Bitcoin sets a new all-time high within 24 hrs. of the previous record. Any prediction that Bitcoin is going to move sideways, even for a little while, are sadly mistaken. There doesn’t seem to be any headwinds and the reaction in the marketplace, on the world stage, and according to global politics is going to be with the speed and ferocity of attracting magnets. All indicators are positive.
What a difference an hour makes in this crazy Bitcoin tumult. Up over $1000 in the last hour, Bitcoin is taking off in the New Year. 2021 looks like the year Bitcoin has arrived. If the big investors were waiting for the New Year, hear me roar.
So much for moving sideways. Another upward move wasn’t expected until we were well into January. With the Electoral College vote on January 6, and the inauguration on January 20, with the tumult guaranteed to surround Trump’s exist from Washington, his break with the GOP and distancing himself from politics, and profit taking in 2020, another move was not expected for several weeks. Oh, well.
At age 97, my father thought Bitcoin was a good idea when pitched to him. That surprised me. Dad was a C.P.A., cautiously conservative with investments, money, and protecting one’s nest-egg. But when the evolution of money, from gold to paper to electronic to digital Bitcoin blockchain-enabled transactions, was explained to him, he was all-in. Most people have a problem with the idea that Bitcoin does not exist physically. There are no precious metal Bitcoin coins or counterfeit-proof Bitcoin paper notes. Most people have a problem with anything that takes longer than sixty seconds to explain or comprehend. Most people do not perceive the mechanics inherent in banking, posting, and clearinghouses for electronic transactions as problematic. Nor do people find fault in having currency controlled by a government subject to the whims of politics. So, to explain banking infrastructure and government financial policies as bad usually falls on deaf ears. Bitcoin is a hard sell.
Bitcoin follows a path similar to the adoption curve of a new technology closely. New technologies typically take fifteen years to be adopted by mainstream users (to the 85th percentile). November 2020 is the beginning of year thirteen for Bitcoin (Bitcoin’s introduction in Oct. 2008). High estimates predict valuations for Bitcoin at $375,000, $400,000, and $500,000 per coin, which would put Bitcoin at $318,000/Bitcoin by the end of 2022, one year from now. That foretells explosive growth between now and then. Bitcoin goes from $28k to $318K in twelve months.
Bitcoin is currently going through what Geoffrey A. Moore calls “Crossing the Chasm,” a book he had published in 1991. The “chasm” he describes is the vast divide between what Bitcoin has experienced so far in its adoption curve and where it needs to go to get further. The Bitcoin owners up until now Moore would label early adopters or visionaries. The Bitcoin owners of the future represent ten times as large an audience as we have seen to date. Moore refers to these as Main-Streeters. Early adopters and Main-Streeters have very different wants and needs. Making the transition from one to the other is what has to happen before Bitcoin goes further.
An early adapter likes to fiddle with new things. To a visionary Bitcoin adopter, “you are the first” is music to their ears. If the idea works, they’re thinking they are going to be champions in their organizations. To Main-Streeters, “you’ll be the first” is cause to cut and run. Remember the commercial “Nobody ever got fired for buying IBM?” They were selling to Main-Street. You can hook an early adapter with a sales pitch like “we make it work the way you want it to work; our technical support staff is available 24/7.” A Main-Streeter wants none of that. He assumes it does what it does without fuss. Any mention of technical support is going to scare off a Main-Streeter. Nothing needs to be customized in his eyes. It just works the first time correctly, out of the box. This is the “chasm” Bitcoin has to cross. Any new Bitcoin enthusiasts are going to be Main-Streeters and have to be treated as such.
For Main-Streeters, the discussion is over. It’s not a question of whether or not Bitcoin. Bitcoin is a done deal. Bitcoin’s price chart may also look like the Heating Curve of Water. We’d still be considered in the liquid phase of water at the level marked ‘boiling.’ You’ve heard the expression “A watched pot never boils?” The author undoubtedly was experiencing the liquid phase of the Heating Curve. As heat is continuously being added, the liquid gets hotter, but there is a long pause before it boils. Likewise, Bitcoin has to gather much more energy without much price appreciation to show it as it changes states from liquid to gas. Another way to think about this period is to think about Main-Streeters, whose buy-in price will be considered their base price. Someone who owns Bitcoin purchased at $2,500 is a very different sort of investor from one who has recently purchased Bitcoin at $26,000 per coin. Two weeks ago, no one owning Bitcoin had a purchase price of over $16,000. Before we move higher, all new money will have purchased Bitcoin for $26k or more.
It is also no coincidence that this “chasm” in Bitcoin’s price comes at the transition period between the Trump and the Biden administrations. Nor is it coincidental that we are amid the coronavirus pandemic and that vaccines are just now being rolled out. We have just entered the holiday season and begun year-end tax processes. Bitcoin most likely moves sideways until after the New Year, Biden’s win of the Electoral College on January 6th, and Biden’s inauguration on January 20th. After that, the sky’s the limit. The stock market will have rebounded from pre-end of year sell-offs and places for managers to park low-risk money.
Coindesk.com reports more instances of big banks investing in Bitcoin. Institutional investors are perceived to be driving this record-setting run. Perhaps one of the more notable is Anthony Scaramucci. His Skybridge Capital ($25 million in December) now claims to have $182 million invested in their Bitcoin fund; MassMutual claims $100 million in December; and Guggenheim boasts up to $500 million (up to 10% of its $5 billion macro fund).
