Bitcoin Will Go Higher

Hosting a fundraiser for a friend, I’ve been wondering what compels a person to donate money and, if so, how much do they decide to contribute. I think they do a mental exercise to determine what they are willing to give based on many experiences and their condition. Indeed, any contribution is in line with their wealth and ability to provide charity, yet there is wide latitude to their involvement within that parameter. I think the same equation holds for investors. Based on their ideas about risk/reward, their financial condition, and willingness to participate, they choose an amount and a target. The same is true when deciding on a gift for a favorite niece or nephew.

In the end, an amount is decided upon, and investment or gift is given. Mathematicians have probably written equations to work out these amounts according to agreed-upon parameters, but most people don’t use such equations. Instead, they perform a mental exercise, invoke feelings and intuitions, and take the plunge. The same holds for Bitcoin purchases.

Now major banks and investment funds have decided it is time to be involved in this new asset class, Bitcoin, for fear of missing out (FOMO). To what extent do they get involved. The same equations apply. Each manager must decide using feelings and intuitions and commit funds. Some have a penchant for cutting-edge financial endeavors, while others have an abiding commitment to stability or growth. Their decisions would fill the entire spectrum of a risk/reward chart.

Bottom line — most are getting involved, some more, some less. Since there is a fixed, limited number of Bitcoin, and all that is in circulation already belongs to someone, those wishing to own Bitcoin have to entice those existing owners to part with some. Bitcoin prices go higher.

Portfolio Managers’ Bitcoin Plan

The manager of an extensive portfolio, say a billion dollars or more, is tasked with keeping it safe for its clients. In the interest of keeping abreast of ever-changing economic opportunities, knowing clients would be asking about Bitcoin, he or she would create an objective list of criteria before authorizing Bitcoin investments. Here is such a plan:

1. Bitcoin would have to be in existence for more than ten years. Ten years would be a minimum standard for any asset class in which to park client wealth. Bitcoin was created during the financial crisis in the fall of 2008, over twelve years ago.
2. Bitcoin would have to be owned by at least ten million people. No single entity could own too-large portions (10%+). Rumor has it that the creator, Satoshi Nakamoto, disappeared with a million Bitcoin. Even that enormous sum gives him less than a 5% share when the market cap for Bitcoin is currently more than $447 billion. There are several Bitcoin whales with a billion dollars or more in Bitcoin. Coinbase has more customers than Charles Schwab. “One recent survey showed that 11% of Americans own Bitcoin (30 million).” It is hard to precisely know this figure, but a recent study said 67 million Bitcoin owners in the EU and the U.S.A. The demographics are interesting, too. The 18-34 year-olds claim 18% own Bitcoin is going steadily downhill to just 4% of the 65+ age group. No single entity can corner the Bitcoin market. The very nature of the blockchain structure of Bitcoin’s platform makes that impossible. Owners can remain as separated and anonymous as they wish to be.  
3. All of the standard financial tools one would expect with any asset class should be available. Shares, funds, options, ETFs, long-term deposits, margin accounts, and plenty of flexibility are all available today through reputable brokers. 

It safe to say that more than a few large portfolio managers are now taking a second look at Bitcoin.  

Bitcoin Replacing Gold is It’s Killer App

Timeline: The adoption curve of some of our most transformative technologies.

Ever hear Jim Cramer recommending investors keep a certain percentage of their portfolio invested in a gold stock as a hedge against markets collapsing? That might have had merit before the coronavirus pandemic but no longer. The threat today is that markets collapse because the entire economy implodes when people are unable to work. Gold stocks won’t be immune to that. What to do? Bitcoin.

Bitcoin is beyond the reach of government authority, political whim, or banking control. With a few simple mouse clicks, Bitcoin is faster and safer to buy, sell, and hold than gold. Bitcoin turns out to be an excellent retainer of value. Acquiring and selling physical gold becomes a logistical nightmare during the pandemic. Bitcoin’s raison d’être, its killer app, may finally have arrived as a replacement for gold as a hedge against the unthinkable.

