Is Bitcoin going to the moon or to zero?
Cryptocurrencies are again becoming a hot topic but opinions are very polarised. The buzz around Bitcoin is starting again since making double digit gains in 2020 and thought it would be good to evaluate my position on this.
What do I really think about Bitcoin? And why did I invest around 10% of my net worth into cryptocurrencies with the hope that it provides a 2-5x return?
In a few weeks from when this article was published the 3rd Bitcoin Halving is taking place. This is huge and if history plays out we’ll see Bitcoin’s price dramatically increase.
The aim of this post is to consolidate what I know about the crypto space, technology and why I invested and when my longer-term strategy is.
I should make clear that I am no cryptocurrency or blockchain expert but have invested into Bitcoin, Ethereum, Litecoin, Ripple and OMG over the last few years. I have invested only what I can afford to lose should it go to zero.
My Views on Bitcoin
First off it’s useful to know where I stand with Bitcoin.
Do I foresee Bitcoin, or actually any cryptocurrency today, as a means for transactional payments?
In its current form, I really doubt it.
I considered offering Bitcoin as an alternative payment for my e-Commerce store but decided against it as I believe the uptake would be simply too low to worry about.
And this is the issue.
I am sold on the use case of cryptocurrency but don’t see the point in offering this as a alternative payment solution.
I know that some services work well using cryptocurrency as a transactional payment, for example, for can buy Gold through BullionStar using Bitcoin.
At this time though, I see Bitcoin predominantly as a digital wealth storage, a digital alternative to Gold if you like.
I have never been tempted to invest in ICOs and concentrated 99% of the time buying and holding Bitcoin, and in 2017/2018 Ethereum too.
Bitcoin a form of Gold 2.0?
Bitcoin has been compared to gold, and even considered to be the new and improved version gold. Hence the term Gold 2.0.
Both Bitcoin and Gold are in finite supply.
There will ONLY be a maximum supply of 21 million Bitcoin available. Estimates suggest that so far 18 million bitcoins are in existence, but not all of these are usable as it’s believe a sizeable chunk (4 million) have been lost.
Source: check out How many bitcoins are there
Bitcoin is the first asset ever to have a 100% predictable monetary supply. This is huge and is different from any other asset, even Gold.
Bitcoin Trading 101
As I mentioned already, I don’t trade cryptocurrencies at all. I know a few guys who do, but I have bought and sold in the early days when I dabbled with trading Litecoin, around 2017.
Most friends who have traded cryptocurrencies got out mostly due to losses. I know one person who did very well in 2013 when his holding went from 50 cents to $50, turning his Bitcoin into a seven figure profit.
Just imagine what the value would have been worth now! (he tries not too!).
I have bought and sold cryptocurrencies in the early days when I dabbled with trading Litecoin, around 2017. I managed to make a 10x return when I sold out of Litcoin, then used this profit to buy Bitcoin.
This may sound like a shrewd play on my part, but I used the profit to invest in a few bitcoin when the price was at the high price of $16k. Looking back from today this looks far from a smart investment, but in the future who knows.
Inside a Bitcoin Mining Operation
For anyone new to Bitcoin it can be hard to conceptualise how this decentralised network is maintained and works 24/7.
I found this YouTube video, which gives a great idea of what a large Bitcoin mining operation looks like.
Upcoming Bitcoin Halving
In around 14 days there is going to be possibly one of the biggest events in Bitcoins relatively short history.
This is the much anticipated Bitcoin block reward halving of 2020.
In Bitcoins history the block chain halving has happened only twice before, in 2012 and in 2016, each time triggered a bitcoin bull run. In 2016 this saw Bitcoin reaching the high of $20k per bitcoin.
The significance of the bitcoin halving is a big drop in supply that has an inflationary impact on the prices. This is what is causing cryptocurrency speculators to get excited, me too.
The reward for mining bitcoin is 12.5 BTC per block mined and on average one Bitcoin is mined every 10 minutes. So, each day 1800 Bitcoin are “minted” into existence.
