcoin newbie, read my section called Bitcoin explained.
There’s also an excellent book I recommend, it is called “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money” by Nathaniel Popper.
You can find it here
So, why should you trade bitcoin ?
First of all, because of its massive reward potential, with a risk you can control. As crowds flock to the digital revolutions of blockchain and bitcoin, we are only at the beginning of a huge wave of interest and price appreciation.
In an article, Newser calculated that if you had invested $100 in bitcoin in 2010 you would be the proud owner of a whopping $75 million today (that was in May 2017, when Bitcoin stood at $2,251) !!
As of Sept 2017, that figure had nearly doubled… That’s what you call mind blowing. I don’t know of any other asset or investment in history that has carried such reward ratios in such little time.
So sure, it has been (and will be) a bumpy ride, but if you are careful enough to expose only money you can afford to loose, you could be on your way to surfing one of the most powerful investment waves in history.
A price target for Bitcoin ? There are wild predictions…
Yes, some prominent stakeholders have been making claims around bitcoin prices reaching sky high valuations.
Max Keiser and John McAfee being two of the most vocal.
Max Keiser thinks it is heading for $10,000. John McAfee has made the bold prediction that Bitcoin would reach $1,000,000 by 2020
You can read my entire section on the wildest Bitcoin predictions to find out more.
True, a lot of people still haven’t heard of Bitcoin, let alone bought any Bitcoin. Just imagine the day Amazon, Ebay or Netflix start accepting Bitcoin…
There is also growing institutional interest around cryptocurrencies
Institutional interest is also building up. There have been major decisions recently that will backup and amplify the global trend:
Recent examples :
- Legislation passed recently in Japan allows retailers to begin accepting BTC as a legal currency, which has considerably increased trading volumes (in yen). More than 260,000 retail outlets now accept Bitcoin;
- Interest in India following a study by a Research Group founded by India’s Central Bank.
- The Commodity Futures Trading Commission (CFTC) recently authorized LedgerX to create a regulated futures market around Bitcoin
- The Chicago Board Options Exchange (CBOE) has also announced that it will start listing Bitcoin futures and create a futures market.
And it is a matter of time before the SEC approves the first Bitcoin ETF, which could also open the door to further significant interest from the wider financial community.
Basically, when a bitcoin ETF becomes possible, anyone with a simple brokerage account can trade it. I believe the day that is announced you will see one of the biggest waves of buying interest the bitcoin has seen.
Just imagine when funds (investment funds or mutual funds) start investing in Bitcoin.
There is also increasing demand for cryptocurrencies linked to ICOs (Initial Coin Offerings), by which startups create new digital offerings or currencies. It is the same as IPOs except that investors purchase tokens issued by the Company.
The media attention around Bitcoin
Bitcoin is clearly getting increasing media coverage, and a lot of people are waiting for the right time to enter the market.
In May 2017, Bitcoin made it to the top 5 google searches. See this article from Cointelegraph.
Lastly, on a personal level, the volume of questions that I’m getting from a small circle of friends and colleagues are another indication that what we are seeing is only the beginning of a massive wave.
Bitcoin remains the king of cryptocurrencies
Out if all the available cryptocurrencies out there, Bitcoin still has the largest market cap, representing roughly 50% of the total cryptocurrency market capitalization.
By design, Bitcoin is also in limited supply, and this is key. Its creators have capped the number of bitcoins that can be mined at 21 million.
You know what happens when everyone wants a piece of something that is both a technological revolution and in limited supply…
Howmuch.net has published an interesting article showing Bitcoin’s value in relation to other key world assets. Gold for example represents 200x the total value of Bitcoin.
Bitcoin is not related to the global economy, but to a technological revolution that embraces a currency that is global, safe, anonymous and with low transactions costs. Many people believe it can be a store of value in the long run.
You can also trade Bitcoin absolutely anytime, anywhere, 24 by 7, unlike stocks or forex (which halts on weekends).
It can be traded in small fractions
Buying Bitcoin is an opportunity to take part in a technological revolution extremely easily, at a very low cost.
Buying Bitcoin doesn’t have to be costly, you can buy small fractions of it, making it possible for anyone to own some. The smallest unit of bitcoin is called a satoshi, it represents one hundred millionth (0.00000001 BTC), and took its name after the mysterious founder of bitcoin Satoshi Nakamoto.
Major technological hurdles have been overcome
As trading volumes increased, Bitcoin transactions had started suffering from delays, costs and other issues.
In order to solve that, the decision to activate Segregated Witness (Segwit) was taken on August 1st and enforced on August 23rd 2017. It produced what is called a Soft Fork. I won’t go into any of the technical details behind these complex decisions, but they have given Bitcoin extra capacities for transaction volumes and speed.
To cut a long story short
To conclude, the driving forces behind Bitcoin are two main things:
- the technological revolution behind it (Blockchain)
- the still relatively low rate of adoption of this cryptocurrency.
Both these factors are absolutely massive, and pretty rare in an investors lifetime. I am convinced there is a a strong case behind investing in Bitcoin in the long run to take benefit of both.
You can read about my Long Term Bitcoin strategy if you want to know more and start profiting.