Bitcoin: It’s Finally Time To Discuss it

by JDH on June 29, 2019

Last week I opined on whether or not the gold market is moving back into a bull market.  (Yes).  After six years, it’s back.

Today, same question, but about Bitcoin: is the bull market back?  Yes.

From a peak at around $20,000 (measured in USD fiat currency) in December, 2017, bitcoin dropped to around $3,000 exactly one year later.  That’s an 85% drop, and you would think that would be the end of that.

But it wasn’t, an on June 26 bitcoin climbed all the way back to around $13,800, a remarkable recovery.  And then it dropped to $11,800 the same day.

There are those that argue that anything that swings that wildly is not an investment; it’s at best a speculation, and a more accurate description would be that it’s a gamble.  That’s a valid perspective.

But it is also valid to realize that what we call money is more accurately described as fiat currency, and it is printed out of thin air.  It’s not even the government that prints it; it’s the banks.  Only 3% of money in circulation is bills; the rest is electronic blips on a screen, created when a bank makes a loan.  What’s backing it?  The good name of the bank, and the good name of the government.  That’s it.

What’s backing Bitcoin?  Blips on a screen, but they are blips that cannot be created endlessly.  There is an algorithm that limits the “bitcoin supply”, and it is that limited supply that will ultimately determine value.

Should you invest everything you have in Bitcoin?  No.  But should you consider putting 1% of your wealth in crypto-currencies as a hedge against whatever may happen to the traditional money supply?  Perhaps.

I am not a Bitcoin investor or speculator, so my ramblings are theoretical.  I do however believe that it is worthy of consideration.

A word of caution: if you do decide to invest in Bitcoin, learn how to do it first.  To buy and sell you join an exchange, like Kraken, or NDAX, or Coinbase, or whatever.  But once you buy your cyrptos, you don’t leave them at the exchange.  You transfer them to your own “wallet” so that they are under your control.  Ledger is the leading supplier of hardware wallets.  You store your bitcoin so it’s under your control, so if your exchange gets hacked, or goes bust, you still have your coins.

That’s my advice.

The weather is great, it’s a long weekend, so that’s enough for now; have a good one.