After the halving the reward will be halved (hence the name) to 6.25 BTC per block, which means miners will lose out. Then each day the number of bitcoin mined each day will be 900.
This will trigger a massive supply shock to the Bitcoin ecosystem.
Even with the same demand for Bitcoin and the supply side drop many believe (and I do too) that the price of Bitcoin will increase. Equally though we could see big fluctuations in price as cryptocurrencies have been known to demonstrate.
The question is, how much will it increase and will Bitcoin reach all-time highs?
For more detailed information on the Bitcoin Halving check out this video from Altcoin Daily.
Interestingly the video from Altcoin Daily outlines why he believes we will see a bull run not immediately after the halving but in 6-12 months.
To find out more about the Bitcoin halving check this page out.
Why does Bitcoin halving occur?
After every 210,000 blocks, Bitcoin goes through a process called “halving.” This mechanism was integrated into the protocol by Satoshi Nakamoto himself.
After a protocol goes through “halving,” it cuts the supply of new Bitcoins in half, halving the miner’s block production rewards, as well.
Bitcoin Speculators (Bulls)
Over the last few years there have been some serious speculating in terms of Bitcoin prices.
These are gone in both directions with respected professionals and personalities pricing Bitcoin at $100k to a million dollars, all the way down to zero.
With such a spread in the future prices in Bitcoin
I was talking about the general optimism around Bitcoin and well cryptocurrency with my friend Dirk (I interviewed him before about his 6 Figure Inc course, check it out here).
One of the most well-known Bitcoin bulls is none other than Billionaire Venture Capitalist Tim Draper. He is quoted as seeing Bitcoin valued at $250,000 by 2023, which would of course be great news for all HOLDers out there.
Interested to know more about the world of cryptocurrency?
I have recently become a member of Intelligent Cryptocurrency, which is ran by my good friend Dirk. Yes, the guy I just mentioned above.
This is a private, members only chat group where you can get daily updates on all things crypto related. It’s a paid membership though so only for those who value the information and have the means to take advantage of it.
Check it out here https://intelligentcryptocurrency.com/.
Bitcoin Naysayers (Bears)
There is no denying there are some significant challenges to Bitcoin, which has caused a number of people to doubt it’s value and use case as a true asset class or form of alternative payment.
This is one of the main arguments against Bitcoin.
Is it a safe and reliable store of wealth, trading or payment alternative?
The cost of transactions is currently too high to make micro-transactions viable but it’s possible for larger value transactions.
Another big challenge is supporting the blockchain and computing power in terms of energy. Mining operations have huge energy demands that can make them environmentally unsound.
That said, the mining operation shown in the YouTube video above uses hydro power to support its massive energy requirements.
Even if decentralisation there are possible failure points for Bitcoin. The main one being the centralisation of large mining operations that could in effect become mining cartels.
These points have only skimmed over the surface of the challenges ahead for Bitcoin. I haven’t even touched on the legal and tax implications, which is way out of the scope of this article.
- Legal/compliance issues – It’s come a long way but it still needs full legal compliance in every jurisdiction. In many places the legality is still vague or uncertain.
- Insurance/safety – It’s getting better but it still needs to get safer for people to use, what happens in case of hack etc.
- Technology – It’s become easier, but it’s still not super easy for most people to actually buy and use BTC. Still complicated and confusing to many
- Education – How to use it, people need to know and be educated on it
- Adoption – This is a catch 22, the more we use it, the more it will be accepted, but more people need to use it for more to accept it
Bottom Line: Good Bet or Risky Punt?
Ultimately I believe the upside is way more attractive than the downside, which is why I have invested currently 10% of my net worth into cryptocurrency.
I don’t trade Bitcoin or use them for any type of transactional payments, I simply buy and hold for the medium to long-term.
Now, there is a risk I lose the lot if it goes to zero. Do I think it will? In my mind there is a greater than 50% chance that it won’t.
So, in my personal opinion (and it’s my opinion but financial advice) it’s worth holding some cryptocurrency to see how this fares in the future. As such, I believe it’s a GOOD BET and will see prices significantly increase in 2020/2021.