(This post was originally a message I sent to a group. Thought I might as well post it here, too)
At this point, everyone should consider having some exposure to cryptocurrency (Bitcoin).
I know no one’s gonna listen but I’ll post the simplest explanation in case anyone does:
The reason Bitcoin has value is because
It is decentralized and disinflationary money:
- Decentralized: not controlled by any government, single actor, or group (as far as we know)
- Disinflationary: there will only ever be 21 million Bitcoin (fixed supply) vs. endless USD, EUR, or even gold (we don’t know what the supply of all gold on planet Earth is)
Pretty much every government around the world prints money liberally these days
…Which has the effect of making your money worth less and less as time goes on.
For example, 50, 40, 30, 20, 10, etc. years ago, 1 dollar bought you a lot more than it does now.
This is why some people don’t keep their money in the bank (~zero or negative interest) and try to beat inflation via investing in the stock market, real estate, etc.
It’s funny how history repeats itself:
^ Replace every mention of Rome and denarius with USA and USD (or EU/EUR, Japan/JPY, etc.) and you start to see some patterns.
Anyway, Bitcoin is basically hedging (lessening some risk by doing something else) against all that.
Yes, Bitcoin is down from its end of 2017 high of $20k, but if you’ve been in this game long enough you’ll know the following:
The Long-Term Trend is Up
I pointed out the 2 most recent bull market (Bitcoin went up a lot) peaks — Dec. 2017, Dec. 2013.
You’ll notice that the Bitcoin price dropped dramatically from both peaks — something like ~80–90% each time…
…But never went as low as before.
^ Pic from last year. Most people think the bottom (“How far did it fall?”) for Bitcoin ($3.2k) has passed — Bitcoin is now at $8k.
Anyway, many people think that the new market cycle has started.
We are probably looking at ~2 years out for the next bull market peak.
If you’re interested, don’t be buying at $20k or the top, like most people did in 2017.
So how much will it go up?
I know that’s what everyone wants to know.
I am guessing low 6 figures (~$100–200k per Bitcoin) for the next peak.
Before you X out, the number might seem crazy, but the ROI (return on investment) is actually lower % wise.
If you bought Bitcoin ~when it first was created, the gains you would have gotten from say, $0.007 -> $10 (1,428,571%) would have been way crazier than $1,000 -> $20,000 (2,000%)
($1,000 to $20,000 = the run we had in 2017 that catapulted Bitcoin into the mainstream consciousness)
So, the numbers are bigger now, but the % gains are actually less.
$100–200k is “only” a 5–10x from the last peak of $20k.
This is called logarithmic regression (English: % gains slow down over time):
You’ll also notice that the pic looks similar to the “Long-Term Trend is Up” pic I posted, if my drawing skills were better.
How much Bitcoin should I buy?
Nothing in here is financial advice, but I don’t recommend betting the house on it or anything.
Like anything else, “diversify your assets”
But with even say, 10% of your net worth:
If Bitcoin were to 20x in 2 years, that means you would double your net worth.
Also, while most people see this as a speculative game, think about the long-term implications (don’t sell all your BTC, depending on your goals)
If you bought the bottom in 2014–2015 (last bear market before the most recent one), you were pretty brave, since Bitcoin and crypto as a whole was WAY more speculative (the “it’s only used by drug dealers and terrorists” argument was way more applicable).
Now, it’s pretty obvious that we’re going somewhere with all this.
While the average person forgot all about Bitcoin and crypto after they got burned buying the top, big names have been making moves all throughout 2018 and 2019.
JP Morgan creates cryptocurrency:
Facebook announcing their cryptocurrency:
Fidelity offering crypto trading services:
…and much more
IMO, this is still the investment opportunity of a lifetime so do with that what you will.
As Bitcoin bull (someone who’s optimistic about Bitcoin) Anthony Pompliano says…
“Get off zero” 😉
P.S. Don’t worry about the altcoins (non-Bitcoin) like Ethereum, etc. If crypto goes up, Bitcoin going up is inevitable (BTC is like the Dow or S&P 500 Index of crypto). The altcoins have higher potential ROI, but you won’t catch those unless you’re super involved and know what you’re doing