Bitcoin’s market cap is currently about $514 billion. These institutional investors’ millions probably do not add up to many billions yet. However, in this marketplace not many Bitcoin hodlers are letting go of their gains and even a small amount of new funding drives Bitcoin’s prices higher.
In an interview conducted by the National Taxpayers Union in 1999, Nobel Laureate Milton Friedman said:
“The one thing that’s missing, but that will soon be developed, it’s a reliable e-cash. A method where buying on the Internet you can transfer funds from A to B, without A knowing B or B knowing A. The way in which I can take a 20 dollar bill and hand it over to you, and there’s no record of where it came from. And you may get that without knowing who I am. That kind of thing will develop on the Internet.”Interview with NTU and Milton Friedman
What Friedman was missing, that came nine years later, was the blockchain Bitcoin was built on. That begs the question — Could Friedman’s “e-cash” exist with only a blockchain and not the Bitcoin blockchain?
Answer: No, not easily. “A” transferring funds to “B” has as much to do with the authenticity of the funds as it does with the two traders’ authentication. “B” can reliably accept that $20 bill from “A”, not because “A” is neither a counterfeiter nor a thief but because the $20 bill has a paper trail. The blockchain does not evaluate “A”‘s motives or intentions. If two people were to meet in the park, and both used smartphones to facilitate a Bitcoin transfer, we would not know if those two smartphones belonged to their rightful owners.
For those who ask, “Where is the value in Bitcoin?” if you understand blockchain, then you recognize the value of Bitcoin is part and parcel of the blockchain upon which it was built. You could not transfer Bitcoin without the blockchain, and you could not establish the blockchain without establishing Bitcoin.
It has been some time since the last entry. There hasn’t been anything new to contribute until now.
It seems that Bitcoin prices have stalled, that they failed to go up when they should have. There are many theories as to why. Here is mine:
Bitcoin has failed to find its raison d’être, its Killer App. There failed to be an application for which Bitcoin was ideally suited, beyond the ability of any other coin or currency. Such an application, that would make users want to download and install the Bitcoin software just to have its functionality, not as an investment but as a tool, never came along until now.
Banking seems reliable and convenient enough that most people would not find the need to invest the additional energy and effort that would be required to switch from fiat money to bitcoin. Until now.
With the coronavirus pandemic, systems are about to fail, or at the very least change, in fundamental ways. Businesses will shutdown. Some will never reopen. Banks and banking will be more and more fragmented. Those banks which cater to the wealthy clients that can afford fees, make loans and payoff debt will do a certain type of business, while others whose business model is more closely related to fees and check cashing will conduct a different sort of money lending.
A huge portion of the population doesn’t have a bank account. With covid-19 even more will drop their bank accounts. Cash itself is a messy business. It’s hard to accept and give cash these days. Have you seen those YouTube videos of people accidentally frying their cash in the microwave while trying to detoxify it? Or have you seen those YouTube videos of pots filled with boiling water and twenty dollar bills? If people started using a Bitcoin app to pay one another, problem solved. Might they continue to use Zelle, or Venmo? Yes, if they have a bank account and don’t mind the fees. Those are two big if’s.
With a bitcoin app you could meet a stranger on a street corner and make purchase from that person for a fixed amount of bitcoin. Both of one would use your bitcoin smartphone app to make the transition. With Lightning or an equivalent, fast cryptocurrency network the two of you would seal the deal and part ways confident that the right amount was sent and received.
With COVID-19, will Bitcoin use can only go up?
Check out this three-month Bitcoin price chart. What a productive three months it’s been! Bitcoin rose from $10.6K to $26.6K. Wow!!
It is interesting to note that the influence of the most important U.S. election in U.S. history, by which it would be decided if Trump would have a second term, November 3, 2020, amounted to a barely perceptible blip. Part of Bitcoin’s power comes from the fact that it is not tied to any company, country, or political agenda. Therefore, it is not beholden to anyone’s election, government overthrow, or power grab.
The Trump administration has not been good for Bitcoin. One couldn’t point to any single detrimental action the administration has taken that has done Bitcoin much harm. But, in general you could say that Trump has not been good for cryptocurrency. Steven Mnuchin has said publicly that cryptocurrency needs to be reigned in. The Treasury convened a task force to help define Treasury’s position regarding cryptocurrency. That was in early March. Nothing has been heard from the effort since. This and so many other issues have gotten swept away by the pandemic.
Bitcoin jumped 10% on the day of the election. That’s not nothing. Bitcoin went from $14.1K to $15.6K in the twenty-four hours after the polls closed, only to give back half two days later. But it did not drop, or stall, or soar. Bitcoin went right on being Bitcoin.
It’s interesting to note just how little influence the most important political event to unfold publicly in the last century on Bitcoin’s price. 10% is a very good day in the stock market. On normal trading days a 2-5% move is considered a strong move. 5-7% would be considered an extraordinary day. 10% is the stuff of quarterly reports, mergers, and acquisitions.
That’s something you can rely on.
This was big news:
“Major American cryptocurrency exchange Coinbase has launched Coinbase Card, that enables its United Kingdom-based customers to pay in-store and online with cryptocurrency. The development was announced in a blog post published on April 10, 2019.
The Coinbase Card is a Visa debit card powered by customers’ Coinbase account crypto balances, which allows them to make purchases with digital currencies worldwide. Coinbase instantly converts customers’ cryptocurrency funds into fiat currency in order to complete the purchase.”
With the ability to use your cryptocurrency wherever Visa cards are accepted, bitcoin is going to start finding its way into our daily economy.
Coinbase has now launched their Visa card in the U.S. as well.