Bitcoin’s Time to Shine
Managing Editor’s Note: Here at Energy & Resources Digest, we’ve been closely watching the meteoric rise of bitcoin and other cryptocurrencies.
Whenever a new asset class comes along, it’s normal – and healthy, really – to approach it with a critical and skeptical eye.
But the performance (and potential) of cryptocurrencies is getting harder to ignore…
Our friend Adam Sharp, co-founder of Early Investing, is an expert on cryptocurrencies. (In fact, his research service First Stage Investor has four active “crypto” recommendations and explains how to invest in them properly.)
In this article, Adam explains why this investment opportunity is truly historic.
We hope you enjoy it as much as we did.
As always, please share your thoughts and questions in the comments section below the article!
– Patrick Little, Managing Editor
One of the first purchases ever made with bitcoin was pizza.
In 2009, an early user sent 10,000 coins to a friend who in exchange ordered him two Papa John’s pizzas.
Those same coins used to order pizza would be worth $27 million today.
Back then, the cryptocurrency community was tiny. There were no exchanges.
Today, around $2 billion worth of bitcoin is traded daily. That’s a higher volume than that of the SPDR Gold Trust ETF (NYSE: GLD) – the most popular gold ETF – as recently noted by Bank of America.
You can spend bitcoin at an increasing number of places. But as I’ve mentioned before, that’s not the real purpose.
Bitcoin is digital gold. You hold it, and it appreciates in value over time as it spreads to more users.
Having Its Moment
The cards are lined up perfectly for bitcoin. Its primary competitors are all vulnerable to disruption.
- Trust in the government is at an all-time low.
- Stocks are expensive.
- The government is printing fiat money like never before.
- Bond and CD yields are tiny.
Then there’s bitcoin, the best-performing asset ever, up 45,000 times or so. It’s the only asset that can be easily sent around the world, safely stored on a USB stick in your pocket and turned into cash almost anywhere.
Bitcoin is “mined” by very powerful specialized computers. It takes a lot of energy to do this cryptographic work (which helps secure the network). Bitcoin mining has become an industry, with hundreds of millions of dollars being spent on equipment and energy.
Bitcoin is also decentralized. It runs on hundreds of thousands of computers all over the world. That means you can’t shut it down. The network cannot be seized or easily blocked.
Bitcoin evolves over time. Changes to the software can be proposed by anyone and are voted on by bitcoin holders. Miners have significant influence as well.
Today, perhaps a few million people own any cryptocurrency at all.
It’s very early. And that’s one thing that’s hard for people to realize, since the price has already risen so much.
The price jump so far has simply been the result of the number of bitcoin holders going from a few hundred to a few million. I plan to hold my bitcoins as that number goes from a few million to a few hundred million.
Bitcoin’s growing incredibly, exponentially fast. But make no mistake: It’s still considered fringe stuff. It’s not owned by any major financial institutions. Money managers haven’t started recommending it as part of any portfolio I’ve heard of.
But the big boys are slowly starting to come around. Fidelity recently integrated bitcoin exchange data into its retirement accounts, so users can check their crypto holdings along with their 401(k)s, all within their Fidelity accounts.
This is a huge firm publicly dipping its toe in the water. The CEO has also spoken very highly of blockchain-based assets.
I think all these mega-financial institutions will come around eventually. And then the real buying will begin.
They can’t deny that bitcoin is the best-performing asset in history, or that adoption is accelerating. The largest U.S. crypto exchange reported 1 million new customers in June of this year, reflecting an incredible pace.
All the bitcoins in existence are now worth around $67 billion.
There are 15 million bitcoins available today, and there will only ever be 21 million. Not a lot to go around on a planet with 7 billion people.
If all 21 million bitcoins were distributed evenly among the world population, everybody would get 0.00222872 of a bitcoin.
And yes, you can buy and sell tiny fractions of a bitcoin. Each one can be divided into 100 million pieces. It was designed this way so that if it rose in value thousands of times, you could still spend it easily.
Bitcoin has already changed the lives of thousands of early adopters, including mine, and it’s going to change a lot more over the coming years.
And the new generation of cryptocurrencies and other digital assets are on a rip-roaring bull run. A few of them may even challenge bitcoin.
To get my top four crypto picks and a complete guide to investing in this space, you need to join our research service First Stage Investor. See our new video about the service here.