Bitcoin (BTC-USD) is down 46.2% for the year. It is down 65% from its high. It is no longer the conversation at the office. My grandma isn’t asking if she should invest anymore. Is Bitcoin dead?
Google searches for Bitcoin:
No. Nothing has changed really except the price action…
My take on Bitcoin is you may want to own a piece because of potential future price action based on its fundamental attractive qualities. Current price action is almost irrelevant. Maybe it’s not irrelevant but I don’t think I have much of any an edge predicting momentum.
Here are X reasons you want to grab a little bit of Bitcoin while no one is interested anymore or embarrassed with their losses to bring up the subject.
Perhaps the primary reason I like to have exposure to Bitcoin in my portfolio is the almost unimaginable upside. I always hesitate to talk about the upside scenarios because these are so wild it takes away credibility from my analysis. But if you put the total value of Bitcoin that can be mined (21 million x market price) in perspective the contrast is pretty stark. Even if Bitcoin becomes “merely” a digital gold there’s opportunity for a 70x.
Continued User growth
The pace of growth slowed down a little bit from the end of 2017 frenzy but the hockey stick like growth of Bitcoin wallets can easily resume. In an absolute sense growth remains healthy.
Last year the financial industry started pioneering in the space and a large amount of crypto funds got established. Launches have slowed down with the crypto market down significantly. This is a classic pattern where it’s just much harder to raise money in a down market. However, these funds have now been established and once we enter another big cycle up the infrastructure is ready to accommodate inflows on a much larger scale.
There are now futures available to trade Bitcoin. An ETF did not yet make it to market although there are a number of ongoing efforts. At some point it’s going to happen. I think that could be a gamechanger for Bitcoin. In March 2003 the first Gold ETF (GLD). You can’t be certain but it looks like the introduction had a profound effect on the price of gold.
Bitcoin bears usually complain about transaction costs and speed. These are real issues no one’s denying that. However, they will ultimately be solved by technological innovation. The obvious example being the lightning network. The lightning network is already being used and it allows transactions that are less secure but much faster and cheaper. Many expected it to work by now but it doesn’t as there are still too many transactions failing and the error rate increases as the value of transactions goes up. Up to $0.03 it is reported to work flawlessly and it seems to me it should be a matter of time to get that $0.03 up to a value where the benefit of the lightning network is real. The lightning network is especially important for low value, cup-of-coffee type, transactions. I prefer to buy Bitcoin before these issues get solved instead of buying into the next frenzy as its ongoing.
Over time I’ve written quite a few Bitcoin articles for Seeking Alpha. The first one was called 5 reasons to Buy Bitcoin as well. With Bitcoin around ~$300. You can find most of them here. A good place to buy a few dollars worth of Bitcoin is Coinbase. It is U.S.-based and if you use my invite you can get $10 bitcoin free).
Disclosure: I am/we are long BTC-USD.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.