Welcome to the weekly mailbag edition of The Daily Cut.
Bitcoin (BTC) has been on a tear in 2020. At the start of the year, one bitcoin traded at $7,200. Now it’s at $15,600.
That’s a jump of 116% – enough to more than double your money.
And bitcoin’s long-term performance is even more impressive. Since 2013, when it traded at $13.50, it’s up 115,456%. That’s enough to turn every $1,000 into $1.1 million.
But as I’ve been showing you in these pages, there’s still plenty of upside ahead for the world’s first cryptocurrency.
Colleague and world-renowned crypto investing expert Teeka Tiwari sees bitcoin and other crypto prices continuing to climb as they go from fringe to mainstream assets.
And right now, he’s most excited about a tiny group of cryptos he believes can change your life. They’re extremely rare. Out of more than 7,000 cryptos, he’s found just six that he thinks are worthwhile.
What makes them unique is something buried in their code. It’s one of the most powerful moneymaking catalysts Teeka’s ever seen.
The last time this catalyst struck, you could have made rare and extraordinary gains like 5,837%… 21,267%… 48,371%… 68,141%… and even 538,868%… (Just $500 into that last one would have turned into $2.7 million!)
Teeka will reveal all next Wednesday, November 11, at 8 p.m. ET at his Crypto Catch-Up event. It’s free to attend. And he’ll be giving away the name of one of his picks to everyone who shows up.
So make sure you’re signed up for that here.
I discussed this with Teeka earlier this week as part of an in-depth Q&A for paid-up members of Legacy Inner Circle. (If you’re a member, you can access my video call with Teeka in full here.)
I often hear from folks who would like to own bitcoin. But they’re not tech-savvy, and they don’t want to leave their comfort zones. So I asked Teeka what he advised for people who find crypto confusing.
Here’s what he told me…
If you don’t climb the educational curve to get involved in these assets, you will be left behind forever. Forever. The stakes have never been higher. We are in the middle of a transition unlike anything we’ve seen since we went from a farming economy to an industrial economy.
That’s why we’re kicking off today’s mailbag with a reader question about the Grayscale Bitcoin Trust (GBTC).
If you’re just catching up, Grayscale is an asset manager that allows accredited investors to own bitcoin through its exchange-traded funds (ETFs). It’s a way for investors to track the price of bitcoin without having to buy and store crypto themselves.
And it’s become a major player… With 450,000 bitcoin under its management, GBTC is worth $7.2 billion.
Now, a reader wants to know if it’s a good option for his own bitcoin exposure…
Reader question: Why is it better to own bitcoin and keep it in a wallet, rather than own an equity like the Grayscale Bitcoin Trust and trade it on the stock exchange?
– Thomas B.
Teeka’s answer: Hi, Thomas. The more secure option is to store your cryptocurrency in a digital wallet that you have a private key to. There’s a saying in crypto, “Not your keys… not your crypto.”
This alludes to the importance of holding the private key yourself. It’s what allows crypto to move out of your digital wallet.
It’s like the keys to your house. If you don’t hold the keys, it means that when you need to get into your house, you’ll need somebody to come unlock the front door.
It also means you don’t control where they hold the private keys on your behalf… who has access to them… or any other aspect of security. It’s why self-custody of assets is the preferred solution for holding crypto.
Now, in some situations, certain people may not trust themselves as the key holder or custodian. This is where platforms that custody your crypto may be a better solution for some. But it’s important to understand the risk associated with not holding your own keys.
For GBTC, there’s some merit for somebody who wants to buy shares versus taking custody of the asset on their own.
You hold GBTC in your brokerage account. There are no keys to lose. It also may be the only reasonable way to gain exposure to bitcoin in a retirement account.
Whatever reason brings you to GBTC as an investment choice, it’s important to understand what you’re buying. One share of GBTC equals 0.00095461 bitcoin. And over time, this figure gets smaller, due to a 2% fee. The fee is charged in a way that reduces the exposure per share.
Also, GBTC typically runs at a premium over the market going rate, or “spot” price, for bitcoin. As I write, bitcoin is trading at $15,600. GBTC is trading at $17.27. If we take $15,600 and multiply it by 0.00095461, we get $14.89.
In other words, you pay 13.8% more to own bitcoin through GBTC than if you were to go to a crypto exchange and buy it directly.
If you decide it’s worth paying a premium for the security and convenience of GBTC, then maybe it makes sense, given your situation.
Regular readers will know that one of the hottest topics in our mailbag is a debate about bitcoin and gold.