Flash forward to a time when everyone owns some amount of Bitcoin, and it’s price no longer fluctuates wildly. The fixed, limited supply of 21 million Bitcoin is spread over the five trillion dollars of liquid assets Americans are said to possess. That would put Bitcoin’s value at approximately $270,000 per coin. Do not be confused by Bitcoin’s rapid run-up in price as it climbs the parabolic adoption curve of new technology. The usual time-period of new transformative technology adoption (think television, smartphone, or radio) is about 15 years. Bitcoin was launched in 2009, which makes this the end of the eleventh year, entering the parabolic curve’s steepest portion. We will see this unfold in the next couple of years. As Bitcoin’s price climbs to the point of stability, it’s value as a hedge against markets collapsing is incomparable, making Bitcoin not only an excellent way to protect your money but an incredible investment as well.

Jamie Dimon: “Buy Bitcoin, folks.”

Comment by Jamie Dimon on Paul Krugman’s weekly column on Bitcoin

Jamie Dimon

New YorkAug. 25

Technobabble? “The Times They Are a Changin’,” (not the NY “Times”) As intelligent as Krugman is, his intellect may be stuck in the legacy financial system. Buy Bitcoin, folks. But like with any investment, only invest what you are willing to lose. Krugman’s negativity probably stems from a lack of understanding Bitcoin’s technology. Or he is closely associated with the Fed, banks and other financial institutions, all which hope to dissuade as they buy Bitcoin at suppressed prices. Or… he’s just “blocking up the hall.” 

I haven’t posted since May, 2018 because I didn’t have anything to say.  Bitcoin hit bottom (around $6k) three times since then and seems to be ever so gradually beginning to find a new footing.  Paul Krugman, an intellect I admire and trust, has unfortunately been unable to understand Bitcoin.  He almost systematically refuses to comprehend the advantages of a Bitcoin economy.  In his column, Transaction Costs and Tethers: Why I’m a Crypto Skeptic, NY Times, July 31, he continues to expound upon his misunderstandings.  Lo and behold, the first of the column’s comments comes from Jamie Dimon, CEO of J.P. Morgan, whom you might recall vehemently shouted “Bitcoin was a fraud.” less than a year ago.  His very visible “BUY” is important.  It goes along with other evidence that the cryptocurrency world is about to explode.

We’ve been waiting for the banks to build out the infrastructure they need to be able to profit from crypto.  Until the banks figure out how they can profit from crypto, Bitcoin isn’t moving anywhere, soon.  We’re almost there, now.  For banks to profit from the handling, holding and hawking of Bitcoin several utilities must be put in place.

There needs to be a good, strong, secure, easy-to-manage place for banks to keep customer accounts.  The software that does that is now readily available.  There needs to be ways for brokers to buy and sell cryptocurrencies for their customers profitably.  Speculation also requires additional instruments such as options and futures.  These are now in place, too.  There has to be a general consensus that crypto makes a good investment.  Here, the banks may have done such a good job of putting down crypto that it is not easily undone, at least not  quickly.  That’s where Jamie Dimon’s words become so significant.

Dimon says, in a Paul Krugman blog comment, “Buy Bitcoin, folks.” Krugman is not known for his crypto enthusiasm; quite the contrary to be sure.  He wasn’t asked or pushed to say anything.  Why bother?  Dimon has to undo years of negativity to launch this new banking endeavor.  I read another investment bankers recommendation telling customers, “You should have seven per cent of your portfolio in cryptocurrency.” Times are a changin’.  These are the signs I’ve been waiting to see.  I’ll be writing more about further developments in crypto in the coming days.

Trust no one. Never sell. HODL forever.

Bitcoin is at the latest, cutting-edge of technology, the bleeding-edge.  Things are a little bit dangerous, a little rough around the ‘edges’.  The ‘edges’ haven’t been polished yet.  That is because the latest technology never works the way it is supposed to. It’s too new.  When everything gets refined, when it’s made to work just right, after thousands of trials and tests, and millions of customers, and tons of revisions, it’s not considered the latest technology anymore. It just becomes our stuff.  We don’t give it a second thought.

The Bitcoin visionaries, the early adopters, were willing to put up with a certain amount of chaos and things not working just right.  They were speculators and prospectors, as well as technologists. It’s okay that the bitcoin exchanges didn’t work that well.  The Bitcoiners were willing to put up with a little nonsense.  They were a tough bunch.

