(Brian Shilhavy) November 8, 2022 will obviously be remembered in history as the day of the U.S. mid-term elections, but could another event that happened Tuesday eclipse even the national elections?
(Brian Shilhavy) November 8, 2022 will obviously be remembered in history as the day of the U.S. mid-term elections, but could another event that happened Tuesday eclipse even the national elections?
Bitcoin’s 150% surge since the beginning of the year has caught the attention of “Mrs. Watanabe,” the metaphorical Japanese housewife investor, and a legion of South Korean retirees who’re hoping to escape rock-bottom interest rates by investing in cryptocurrencies, according to Reuters.
Retail investors in Asia, many of whom are already regular investors in stock and futures markets, are turning to bitcoin in droves. Trading volume on Asia-based exchanges exploded following a Japanese law that officially designated bitcoin as legal currency. And now that the largest Chinese exchanges have reinstated customer withdrawals, the bitcoin market in China will likely stabilize, and the price will likely rise as a result.
Bitcoin was recently trading in South Korea at a $400 premium to its value on US-based exchanges, in part due to tough money-laundering rules that make it difficult to move bitcoin in and out of those markets, Reuters reports.
One of the retail traders interviewed by Reuters said she started with bitcoin because she’s worried she won’t be able to rely on her pension.
“After I first heard about the bitcoin scheme, I was so excited I couldn’t sleep. It’s like buying a dream,” said Mutsuko Higo, a 55-year-old Japanese social insurance and labor consultant who bought around 200,000 yen ($1800) worth of bitcoin in March to supplement her retirement savings.”
“Everyone says we can’t rely on Japanese pensions anymore,” she said. “This worries me, so I started bitcoins.”
Another trader noted that most South Korean buyers see bitcoin as an investment; few plan to use it for payments purposes.
The risks for these traders are high, Reuters says, alluding to the collapse of Mt. Gox, which led to hundreds of millions of dollars in losses for its customers.
The digital currency is largely unregulated in Asia. In Hong Kong, exchanges operate with a money-changer’s license, while in South Korea they are regulated like online shopping malls, Reuters says.
There’s also a burgeoning cottage industry of seminars, social media and blogs all designed to promote bitcoin or bitcoin-like schemes. The cryptocurrency world is rife with scams, and pyramid schemes are becoming increasingly common.
Police in South Korea last month uncovered a $55 million cryptocurrency pyramid scheme that sucked in thousands of homemakers, workers and self-employed businessmen seduced by slick marketing and promises of wealth, Reuters reported.
Seminars in Tokyo, Seoul and Hong Kong promote schemes that require investors to pay an upfront membership fee of as much as $9,000, according to Reuters. Investors in these scams are encouraged to promote the cryptocurrency and bring in new members in return for some bitcoins and other benefits.
One Tokyo scheme offered members-only shopping websites that accept bitcoin, 24-hour car assistance and computer problems, and bitcoin-based gifts when a member gets married, has a baby – or even dies, according to marketing materials seen by Reuters.
Leonhard Weese, president of the Bitcoin Association of Hong Kong and a bitcoin investor, warned amateur investors against speculating in the digital currency.
“Trading carries huge risk: there is no investor protection and plenty of market manipulation and insider trading. Some of the exchanges cannot be trusted in my opinion.”
Regulators in China have already cracked down on money laundering at local exchanges. South Korea’s Financial Services Commission has set up a task force to explore regulating cryptocurrencies, but it has not set a timeline for publishing its conclusions, Reuters reported.
And Japan’s Financial Services Agency (FSA) supervises bitcoin exchanges, but not traders or investors.
“The government is not guaranteeing the value of cryptocurrencies. We are asking for bitcoin exchanges to fully explain the risk of sharp price moves,” an FSA official told Reuters.
Bitcoin was trading $2,529 on Coinbase Sunday, while it traded at $2,593 on Bitflyer, one of the largest Japanese exchanges.
One Japanese finance blogger said his most popular article has been an explanation of bitcoin. Readership of the article doubled last month when bitcoin was on its record run.