They’re both ways to escape the mainstream financial system. But ever since Legacy’s globetrotting goldbug, Tom Dyson, wrote “bitcoin will prove to be worthless,” our mailbag has been buzzing.
Tom reckons gold is a superior store of value because it has intrinsic worth outside of its use as money.
Gold has all kinds of practical uses, from jewelry to technology. So Tom says it will always be in demand. That’s why folks trust it as payment.
But Tom’s argument hasn’t convinced all the analysts here at Legacy…
Take this response from The Casey Report and Crisis Investing editor Nick Giambruno…
Point #1 – There Is No Such Thing as “Intrinsic Value”
One of the first – and most important – things free-market Austrian economics teaches is that all value is subjective.
There is no such thing as objective or intrinsic value.
Something has value only because individuals subjectively determine it has value to them.
When people didn’t understand what crude oil was, they’d find it in their backyards and think it was waste. They’d pay to have it removed from their property.
Later, once people understood the economic potential of crude oil, it transformed from unwanted waste into a lucrative commodity.
The oil itself didn’t change; it was still the same oil. What changed was how people valued it.
Marxists differ in that they falsely believe that labor has objective and intrinsic value. In other words, something obtains its value only due to the labor that went into it.
But we can easily debunk this ridiculous notion.
The great Austrian School economist Murray Rothbard explains this by asking people to try to make and sell mud pies – not the chocolate desserts, but pies literally made of dirt.
According to the Marxists, the pies have objective and inherent value because of the labor someone put into making them. But good luck getting someone to pay for them voluntarily…
The concept that all value is subjective applies to all goods, including monetary goods.
A lot of people can’t wrap their minds around how bitcoin – which is digital and intangible – can be a good money.
A lot of people reason, incorrectly, that bitcoin can’t be a good money because it’s not physical and doesn’t have any industrial use or “intrinsic value.”
I would argue those characteristics are irrelevant to bitcoin’s use as money.
What is relevant is that bitcoin shares many of the same monetary properties as gold. It’s durable, divisible, consistent, convenient, and scarce. And most importantly, it’s a hard money (i.e., it’s hard to produce relative to existing stockpiles) because of its ever-shrinking supply growth. Up until bitcoin, gold was the hardest monetary good.
The bottom line is that hardness is arguably the most important characteristic of a good money, because it means nobody can easily inflate the supply. And bitcoin is now the world’s hardest money.
It’s important to note that no other crypto has a monetary policy with the credibility of bitcoin.
All other cryptos have key players, insiders, and development teams that can potentially act like central banks and increase the supply if they choose to. They’re not hard assets.
It’s a temptation that humans will likely find impossible to resist. Eventually, it will happen – that is the nature of putting the potential to tinker with monetary policy in the hands of humans.
Bitcoin, on the other hand, takes humans out of the equation. Its nondiscretionary monetary policy is in the hands of an unalterable protocol.
Bitcoin is the only crypto that is truly not controlled by anyone. Nobody can get together and alter its supply, which is fixed for eternity.
That’s the essential difference between bitcoin and all other cryptos. That’s why bitcoin is credibly a hard asset.
Taken together, these superior monetary characteristics have caused millions of individuals all around the world to subjectively value bitcoin as money. Billions of others will soon join them.
Point #2 – Industrial Use Does Not Make a Good Money
Industrial use is not necessary to make something money.
The use of something as money itself is sufficient for it to be money.
That gold has some minor industrial use doesn’t give it its monetary properties. People value gold as money because of its unique monetary characteristics – namely that the supply growth is lowest and most predictable relative to existing supplies of all commodities – not because it’s used in dentistry, electronics, or other industries.
On the contrary, I’d argue that gold’s relatively small industrial uses are a weakness, not a strength. Gold would be an even better money without the variation in its supply/demand that comes from its industrial uses, which are unrelated to its use as money.
When it comes to money, I’m interested in a purely monetary good, which simply means something good at storing and exchanging value.
I’m not interested in something whose value is hostage to the whims of ever-changing industrial conditions. That’s why platinum, palladium, copper, silver, and other primarily industrial metals are all poor forms of money compared to gold and bitcoin.
That’s all for this week. To get in on the outsized crypto profits still on the way, remember to sign up for Teeka’s free event next Wednesday. You’ll learn all about the lucrative setup he stumbled upon in six crypto coins.
If you’d like to put a question to the Legacy experts, be sure to get in touch at feedback@legacyresearch.com.
Have a great weekend.
Regards,
Chris Lowe
November 6, 2020
Bray, Ireland