Anecdotal evidence suggests that the newest wave of bitcoin investors, the group buying Bitcoin now, isn’t as thick-skinned as the Bitcoin oldtimers.  An ‘oldtimer’ is someone who has been in bitcoin six months or longer.  If you see someone wearing a sweatshirt that reads “I bought Bitcoin at $50.” extend them the proper respect.  They are a tough, old breed.

Trial by fire. This old breed’s mantra: “Trust no one. Never sell. HODL forever.”

*HODL is a misspelling of HOLD in a tweet that just stuck.

Bitcoin Resumes Upward Climb

Following Bitcoin’s meltdown a few days ago when prices fell from $19,500 to around $11,000, it sure seemed like the bears were right and Bitcoin was in free fall.  But within a day or so the price stabilized and by Christmas Day Bitcoin’s price began to rise again.  What’s going on?

The late-comers to the Bitcoin party came into Bitcoin after Thanksgiving when prices were somewhere between $8000 at the beginning of that holiday’s weekend and $10,200 by Sunday night.  When their investment rose to nearly $20,000 they were thrilled and then petrified when it began suddenly to shrink back to nearly what they had paid for it.  Fortunately, they didn’t all bail on the idea.  The fainthearted exited quickly.  The more astute doubled down on their new investment.  That’s where we now stand.  Consider that solid footing.  Bitcoin is going higher.

Adoption Curves

 

Adoption curves of new technology get ever steeper as communications, transportation, and knowledge improve though radio took just 15 years from the first commercial app to reach 85% of the population. The telephone took 90 years to do the same thing.

Bitcoin’s price chart looks more like the adoption curve of a new technology than a Wall Street bubble.  The chart above shows the speed at which new ideas take hold as more and more people begin to use a new technology.  When Marconi invented the radio in 1895 it took 25 years before the first commercial application appeared.  But it took just 15 years until the radio could be found in nearly 85% of American households, one of the fastest technology adoptions ever to be seen, before or since.  The telephone took 90 years to do the same thing.  However, in general, the chart above demonstrates that adoption of new technology happens at a faster and faster rate.

What we are witnessing since Bitcoin’s inception in 2009 is the steadily increasing adoption of cryptocurrency.  The cell phone started in 1983 but didn’t take off until seven or eight years later. By 2009, after Apple’s iPhone appeared on June 29, 2007, and several copycats in the two or three years that followed, nearly everyone purchased a smartphone of one kind or another in the following decade.  The Internet, another new technology, shot up just as quickly but without the eight-year incubation period.

While there are limits to the speed of adoption, for example manufacturing limits in the case of cell phones, Bitcoin promises to move even faster than these earlier technologies.   It will NOT take 15 years for the vast majority of people to start using cryptocurrency.  If what has happened to Bitcoin in 2017 with 700% growth is any indication, Bitcoin growth will exceed anything we have ever experienced.

 

A typical adoption curve consists of innovators and early adopters, followed by mainstream folk and finally laggards as new technology is disseminated throughout the population.

Certainly, the money flowing into purchasing cryptocurrency at this time is speculative investors eager to make a quick buck.  However, this only accelerates the adoption curve, but does not change what is happening to a bubble.

 

 

 

 

171125 Visacoin: Fabulous Idea or Fraud?

A tweet from Visacoin.eu (VCX) caught my attention yesterday. It took me thirty seconds to get the idea.  A virtual card which you fund with Bitcoin or Ethereum or Dash can be used wherever Visa can be used.  At the moment it is used, the correct amount of Visacoin is converted into dollars (if you’re in the U.S., for example), and the amount is paid.  This would be the perfect answer to “Yeah, Bitcoin. But what can you do with it?”  This is going to be very big, I thought!

I downloaded the White paper and started my due diligence.  Everything seems to make sense.  All of the legal verbiages that you would expect to see in such a monograph was there.  The reference to COMIT technology was there, too.  I downloaded that White paper, as well.  If you enjoy good grammar or appreciate well-edited English, be forewarned.  That, it is not.  Be that as it may, using COMIT technology to explain Visacoin is brilliant.