Rachel Poole, a Hong Kong-based kindergarten teacher, said she read about bitcoin in the press, and bought five bitcoins in March for around HK$40,000 ($5,100) after studying blogs on the topic. She kept four as an investment and has made HK$12,000 tax-free trading the fifth after classes.
“I wish I’d done it earlier,” she said.
Where does Internet data mining expert Clif High see Bitcoin going in the hyperinflation we are heading into? Clif High says, “I’ve got what you call a strike point, a numeric value our data sets are aiming at that shows Bitcoin should be about $13,800 sometime in early February of 2018. That will basically be a fivefold increase at what we are at now. . . . I always thought cryptos would have to break out first in order to upset . . . the structure of the central banks so silver and gold could break loose. I suspect silver will break loose. The rocket shot on that will be staggering, but bear in mind I am the Internet’s worst silver forecaster. I have had silver at $600 per ounce in our data since 2003. If that occurs, look at how shocking and rapid that rise is going to be.”
High goes on to say, “Gold and silver are the most undervalued assets on the planet.” . . . And he predicts “by early February, gold will be at $4,800 per ounce and silver will be around $600 per ounce.”
High also says, “The Fed can’t kill crypto currencies . . . The elites are fearful because they can’t control crypto currencies, and they can’t suppress them. There will be no more source of free printed money for bribing people. . . . When the dollar dies, the corruption and crime will be revealed.”
Join Greg Hunter as he goes One-on-One with Internet data mining expert Clif High of HalfPastHuman.com.
You might have been hearing about Bitcoin more frequently in the past few years. Recently it made a lot of news because of the ransomware attacks that affected countries around the world by demanding Bitcoin ransom to release embargoed documents on computers. So what the heck is Bitcoin, and how does it work?
First, let’s get this out of the way: bitcoin is money. It’s money as much as the dollar or euro or yen is money. And it’s fully interconvertible with these or any other currencies. Bitcoin is different than these national currencies in many key ways, however, because Bitcoin is a type of digital money that basically runs itself without any government intervention and minimal regulation.
Bitcoin is both the network for using the currency as well as the currency itself. It’s usually denoted Bitcoin (big B) when talking about the network and bitcoin (small b) when talking about the actual currency. For example, I have about four bitcoin in my online wallet, and I use the Bitcoin network to send payments.
How do you get bitcoin? There are two ways: Either you buy bitcoin, or you mine bitcoin. Buying bitcoin is quite easy. There are many online exchanges that will sell you bitcoin in exchange for whatever currency you normally use (dollars, etc.). I use Coinbase to buy my bitcoin, and it’s the most mainstream and scrutinized of the current exchanges. It was founded by Wall Street types in order to help Bitcoin become more mainstream. There are many others you can use, such as Kraken or CoinMama.
You can also buy bitcoin in person at various bitcoin ATMs around the world. There are now about 1,200 such ATMs in 60 countries around the world, and they’re growing rapidly. Here’s a site that allows you to find the nearest ATM.
Last, you can buy bitcoin through real people by using localbitcoins.com to find people in your area who will sell you bitcoin without going through an online exchange at all.
The second way to get bitcoin is by ”mining” them. You mine bitcoin using fast computers specially built for doing this. These specialized machines crunch numbers to discover the right codes. Every 10 minutes, the Bitcoin network releases a new block of bitcoin and the party or parties who discovered the right codes gets that block of coins (currently 12.5 coins per block). Bitmain is one of the bigger mining machine manufacturers and their newest model, the T9, sells for about one bitcoin.
This number crunching for “mining” is why bitcoin is referred to as a “crypto currency”: it’s all about using very large numbers that take massive computing power to preserve the integrity of the system and avoid hacking. The Bitcoin system basically turns electricity into money.
So far, Bitcoin has never been hacked. There’s a common misconception that it has. Many companies that buy and sell bitcoin — bitcoin exchanges — have been hacked. Most famously, MtGox, one of the earliest exchanges, was hacked in 2013 and people lost a lot of money. But even then the Bitcoin network wasn’t hacked. Only the exchange was hacked.
That said, security is very important for those buying and selling bitcoin because the code itself is the currency. It’s a string of numbers and letters called a “hash key.” If someone has your hash keys, they have your bitcoin. There’s nothing extra beyond the hash key.
