Look at this chart of bitcoin (BTC).
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Our favorite cryptocurrency began the year at $28,996…
It climbed as high as $64,870…
Then it plunged back to $28,019… before taking off again.
This volatility can make your stomach churn… especially if you’re new to crypto.
It may even cause you to panic sell. And that could end up being the worst financial mistake of your life.
Because as I (Chris Lowe) will show you in today’s dispatch, bitcoin’s unique features could help it hit $680,000.
That’s a 1,600% gain from today’s level… enough to turn a $1,000 investment into $17,000.
Moves like these grab attention. The drama makes for good TV news.
But as colleague and world-renowned crypto investing expert Teeka Tiwari has been showing his readers, obsessing over every price swing is a waste time.
This is par for the course when a breakthrough new technology emerges.
Amazon.com (AMZN) plunged as much as 94% on its way to a $1 trillion valuation. And Apple (AAPL) plunged as much as 82% on its way to a $1 trillion valuation.
That’s why Teeka calls volatility the “price of admission” for spectacular gains as an investor.
So instead of fretting over short-term price moves, he recommends you focus on the only stat that matters for bitcoin right now: the pace of adoption.
Here he is with more on that…
The odds of guessing what the crypto market will do over a short timeframe are too small to bet meaningful money on. That’s why I stay focused on long-term adoption trends.
I’m not saying I don’t ever look at crypto prices. That’s impossible. But I don’t let price be my guiding star when it comes to my research. When I’m figuring out the future of any investment, I look at two things: Is it getting better? Are more people using it?
This is particularly important for investments in new technologies. And Teeka has viewed cryptos as a tech play ever since he first recommended bitcoin in April 2016.
In January, bitcoin hit 100 million users. That’s faster than it took for the internet and smartphones to hit that level of adoption.
This has helped make the cryptocurrency the fastest asset in history to reach a $1 trillion market value.
And as Teeka explained here, he believes we’ll see 5 billion bitcoin users as adoption expands.
But what makes bitcoin something people want to use in the first place?
Some people claim bitcoin has no value at all. Others see it as the most transformative new technology since the internet.
When you boil it down, why does bitcoin have value?
There can never be more than 21 million bitcoins. That’s baked into the crypto’s code.
And mining each new coin is costly. That’s thanks to the complex – and energy-intensive – math puzzles bitcoin miners have to solve to get their rewards.
But scarcity alone doesn’t give something value. People also have to want to own it.
People want to own bitcoin because it solves an important problem: It allows us to securely store wealth without relying on a third party.
That’s not true of most financial assets.
You may legally own your stocks, your bonds, and your cash accounts. But you rely on a broker or a bank to hold them for you.
In the case of cash accounts, you need a commercial bank and a central bank to manage transactions.
Bitcoin is different. You can self-custody your coins in a digital wallet on your smartphone. All you need is a private cryptographic key to access and spend your funds. Banks and other middlemen don’t come into the equation.
Gold is metallic cash that’s been around for thousands of years.
It’s decentralized, like bitcoin. You can also self-custody it. You don’t need a third party to manage transactions.
You can swap a gold coin or bar for something worth the same amount. No bank or institution needs to be involved.
In their electronic form, fiat currencies such as the dollar are not decentralized. Central banks and governments control their supplies. You also need banks to facilitate transactions.
But you can self-custody your fiat currency in paper form – say, under the mattress. And you can use this physical cash to buy or sell something without involving any third party.
Analyst and investor Lyn Alden has some of the best insights into crypto outside of Legacy Research. Here’s her take…
Bitcoin is digitally native, unlike gold and cash. Gold and cash can only be transacted with offline, unless [you] are willing to rely on a trusted/centralized third party (at which point they lose the property of being self-custodied and censorship-resistant). Bitcoin can do that online and across borders. It’s a digitally-native money-like bearer asset.
Bitcoin isn’t “magic internet money,” as its detractors like to call it. It’s the world’s first electronic bearer asset.
Bearer assets mean he who bears them owns them. They have value because they’re hard to confiscate.
In 2015, the country was reeling from an economic crisis. The government decreed savers couldn’t withdraw more than €60 (about $66 at the time) a day from their banks.
Argentines suffered a worse fate 15 years earlier…
I experienced it firsthand. I was living and working there at the time.
To stop a bank run, the government there froze Argentine-peso bank accounts as the currency cratered. And it banned withdrawals from U.S.-dollar-denominated accounts.
Governments can have other, more sinister reasons for freezing accounts, too.
Just ask Russian opposition leader Alexei Navalny. He uses bitcoin donations to try to get around Vladimir Putin’s government’s attempts to block his funding.
Between 2000 and 2016, the Department of Homeland Security seized more than $2 billion in cash from folks passing through U.S. airports.
In 70% of those cases, officers made no arrests.
Thanks to a legal tool called asset forfeiture, law enforcement officers can permanently take your property – including physical cash – if they suspect it’s connected to a crime.
That makes it hard to get your cash back… even if you did nothing wrong.
Law enforcement doesn’t have to prove you got it illicitly. You have to prove you earned it legally.
By contrast, you can go through an airport carrying millions of dollars’ worth of bitcoin in your head.
All you need to do is memorize the “seed phrase” (a string of random words) that can access your bitcoin when you arrive at your destination.
So the next time someone claims bitcoin is worthless… tune them out. They don’t know what they’re talking about.
Bitcoin is the world’s first electronic bearer asset. Thanks to its scarcity, it’s inflation-proof, like gold. But unlike gold, you can transact with it online 24/7, 365 days a year.
Consider bitcoin in relation to gold.
The market value of all mined bitcoin is about $700 billion. That may sound like a lot.
But it’s still 17 times smaller than the value of all the world’s mined gold, which is $12 trillion.
So if the bitcoin market becomes as valuable as the gold market, it would mean a bitcoin price of $680,000.
Even if bitcoin becomes only half as valuable as gold, it would mean a bitcoin price of $340,000.
With bitcoin currently trading for $39,650… both targets mean it’s a bargain at today’s price.
Don’t know where to start? You can find out how to buy your first bitcoin in our free special report here.
Regards,
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Chris Lowe
August 2, 2021
Barcelona, Spain