But glaring typos began to appear, not just in the COMIT paper which Visacoin does not lay claim to, but in the Visacoin whitepaper, itself.  The big, bold heading on the top of each and every page reads “VISACOIN IS A POTENTIAL ECOSYTEM FOR VISIONARY INVESTORS.”  I have to believe a huge effort like this project purports to be, would have writers, editors, graphic designers, accountants, lawyers, social media professionals, fact-checkers, and proofreaders going over such an important document with a fine-toothed comb.  How could a typo like that get overlooked?  I read in bitcointalk.org a post from an unsigned Visacoin rep. the following:

“Many people have been posing the question whether Visacoin is affiliated with VISA, visa credit card and Visa Inc.or not.

Our answer is that we are nothing related to Visa Inc. We have conducted thorough researches and you can be ensured that there is no legal issues related to Visacoin (VCX).

Visacoin ICO will start on December 05th, 2017. However, from now on, we have created opportunities for large investors to pre-order VCX on the website visacoin.eu or visacoin.us between 00:00 a.m. and 02:00 a.m. every day.

@VisacoinTeam.

I would ask the same question “What is the affiliation with Visa?” The answer “There is none,” is troubling.  Another tweet appeared yesterday:

I am not in the least ‘ensured that there is are no legal issues related to Visacoin.’  In fact, Visacoin probably runs the risk of being sued in 140 countries around the world, wherever Visa currently does business for injuring their good name not to mention trademark and copyright infringement.

They try to emulate the Visa logo.  The wing on the “V” is part of the Visa trademark but Visacoin failed to use the correct font.  That might not sound like a heiness crime but no program worthy of investment is going to fail like that. The list of problems grows longer by the minute.  There is a pre-sale.  Then an unannounced pre-pre-sale.  They have an Android app and will follow in several months with a Webapp and iOS.  Really?  The White paper includes the names Vitalik Buterin, creator of Ethereum, David Lee and Bo Shen.  I’d like to hear what they think of Visacoin.

In an environment where a new product must start, out of the gate, at full speed and finely tuned, this product will very quickly spin out of control, crash and burn if it is real.  God is in the details. Whatever you do, do it well, i.e. the details are important.

 

171106 Frontier Days

What’s happening in the world of cryptocurrencies reminds me of the time when the Internet was just becoming known and getting popular.  People were scrambling to understand the Internet, to learn what a browser was, why you would call a web address a URL and other such new phenomena.  You could register a domain name for $9.95 and they were ALL available. “They would be worth good money some day,” someone told me.  Anyone could have registered macdonalds.com, coupon.com, or ford.com if they’d had a mind to but no one could think of what one would do with them, and it wasn’t clear that they would be worth money then.

When the use of blockchain technology and cryptocurrencies spread through our society, there will be tokens or cryptocurrencies for everything.  There’s a good chance that half of all the cryptocurrencies out there already will be valuable at some time in the near future.  We’re at the beginning of virtual money, and as currencies come into being, with a little imagination, all you have to do is put out your hand and grab some.

I founded and managed a small software company for many years that specialized in barcode.  I learned a great deal about barcode during those years.  Barcodes are like languages in that if you print a certain barcode type and your scanner is capable of reading that barcode type you will be understood.  The reasons for different types of barcodes are many.  One barcode type might be capable of being printed smaller than another.  There is a barcode for really bad printers.  There is a barcode just for pharmaceuticals.  There is a barcode that can hold two thousand characters.  There is a barcode just for military purposes.  So, too, are there now cryptocurrencies with special features and applications.  The list is already enormous and keeps growing.  We already need a dictionary of cryptocurrencies to understand the universe of virtual money.

There is no doubt some will be enormously popular and some will disappear.  The world is evolving quickly.  No doubt fortunes will be made and lost during this process.

171003 JPM’s John Normand: Bitcoin is like Airmiles

JP Morgan Chase’s John Normand has been writing about Bitcoin for many years.  He called Bitcoin “a retail novelty,” back in 2014 and essentially has the same opinion today. He acknowledges, though, the huge change in scale Bitcoin has achieved.   Trying to avoid calling Bitcoin a Ponzi, he likened it to “Airmiles,” as though Bitcoin’s added value is something like a bonus in the same way as Airmiles is an added value bestowed upon credit cards.  Wow.  That’s as basic a misunderstanding of the value of Bitcoin as you can get.

The underlying blockchain technology gives Bitcoin the trust and reliability that makes it part of an ever growing network of value.  In the future Blockchain technology will be used wherever a secure database is required.  Contracts, property deeds, vehicle registration information, stocks, and bonds are going to be using blockchain technology.