Your bitcoin are kept generally in an online wallet at an exchange like Coinbase or Xapo. Here’s a site that compares the security of the various means for storing bitcoin. Coinbase wins that comparison currently for online wallets and the Ledger Nano wins for hardware wallets.
You can also keep your bitcoin in an online “vault,” which adds extra layers of security for bitcoin that you don’t plan to use for a while. For example, it takes a couple of days to withdraw bitcoin from the Coinbase vault, and various types of authentication are required before the transaction is complete.
For those who want to take matters more into their own hands and avoid having to trust an online wallet or vault, you can keep your bitcoin in a physical hard drive, or you can even just write your codes by hand on paper and keep them in your physical wallet in your pocket.
Personally, I use a variety of online wallets and vaults in order to prevent any single mishap or hack from hitting me too hard. I can’t be bothered with keeping the codes offline but maybe I will one day as an extra layer of security.
The price of one bitcoin has grown from nothing in 2009 when the Bitcoin network was created to more than $1,800 in May. If you had invested $1,000 in bitcoin in 2010, you would be sitting on more than $12 million now. How has it gone up so much? Well, because increasing numbers of investors have decided to place their confidence in the system.
We can look at the stats to get a good feel for how fast Bitcoin has grown. Blockchain.info keeps detailed stats.
» The number of bitcoin in circulation has grown from zero in the beginning of 2009 to almost 16.5 million now, with only about 4.5 million more to mine (but this will take about a century to complete because mining becomes intentionally more and more difficult).
» The Bitcoin price grew from nothing to almost $1,200 at the end of 2013, plummeted to around $200 in 2014, and rose again to more than $1,800 in May.
» Bitcoin’s market capitalization has gyrated similarly, but is now about $30 billion, up from zero in 2009 and $12 billion at the end of 2016, and is enjoying a strong upward trend in 2017.
» All crypto currencies combined now have a market cap over $60 billion, including Ripple, Ethereum, Litcoin and many others, many of which are also on very strong upward trajectories.
» The number of Bitcoin wallet users (required to buy and conduct business using bitcoin) has grown from zero in 2009 to more than 7 million by mid-2016 and 14 million now.
» Bitcoin daily transactions have grown from nothing in 2009 to 210,000 in mid-2016 and more than 350,000 by May.
So we’re seeing the Bitcoin system roughly doubling in size each year, and there’s little reason to believe that this rate of growth will slow down at this point. If anything, it’s likely to increase.
Bitcoin is different than regular money in that there’s a limit to how many can be created: just 21 million. Ever. The idea behind this limit is that the value of this currency can’t be inflated away by policymakers. The dollar loses about 2 percent in value each year because of planned inflation, and this provides a strong incentive to invest rather than save — and that’s literally why the Federal Reserve has a target inflation rate of 2 to 3 percent.
Bitcoin is the opposite: It’s designed to always increase in value, so simply buying and holding may be a very good investment strategy. This is why Bitcoin is described as a “deflationary” currency rather than an inflationary currency.
There’s also a limit on how small each Bitcoin can be divided: into 100 million parts. This tiny part of a bitcoin is called a satoshi, in honor of its mysterious and anonymous creator Satoshi Nakamoto.
The magic ingredient in Bitcoin is the distribution of trust in a vast electronic network. This distribution moots the need for the “centralization of trust” that is the function of central banks like the Federal Reserve. Central banks issue money, control interest rates and act as a lender of last resort in “fiat currency” systems like in the United States. The distribution of trust to the network performs these roles in the Bitcoin ecosystem. This trust network is called the “blockchain,” and it is the heart of Bitcoin.
The blockchain is an electronic record (ledger) of all bitcoin transactions that is stored on every node of the ever-increasing network of the Bitcoin ecosystem. Because it is completely distributed and constantly updated in real time, using very difficult cryptographic keys that require massive amounts of computing power, the blockchain can’t be shut down by any outside force. This fully decentralized system renders Bitcoin as a system practically immune from hackers. As mentioned above, individual bitcoin exchanges can and have been hacked, but Bitcoin itself has never been hacked.
