Another week, another high. Bitcoin’s price is surging, nearing its all time high, as the year comes to a close. Looking at all of 2020, it’s been surging all year long. The largest digital currency is up 160% since January 2020, and up 190% since March 15, after a nose dive in the second week of March, when the price dropped 25%. As I write this post, bitcoin’s price is hovering around $18.5k and it’s market cap is at $343 billion. Thirteen hundred bucks… not that far from its all-time-high of around $19,800 at the end of December 2017.
Ilias Louis Hatzis is the founder and CEO at Kryptonio, a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords.
Three years ago, the press had a feeding frenzy and bitcoin’s price was the topic of conversation around Thanksgiving dinner tables. People that had just heard of bitcoin, were getting into the market to make a quick buck, buying bitcoin, ethereum and anything they could get their hands on, only to lose their shirts when prices started to drop after mid January 2018.
This time around things are very different. On the surface they look the same, I mean the price is rising. But the reasons the price is rising are definitely not the same. Google search terms suggest that the retail investors aren’t paying much attention now. In 2017, there was a buying hysteria driven by retail investors. Bitcoin searches on Google exploded and the price followed the same trend. Today, Google searches are 86% lower than at the peak, yet the price is at a similar level to the price at the end of 2017.
This is an indication that bitcoin has matured as an asset. Yet, as people are seeing the price skyrocket they are wondering what to do. Some are thinking they’ve missed the boat, that it’s too late to buy. Others remember what happen the last time, after prices reached this level. Once bitten, twice shy.
Who is to say that today’s price is high?
Some of the people that called it a bubble last time, have gone from from Saul to Saint Paul.
Well, I guess if you compare today’s price to yesterday’s or to the price bitcoin had, when I wrote my November 2nd post, it certainly is high. You could have made around $3.5-4k a coin if you bough a bitcoin twenty one days ago. That’s 23% return, in less than a month.
When you scan the news to read what other smarter guys are saying about bitcoin, you’ll find stories like these:
- Max Keiser (Heisenberg Capital): $100,000 USD
- Anthony Pompliano (Morgan Creek Digital): $100,000 USD by 2021
- Tim Draper (Draper Fisher Jurvetson): $250,000 by 2022
- Raoul Pal (The Global Macro Investor): $1 million by 2025
- Jeremy Liew (Lightspeed Venture Partners & Snapchat): $500,000 by 2030
- Tim Fitzpatrick (Citibank) $318,000 by December 2021
The predictions go from $100k to $1 million bucks.
If they are right, worst case scenario is that you’ll make at least 5x in the next twelve months.
Cryptocurrencies have been in a state of rapid expansion over the past few years. This is definitely the next new frontier. But from the Wild West, bitcoin by bitcoin, the new frontier is moving into mainstream.
When you compare bitcoin to the Wild West, you find plenty of similarities.
The gold fever revolution started in 1848 when James W. Marshall discovered gold at Sutter’s Mill in Coloma, California. This eventually brought approximately 300,000 people into California from other parts of the US and from around the world. A similar gold fever revolution happened a few years later between 1896 and 1899 during the Klondike Gold Rush in the Yukon region of North West Canada. Over 100,000 prospectors arrived in the Yukon during this time. Why did the miners flock to these areas? They wanted to strike it rich. A few miners did become extremely wealthy. However, many of these prospectors suffered from the harsh conditions in the gold fields. Some died due to the extremely harsh weather conditions. Others died due to having their claims stolen by other prospectors. Even though a few of the prospectors did become extremely rich, those who prospered the most were the banks, saloons, hotels, tailors and equipment stores that provided the financing, food, alcohol, accommodations, companionship, clothing and equipment to the miners.
The history of cryptocurrencies begins somewhere between 1998 and 2009 when the first ideas of creating online currency emerged. The first actual cryptocurrency developed, originated as a result of a paper published by an anonymous individual under the alias of Satoshi Nakamoto: the framework for bitcoin came from the article “Bitcoin – A Peer to Peer Electronic Cash System” which was published in 2008.
