Why Matt McCall thinks bitcoin is going higher … and now is the time to get in
2017 created immense wealth … and 2018 destroyed it.
That was the reality for many bitcoin investors.
Take “Mr. Smith” — an individual profiled by Forbes who wishes to remain unknown. After finishing college in 2008, this person began working as a software engineer for a large technology company in Silicon Valley.
Courtesy of one of his “equally geeky” friends, “Mr. Smith” first heard about bitcoin in July 2010. This was shortly after its first major price increase. The cryptocurrency had just appreciated tenfold from $0.008 to $0.08 over the course of five days.
In October 2010, Smith had seen enough, so he gambled. He put in $3,000 at a price just of over $0.15 per bitcoin. That bought him slightly under 20,000 bitcoin.
Then Smith largely forget about the investment … until a couple years later, when suddenly the crypto began soaring. When the price hit $350, more than two thousand times Smith’s purchase price, he sold 2,000 bitcoin. When the price hit $800 just days later, he sold an additional 2,000.
And just like that, he had made $2.3 million.
At the end of the day, when prices exploded in 2017, Smith revealed he had made “$25 million, give or take.” From just a $3,000 investment.
***But for every “Mr. Smith,” there is a “Sean Russell”
Russell didn’t have a great deal of investing experience. But he had amassed about $120,000 in life savings, which he sunk into bitcoin in November 2017.
One month later, it was worth $500,000.
I was thinking, wow, that’s mortgages paid, that’s holidays that I’ve always dreamed of.
As you know, the good times didn’t last.
After topping out at a bit more than $20,000, bitcoin’s price collapsed.
Russell tried to mitigate the growing losses by shifting money from bitcoin to other crypto currencies — Bitcoin Cash, Ethereum, and Ripple. But as they lost value too, Russell saw his paper losses reach 96%.
His life savings destroyed.
It was devastating, quite traumatic, really. I’ve seen stories on the news of billionaires going bankrupt, and you think how can that be? How on earth did you lose that amount of money? And yet, here I am in that position.
So, where is bitcoin now? And for investors considering it, is it more likely to result in life-changing riches, like those enjoyed by Mr. Smith? Or catastrophic losses, like those suffered by Mr. Russell?
In today’s Digest, we turn to Matt McCall, editor of Investment Opportunities. You see, Matt is a bitcoin believer. And he thinks we’re on the verge of another major leg higher in its price due to a little-known event happening next year. Today, we’ll look at what it is and why Matt is so confident in bitcoin’s future.
***The basics of bitcoin
Chances are you’re already quite familiar with bitcoin. But for anyone who’s newer to the game, let’s do a very brief primer on the cryptocurrency.
Although it’s largely treated as an asset today, technically, bitcoin is a digital currency.
In its token form, a bitcoin is a snippet of code that represents ownership of this digital currency. The original idea was bitcoin would be an electronic payment system based on mathematical proof. This would enable it to exist outside of a central authority, like a government or bank. It could then be transferred electronically in a secure, verifiable way, beyond outside control.
Bitcoin runs on something you’ve also likely heard of — the “blockchain” network. This is simply a vast network of computers that all track and time-stamp various transactions. Think of it as an incorruptible digital ledger.
Now, that’s a high-level description of what is it, but here’s Matt on what it does and what it’s for:
You can think of it as both a store of value when other assets are over-inflated, like gold, and as a go-to means of value exchange, like the U.S. dollar … Governments or banks can’t suddenly step in to regulate, constrict, control, or debase it anytime they feel like it. For those that don’t place much trust in governments and monetary policy, bitcoin holds great promise.
***Why bitcoin could be a superior storehouse of value
Let’s start with the U.S. Dollar …
When was the Dollar able to buy you more “stuff”? 100 years ago, or today?
If you answered, today, you’re in for a shock.
The chart below shows the U.S. Dollar from 1913 through 2010. More importantly, it shows the Dollar losing over 90% of its purchasing power.
When governments want to pay for wars and big social programs, they often create extra currency units (like dollars). They print more money. In simple supply and demand economics, every created currency unit devalues existing currency units. This is called “inflating” the money supply.
Curious whether the United States government has been printing more money?
Here’s a chart of the M0 money supply since the 60s. “M0” is the most liquid measure of the money supply including coins and notes in circulation and other assets that are easily convertible into cash. Notice the explosion of M0 supply beginning in 2008, courtesy of quantitative easing.
Now, compare this to bitcoin.
The cryptocurrency has strict limits on how many currency units can be created — only 21 million.
Matt tells us that the coins can only be created through “bitcoin mining.” It’s a process that uses powerful computers to solve extremely complicated math puzzles, which are woven into the currency’s design. When someone “solves” one of these puzzles, they are rewarded with bitcoins.
Right now, we’ve mined a little over 18 million bitcoin. So only about 15% left to go.
Here’s the takeaway from Matt:
Bitcoin exists only in fixed amounts — no extra units are possible — and cannot be debased. This is a big reason why the allure of this digital money will grow and grow over the coming decade.
***The event that could cause bitcoin’s next push higher
There’s an event that happens uniquely to bitcoin, which most investors aren’t aware of. It’s called “halving.”
In Matt’s issue, he explains that this event occurs when the reward for mining new bitcoins is cut in half. Every 210,000 blocks, the network goes through the halving. The next one is expected to take place in May 2020.
The reason this is a big deal is because it has happened twice so far in bitcoin’s history, and each time sparked huge rallies.
The first halving took place in November 2012, when mining rewards were cut from 50 to 25 bitcoins per block. The second was June 2016, when the rewards were cut in half from 25 to 12.5 bitcoins.
One year before the November 2012 halving, bitcoin traded in the $3 range. When the halving occurred, bitcoin was up to $12 — a 4X return in just one year. And one year after the halving, bitcoin hit $1,200 — a 100X return!
The second halving followed a similar pattern. In June 2015, a year before the event, bitcoin traded at $235. In the month of the halving, June 2016, bitcoin had jumped to $700 — a gain of 3X. One year later, bitcoin was nearly 4X higher at $2,600. And by December 2017, 18 months after the halving, bitcoin hit a high just above $20,000 — a phenomenal 28X gain.
Matt points out that if the historical trend continues, bitcoin could be close to $24,000 by next May. But that would be just the start:
Remember, the last two times this occurred bitcoin shot up 100X and 28X in the 12-18 months after the halving.
If bitcoin rises to $24,000 by next May, even a smaller 4X gain from there takes bitcoin near $100,000 for the first time ever.
This is just the beginning as to why Matt thinks bitcoin is going to push higher from here. To read more of his analysis, click here.
***If you’re thinking about investing in bitcoin — or any cryptocurrency — please head the cautionary tale of Sean Russell
Cryptocurrencies are not an “all in” investment.
Due to their volatility, they must be treated with caution. Even though there’s a strong case to be made for big gains from bitcoin, do not invest more than you could afford to lose. After all, as Sean Russell’s experience illustrates, a 96% loss is a possibility.
But the good thing is even a modestly-sized investment has the potential to turn into serious money. As Matt pointed out, history suggests bitcoin could hit $100,000 by one year from May — that would be a be about an 11X return from today’s prices.
Here’s Matt for the last word:
… I think (bitcoin) could soar by 15X or more in the coming decade.
The good news is that you haven’t missed the boat if didn’t buy into bitcoin seven years ago. Not by any means …
…I believe we’re just getting started.
Have a good evening,