The beauty of the blockchain and Bitcoin ecosystem is that it allows any person or people using it to avoid the centralized (and often abusive) power of central banks and of national governments entirely. ABN Amro bank chief said it well in 2015: “What the Internet has done for information and the way we communicate, the blockchain will do for value and the way we look at trust. The financial world is going to flip upside-down.”
We are witnessing that upside-down flip right now in real time. This is why we’ve seen literally $30 billion in new money come into the Bitcoin and other crypto currency space in the past six months alone.
Obviously, the decentralized nature and independence from government influence has appealed to libertarians and techno-optimists since Bitcoin’s creation. Bitcoin long has had a bad rep because it’s been used by various versions of the Silk Road website to buy and sell drugs and other illegal items. But there’s far more to Bitcoin than illegal drugs.
Bitcoin is now accepted by thousands of companies and vendors around the world. Japan recently recognized Bitcoin as a legitimate currency, and this means that more than 260,000 stores in Japan soon will start accepting Bitcoin.
We are very likely seeing the beginning of a very large wave of growth for Bitcoin and other crypto currencies like Ethereum.
How should you invest in Bitcoin? I’ve always advised people that you shouldn’t invest anything in Bitcoin that you don’t mind losing. That’s generally still good advice because this currency and the technology behind it are still very new. They could just disappear for a variety of reasons.
But the highly positive trends in terms of wallet growth, acceptance by businesses and governments, as well as market cap and price, discussed above have led me recently to change my mind a little and suggest that Bitcoin should in fact be a part of any smart investor’s portfolio.
It shouldn’t be a large part, but it should definitely be a part of it. With returns like we’ve seen on Bitcoin in the past eight years, it’s reasonable to accept some risk.
The last thing I’ll look at is the revolutionary potential for Bitcoin and other cryptocurrencies in terms of how they may change the world. I wrote a piece in 2015 looking at how Bitcoin may stop China from replacing the United States on the world stage. This would be a good thing and could happen if enough Chinese simply start to prefer using bitcoin instead of yuan to conduct business. If China can’t control its currency it can’t control the world.
I also looked in a piece last year at whether Bitcoin is likely to be the future of money more generally. I concluded then and still believe that Bitcoin (or maybe some other coin built on the blockchain) will probably either grow in the next couple of decades to become a global currency or shrink down such that it becomes just an interesting historical footnote.
What happens if Bitcoin or something like it does replace national fiat currencies around the world? First, it makes it much harder for nations to raise massive amounts of money through printing or borrowing. This means that deficit spending will shrink or even go away. And, according to at least some Bitcoin libertarian optimists, this would also stop nations from waging war as much because they’d have to finance such wars as they go, with real money, rather than using deficit spending. A more peaceful world would indeed be a nice consequence of the Bitcoin revolution.
In closing, Bitcoin is a potentially transformative new type of currency that promises to create a more borderless and peaceful world, and an increasing flow of information and goods. It also may well lead to many unpredictable effects that we’ll simply have to sit back and watch as they unfold.
By Parke Shall
That is our simple bitcoin advice. “Buy one and forget about it for a while.” Your loss today is going to be capped at about $1400 but, as was said in Back to the Future, “if this thing hits 88 miles per hour, you’re going to see some serious s***.”
We wanted to take the time to write a small note today about our continued thinking on bitcoin and why we think a small investment in perhaps just one bitcoin could be a prudent strategy for asset diversification for any investor.
Hopefully, our track record on the digital currency also helps our credibility today. In the past, we have advocated for buying any and all dips in the digital currency making the argument time and time again that we believed bitcoin would continue to appreciate regardless of small aberrations that have occurred along the way. For instance in December of last year, we predicted bitcoin would soar through $1200 this year.
The conclusion has generally been the same in each of our bitcoin articles: we expect demand for bitcoin to continue to rise and, with a limited supply, and we expected this demand will push the price significantly higher. This is the dynamic we have seen during the course of bitcoin’s life cycle thus far,
Many people have been deterred from investing or purchasing bitcoin at these levels because of how much the prices has appreciated so far. This is akin to not wanting to buy a stock while it is on its way up, despite its best years possibly being ahead of it. If you didn’t buy at $700 like we advocated, then yes, you missed out on a double. But who is to say that if you don’t buy here at around $1400 you won’t miss another double? In fact, we think the reality is that an investment in bitcoin today could pay off many multiples in the future as long as, as an investor, you have patience.
