It has been a while since the last I posted. It was not a prolong holiday but we spend a big chunk of our time trading. Late October I directed the students of PIPtree to trade Cryptocurrencies and we experienced an unprecedented move in Cryptocurrencies never experienced before by traders for a long time. I was skeptical in Bitcoin in the early days not on its technology but the very existence of it will disrupt the financial system. I doubted the banks and the big boys would allow this to happen. Well I was right in one thing and wrong in one thing. The right part was the banks and big boys did indeed try to assassinate Bitcoin and has the assassinations attempts numbers in the 200 plus times and counting. The part which I did not anticipate was that every single time it failed. One of the biggest assassin for Bitcoin is non-other than the CEO of JP Morgan Chase, Jamie Dimon. I still remember him attacking Bitcoin and together with bad news from China managed to push Bitcoin down from a high of $4971 to $2965. However at $2965 we saw unprecedented buying and in less than a month we had a new high for Bitcoin.
I have always regarded Goldman Sach as the big brother of banks and lessons from history has told me to monitor their actions. Like the 2008 where Goldman Sach was one of the main culprits who started the Sub Prime fiasco, they were also the first to get out when they noticed the bonds would go bad. Thus as soon as I noticed Goldman’s CEO Lloyd Blankfein softening his stance on Bitcoin, I jumped in and wrote 2 reports to ask our students to buy Bitcoin and other Cryptocurrencies which we know stand a good chance to ride the wave up.
That marked the beginning of a very busy November and December trading period. I anticipate this trend would continue into 2018 where Bitcoin will rise higher especially if Exchange Traded Funds is approved by the SEC.
Many still think Bitcoin is a bubble and risky as it is not supported by anything obvious. Let’s think this. During the period before man used gold as a currency, when they found gold nuggets on riverbeds and mines, did gold appeal to them? The answer is no. It was just a shiny yellowish rock. Only when smart industrious individuals managed to convince the masses to use gold, then only gold became valuable. The same thing for paper currency, how much does it take to print a US hundred dollar bill? The answer is about US 12 cents. So how can a paper worth only US 12 cents but in the open market worth US Dollar 100? This is because the US government said so and managed to convince enough people around the world to believe in it. Bitcoin nowadays have enough people around the world believing in it hence making it assassination proof so far. Its value is based on actual supply and demand and not manipulated by some centralize institution. Bitcoin is not made out of thin air. To produce a Bitcoin, you need to buy and constantly upgrade your hardware. Then you need to pay your electricity bill for the on-going mining. All these activities cost more than making a US100 note for sure.
“The very true nature and value of things is based upon enough people believing in it”.
What gives Bitcoin its value.
- Finite value of 21 million coins ever to be produced and an estimated 5 million Bitcoin missing.
- Loss in faith by the masses in currency not backed by gold aka FIAT currency due to world currency war.
- Government confiscating its citizen’s money during times of financial crisis (think Argentina and Venezuela).
- Its decentralize nature.
- Adoption into mainstream finance with the introduction of CME and CBOE Bitcoin futures and possibly Bitcoin ETF in the future.
Having my idea, can Bitcoin and the rest of the crypto currencies go to zero. There is always a possibility. I thin 95% of all crypto currencies you see today will go to zero due to technology redundancy and scams. My thought is like all investments, do not bet the whole farm. However, if cryptocurrencies really is here to stay, what would be the value if you are an early adopter? According to RBC Wealth Management, there are 14.6 million millionaires in the whole world. If everyone of them want a bitcoin, how much would bitcoin be worth? Give it a ponder…..