I’ve been sitting here for a week with a ‘Bitcoin plummets’ piece up my sleeve, ready to publish. If this was a share of a company, you could bet your bottom dollar (or bitcoin) that we would have had a price retraction at some point.
It’s just natural psychology, as those in profits look to take some risk off the table. And the eager sellers start to drift off as the price falls.
But the price has been hovering around the $5,500 high.
It’s up 3,355% in 2017.
There are no falls in sight, though. If anything, demand might even be building!
That’s because bitcoin is not a share. It’s not PayPal, as some people have said this week, when bitcoin overtook PayPal’s market cap.
It’s not even gold, though there is a loose economic comparison.
The closest analogy you can make is with the birth of the internet.
When the internet started to take off, no one really knew what the outcome would be. In fact, back then, a lot of people were sceptical of the ultimate effect.
Consider this headline in 1995, by the popular Newsweek magazine:
‘The Internet? Bah!’
The story itself was even better. It included such classic lines as…
‘We’ll soon buy books and newspapers straight over the Internet. Uh, sure.’
Erm, clearly not an investor in the US$474 billion company Amazon.com [NASDAQ:AMZN] then!
And this is why the price is rising so steeply now.
Let me explain…
In bitcoin’s case, there will only ever be 21 million bitcoins. They are divisible to eight decimal places though, so there are plenty to go around.
Companies are only now starting to build products using the bitcoin blockchain. It is the most secure, decentralised, record-keeping system in the world. And it’s vastly cheaper than centralised solutions.
In the next few years, we will start to see blockchain solutions in identity, asset trading, banking and administration. Like the internet, it’s still pretty hard to fully comprehend where this will lead to.
Did anyone see smartphones and social media in 1995?
Sure, there are developments and improvements to be made.
But Pandora’s box has finally been opened and, after nine years, the world is realising it’s not quietly going away.
So, if we assume that bitcoin is useful, where does that leave the investment story?
Not enough bitcoin to go around
Imagine if every millionaire in the world received advice from their highly paid financial adviser that they should ‘dip a toe’ into bitcoin.
Each one of these millionaires then decided they should own at least one bitcoin.
Well, there are 15.7 millionaires in the US alone. According to Credit Suisse, there are 35 million millionaires worldwide, and this is expected to rise to 53 million by 2019.
In this case, there would not be enough bitcoins to go around! And that’s not even including the rest of us!
Where does that push the bitcoin price to?
Right now, investors have the chance to own a stake in a future we can’t yet imagine. It’s like being able to buy a ‘part of the internet’ and being paid for every single product built on it, from Google [NASDAQ:GOOG] to Facebook [NASDAQ:FB], and all the rest.
Is it risky?
Yes, of course it is! Riskier than any other investment out there.
And bitcoin is not the only cryptocurrency there is.
In this journey into the future, you will need a guide. My colleague Sam Volkering spends literally every day researching the best of these opportunities. Because a lot of them will end up worthless.
But if you invest in the right ones, the returns could be enormous.
Is it time for you to ‘dip a toe’ in?
Editor, Money Morning