Invest Long Term in This Revolution, Expert Says
This is individual research and does not constitute investment advice.
Editor’s Note: Today, we’re looking at a strategy that’s a little out of the ordinary.
The article below comes from Early Investing co-founder Adam Sharp. In it, he makes the case for adding cryptocurrency to your retirement portfolio.
Keep in mind, this is a speculative play. If you decide to invest in cryptocurrency, we recommend you invest only a small percentage of your retirement portfolio.
– Rebecca Barshop, Managing Editor
People think you should buy bitcoin because the price is likely to rise over time.
But the real reason you should own bitcoin – especially in your retirement portfolio – is that it’s a bet on a monetary revolution.
Crypto assets are all about cutting out the banks, middlemen, financiers and academics who control our current monetary system.
The monetary policy of today’s world is a mess rife with conflict, interest and bad incentives. Every country does it similarly. Most governments are controlled by special interests and spend far more than they should.
They rack up too much debt and end up printing money to solve the problems that result.
A well-constructed cryptocurrency, on the other hand, has a hard cap on the number of “coins” in existence.
So if we’re looking at bitcoin as a competitor to the dollar, there’s no contest. The U.S. government, for example, borrows more than $1 million each minute… printing money like crazy all the while.
That’s why bitcoin has risen from around $0.005 in 2010 to more than $6,500 today.
Bitcoin is a call option on a future where it’s mainstream money. You don’t sell for double or triple what you put in; you hold on and hope it keeps going up. Less than 1% of people own bitcoin today. If it becomes mainstream money, today’s bitcoin owners may become tomorrow’s wealthy class.
But it’s not just bitcoin anymore. There are hundreds of interesting cryptocurrencies out there – all competing against one another, sharing code and breaking new ground.
Here’s what’s really revolutionary about it…
All of these “coins” or “tokens” (digital assets) have their own funding mechanism – the initial coin offering, or ICO – in which well-run projects raise tens of millions of dollars each week… hundreds of millions in many weeks, actually.
So they don’t need outside funding from the stock market or venture capitalists. Crypto is its own bank.
These crypto projects are trying to do big things like overthrow large, traditional financial institutions, software companies and, in some ways, governments – or at least their monopoly on money.
After all, there’s no good reason a government should have a monopoly on legal tender. Libertarians like Ron Paul have long been calling for “currency competition.” We shouldn’t be forced to use dollars that constantly lose value.
The stakes in this game are high.
Crypto has the potential to be a better form of money compared with the current (crude) methods employed by most governments.
So that’s why you would want to own at least a little bitcoin in a retirement account. Because if the crazy revolution happens, you’ll do very, very well, as long as you buy before half of the country gets in.
If it becomes popular as a way to store value for even 10% to 15% of the population, that’s more than enough to take it to at least $100,000 per coin by my rough estimates. It’s hard to say exactly, but demand is high and rising fast.
Each bitcoin is divisible into 100,000,000 pieces. Each piece is one “satoshi,” named after bitcoin’s anonymous creator, Satoshi Nakamoto.
So if bitcoin continues to rise in value, we may start thinking about prices in satoshis, not bitcoins. Bitcoins will be for very large purchases, and satoshis will be for everything else.
This is already happening in the crypto community. When we buy other cryptocurrencies, we usually buy them with satoshis. It’s easier to think about thousands of satoshis than it is to think about tiny fractions of a bitcoin.
You don’t need to buy a whole bitcoin. Start small and it could still turn into a great deal of money one day.
The technology is advancing, and large amounts of “patient capital” from venture capitalists and other long-term investors are flooding into the crypto industry. Some of the best VC firms in the world, including Andreessen Horowitz and Union Square Ventures, are investing heavily.
The infrastructure necessary for an alternative financial system is being built.
This is why I can’t imagine a better long-term retirement bet than bitcoin and other cryptos. It’s not a sure thing, but I believe there’s a pretty good chance of a crypto financial revolution happening.
Bitcoin peaked at around $19,000 in its recent bull run. Today, it trades for around $6,500. At the start of 2017, it was trading around $1,000. So, to me, this is simply a healthy pullback after a monster run.
Today’s price gives bitcoin a market cap (valuation) of around $110 billion. That’s a tiny blip on the world’s financial radar. I believe the upside remains tremendous.