We also don’t think owning gold is a bad idea either. We are not sure why this argument of gold versus bitcoin started, but we own both. We like to think of them as our “old-school” and our “new school” hedges. Gold is an “old-school” hedge because it is actually a physical asset that you can reach out and touch that has been intertwined with economics for thousands of years. It has a great track record of demand and comes in finite amounts, therefore making it a great hedge against anything and everything that is “new school” in the market, from Keynesian theory to bitcoin.
Bitcoin obviously has the biggest track for potential appreciation, we believe. While gold may not go up 10 times in the event of a catastrophe or a risk off event, it still may appreciate significantly. We believe bitcoin, on the other hand, actually has the potential to appreciate over 100 times in the future, if it holds up. By that, we mean that there is definitely a theoretical case for the asset to appreciate this much, although there is probably a cautious likelihood of it happening. In other words, and not to sound hyperbolic, Bitcoin going to $1 million may not prove to be a total impossibility.
This appreciation may occur without a catastrophe or without a risk off event. In other words, we like bitcoin not only as an investment in the financial technology and not only as an investment in a digital currency but also as an investment in a hedge against central banks and the markets.
1. We know that blockchain is at the core of what makes Bitcoin tick. Companies and governments have continued to invest in blockchain, and we believe that owning Bitcoin is another way to invest in one of the earliest and possibly the most well known blockchain project out there. Therefore, an investment in Bitcoin is an investment in Blockchain.
2. Not unlike gold, people use Bitcoin because they want less government and less regulation in their lives. Buying Bitcoin is a way to, at least for now, shore up a method of transacting value outside of the “system”. Gold offers the same benefits and is tangible, which is why we like owning both gold and Bitcoin as hedges against the “system”.
We have gotten numerous questions over the last year or so about what our strategy would be if we were new to investing in bitcoin. Put simply, the strategy would be to “buy one bit coin and just leave it”. One of a couple scenarios are going to happen.
The first situation is the worst. Let’s assume bitcoin winds up going to zero eventually and is somehow either rejected as a digital currency or disproven as a financial technology. In that case, you take a 100% loss. Sorry. At least your risk was defined.
The second situation is one where bitcoin is adopted in somewhat of the same fashion as it has been adopted of recent. Its use starts to drift from outside the mainstream to inside the mainstream and the price continues to appreciate. This is a case where you’d likely see appreciation in a bitcoin that you purchased today.
Finally, the third situation. We call this the grand slam. Bitcoin is unanimously excepted as the first and only prominent digital currency. It becomes a full-scale hedge, adopted by a significant portion of the population, against central banking systems and finance as we know it today. Given the fact that only about 20 million bitcoin will be issued in total, there will be a severe dry up in supply as billions of people worldwide look to get their share of the digital currency. This is a situation where the currency could appreciate 100 times what its worth now or more. Obviously, this is the most speculative of the three situations but could be a reality if an investor has enough patience to wait it out. This type of situation could take 15 to 30 years and this is why the title of this article is “buy one bitcoin and forget about it“.
Again, bitcoin does not come without risk.
Relative to other assets you may hold, like stocks, options and other currencies, Bitcoin is going to be extraordinarily volatile. Due to the fact that it is easily in the digital currency’s life cycle and that it has yet to be proven on a wide scale, investors can expect significant volatility, sometimes 20%+ in one day’s time, for the capital they have invested in Bitcoin.
Also, it is an all digital currency meaning that it needs digital infrastructure to survive. In a catastrophic scenario where our infrastructure is compromised, we have no idea what would happen to bitcoin. It isn’t tangible and you can’t physically hold it, which are two of its major detracting points versus gold. However, we see buying bitcoin at $1400 as a speculative investment that could yield immense results in the future if you have the wherewithal and you have the strength to hold it over time.
By Parke Shall | Orange Peel Investments