Japan Makes Bitcoin Legal

We’ve all heard about those early success stories.

Someone who happened to get in on a stock before anyone else. Make crazy triple-digit gains in a short amount of time before selling the stock and moving on to a new one.

My college, Greg Canavan, is launching a brand-new service that enables investors to get into stocks before they are listed on the Australian Securities Exchange. That’s where the big gains are to be found. Be sure to keep an eye on your inbox.

Same goes for Bitcoin. The giant, never-to-be-repeated gains occurred for early investors.

It was seven years ago this May that the world saw the first ‘Bitcoin Pizza Day’.

A programmer called Laszlo Hanyecz spent 10,000 bitcoins on two Papa John’s pizzas. Back then, one bitcoin was worth 0.003 US cents.

This morning, one bitcoin is worth US$2,290.35 (AU$3,078). To put this in perspective, the 10,000 bitcoins Hanyecz spent on two pizzas in 2010 would be worth US$22.9 million (AU$30.7 million) today.

Humpf. To all those early Bitcoin adopters, I salute you. Unfortunately, I can’t say I was one of them.

In fact, I’d never heard of Bitcoin before 2013, when I was introduced to Revolutionary Tech Investor Editor Sam Volkering. Sam explained what Bitcoin was and how it was mined, while laying out the case for a future filled with cryptocurrencies. While I’ve always loved all things tech, I didn’t jump on board and buy any bitcoin back then. Instead, I stuck to what I knew best…stocks, gold and silver.

I’m still kicking myself over that. If you happened to own bitcoin when it was worth 0.003 US cents, you’d be sitting on a 7,746,233.33% gain today.

See what happens when you get in early?

However, we may look back at 2017 as the year Bitcoin went ‘mainstream’.

The cryptocurrency started 2017 at US$997.79 and has made an incredible 124% gain for the first five months of this year.

Sure, that’s not a seven-million-percent increase…but clearly the alternative currency is starting to gain some clout.

For starters, one bitcoin is almost twice the value of one ounce of gold. As of this morning, the gold price is US$1,269. You can at least hold gold in your hand and feel its weight. But you can never touch a bitcoin.

However, bitcoin has an unlikely ally…the Japanese.

The gain has largely come on the back of Japan officially recognising Bitcoin as legal tender. Since 1 April this year, Japanese retailers can now choose to accept bitcoin as payment.

It took some time for the rally to kick in, but the price of Bitcoin began to soar from the start of May.

Bitcoin US dollar — three-month chart

Source: CoinDesk.com

Click to enlarge

Japan’s move to accept bitcoin as legal tender goes some way to legitimising the currency.

Like gold, bitcoin is one of the few remaining products beyond government manipulation, at least for now. Along with precious metals, this is one of the last options investors have to keep their wealth out of the hands of governments and central banks.

Japan is now the only country in the world to recognise it as legal tender. Many other countries merely tolerate its presence.

The next push for Bitcoin will — surprisingly — come from Russia. One of the country’s largest retailers, Ulmart — the Russian version of Amazon — is planning on accepting bitcoin as payment from 1 September this year.

This move clearly shows the softening of Russia’s stance on cryptocurrencies.

Last year, the Russian Ministry of Finance was pushing for legislation that outlawed any cryptocurrencies. Either accepting defeat — or finally seeing it as a way to sidestep the US dollar — the Russian deputy finance minister hinted that Bitcoin and other cryptocurrencies may become legal tender in 2018.

So we have Japan and Russia leading the way by accepting cryptocurrencies…and then we have Australia…

Australia yet to catch up…again

Australia’s war on cash became noticeable in December last year, when mainstream rags such as The Sydney Morning Herald were pointing out that criminals love $50 notes to complete their naughty criminal deeds.

This topic came up with a subscriber earlier this month, at Port Phillip Publishing’s Doomers’ Ball at the Windsor Hotel. They wanted to know how to spot these wealth-altering moves from governments and central banks.

My answer was simple: It’s the language. The little statements that easily go unnoticed.

Once you know what to look for, you see it everywhere. The easiest path to change public opinion is to point out the criminal relationship with something.

I pointed this out a couple of weeks ago in Money Morning, in the wake of the ransomware attacks that crippled 200,000 computers globally.

Part of the war on cash involves encouraging you to embrace all things digital.

In the aftermath of hundreds of thousands of computers being held hostage, subtle jabs were being made towards Bitcoin by the media and governments, who were pointing out that the ransom to ‘unlock’ your computer involved transacting bitcoin.

That’s step one in demonising cryptocurrencies.

In other words, they don’t just want your cash; they want your wealth as well.

This attack put Bitcoin firmly on the Australian government’s radar.

In the week since I argued that Bitcoin would be next to face scrutiny from the Aussie government, The Australian wrote:

The federal government’s key tax adviser has dramatically upgraded its estimates of the size of the cash economy in Australia to as much as US$50 billion, as it ramps up its focus on illegal activities including drug trafficking and money laundering.

The Black Economy Taskforce is now set to focus on a range of areas including illegal gambling, hire practices from criminal gangs and the illegal cigarette trade as it delves further into the black economy… Its interim report also lists cryptocurrencies such as bitcoin as likely areas of focus in its final report.

And there we have it.

Bitcoin is now on the hit list of things the government is looking to control. Of course, it’s for your own safety. After all, it’s clear that only bad people would use an asset beyond the reach of government control.

As I said, it’s the change in language. Make no mistake. Bitcoin is on the Aussie government’s radar — which is a shame when Japan is actively taking steps to embrace cryptocurrencies.

Kind regards,

Shae Russell,
Editor, Strategic Intelligence

Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Fat Tail Investment Research eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

Money Morning Australia