In Bitcoin’s early days, the prospectors were the miners and speculators who engaged with Bitcoin before there were any marketplaces. They were the ones that presided over the development of the earliest exchanges, culminating in the first major exchange, MtGox. Some of these early prospectors would go on to establish their own trading posts, like the fur trapping companies of the Wild West, and companies like Kraken, Grayscale, or Blockstream emerged.
Most bitcoin price charts don’t show prices previous to MtGox, but bitcoin had a price since the first block was mined, when Satoshi exchanged a certain amount of electricity for the first 50 bitcoin reward. As the price of bitcoin has increased, several miners have become extremely wealthy. Today there are even bitcoin billionaires.
And even though 2017 was an important milestone in the evolution of Bitcoin and cryptocurrencies, it was still too early, because the infrastructure was missing. In 2020, everything is completely different. We are going through a phase where demand has been increasing and large corporate interests, like banks and others are building the needed infrastructure to profit from this demand.
As highlighted by JP Morgan in a recent report, investors are ditching Gold ETFs for bitcoin. Research by Citibank, “Bitcoin: 21st Century Gold”, talks about a price target of $318,000 in one year. Billionaire U.S. investor Stanley Druckenmiller, who just weeks ago was said to be shorting the dollar, is long on bitcoin.
Microstrategy was the first public company to announce their move into bitcoin.
#Bitcoin provides Integrity to the digital monetary system. Liquidity, Scalability, Security, Functionality, Performance, Compatibility, Accessibility, Compliance, & Popularity will be delivered by those individuals, enterprises & agencies that support the Bitcoin Standard.
— Michael Saylor⚡️ (@saylor) November 1, 2020
But other publicly traded companies are putting bitcoin on their balance sheets. This means that bitcoin is much harder for any government to ban. Also, it means that millions of people are now indirectly invested in Bitcoin, because they hold stock of these companies.
The real problem with the advice that you normally hear, “buy low and sell high” is that its incomplete advice.
What is low and what is high? The key is not selling.
“Not selling” does not mean “never selling”. That’s pointless, unless your sole objective is to build a big stock pile for that those that will inherit you, after you’re long gone. When I say “not selling”, what I really mean is HODL long-term, really long. Buying high, only makes sense if you buy the right asset, and if you’re patient enough to HOLD it long enough.
Here’s a stock with a steep price climb. I am not going to tell you what stock it is, but let’s look at the chart. Most people wouldn’t buy this stock, because they would expect the price to drop.
And it did drop, big time. If you had bought when it was high and had a faint heart, you would have lost your shirt.
Now, here is the chart for the same stock, after more time elapsed. 1,700% profit from the high!!!
The stock was Amazon. The only reason why you should have HODL Amazon was because company was linked to a new frontier of its time, the Internet and specifically to the Internet retail market.
With absolute certainty, bitcoin at $20k is going to look like a bargain in future, and not that far into the future. With the US election behind us, the markets have gone back to Covid-19, vaccines, and stimulus. The US dollar had a low in early September, and we’ll see more of that. Looking at the past four years, bitcoin has performed best when the dollar has dropped.
So don’t sweat over day-to-day price volatility.
In August, I talked about the OCC allowing banks to provide cryptocurrency custody services to their customers. Paypal just got into bitcoin. PayPal has hundreds of millions of users that will have the opportunity to buy bitcoin and a number of other cryptocurrencies at the touch of a button.
Forget about charts, the dollar and everything else, trying to analyze what could affect bitcoin’s price. Just think about one thing. If the Internet was about the digitization of information, communication and commerce, bitcoin is the digitization of money and value. Think about how the Internet has changed you life in the last 20 years and image how bitcoin will do the same in the next 20 years. Only by understanding how early we are in its adoption and development, can we realize how much more development is ahead of us and what that means for its price.
Start with a small amount of money. Buy only what you can forget. Add some more, each week or each month. Go long and HODL. You can’t lose. And that’s something you can take to the bank!
Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research)