The world’s first cryptocurrency hit an all-time high of $67,617 last November.
Since then, it’s down 44%.
That’s led to a spate of negative stories from mainstream reporters.
They’ve compared bitcoin to “meme stocks”… “crappy tech stocks”… even a “venereal disease.”
I (Chris Lowe) kid you not…
That last one was in a story on financial news website MarketWatch. It was based on a comment from Warren Buffett’s right-hand man and outspoken bitcoin hater, Charlie Munger.
But as our crypto investing expert, Teeka Tiwari, has been showing his readers, lower prices shouldn’t make you bearish on bitcoin.
Instead, they’re an opportunity to add to your position at a steep discount.
As we’ve covered in these pages, Teeka sees bitcoin hitting $500,000 within the next three years as its mainstream adoption ramps up.
And as we’ll get into today, the military conflict in Ukraine – and the financial warfare it’s unleashed against Russia – will accelerate that process.
He knew the U.S. and its allies would hit back at Russia for invading Ukraine by slapping sanctions on its economy.
And he knew their sanctions could devastate Russia’s currency, the ruble.
So he ordered the Russian central bank to stockpile foreign currency reserves to defend the ruble.
If the Russian currency started to slide, he calculated, the central bank could use these reserves to buy rubles. This would prop up the ruble’s value.
As of January, the Russian central bank had $630 billion in reserves.
This mostly consisted of deposits in bank accounts in the U.S., China, Japan, Germany, and other European countries.
It also included a bunch of bonds and about 2,500 tons of gold.
Days after Russia’s tanks rolled into Ukraine, America and its allies froze the Russian central bank’s assets.
Its foreign exchange deposits and bonds are still there. But now the Russian state can’t access them.
The only foreign currency reserves it can use to shore up the value of the ruble are deposits with Chinese banks.
China hasn’t joined the West’s sanctions on Russia.
Outside of those, the only other store of wealth Putin can rely on is gold bars the Russian central bank has stored in underground vaults in Moscow.
Gold is up 3.8% since the start of the war.
That’s roughly double the gain for bitcoin over the same time.
But Teeka says bitcoin will be the ultimate winner. Here’s how he explained it in our Palm Beach Daily e-letter…
While many still consider gold a store of value, it has limitations.
First, it isn’t easy to move. A million dollars in gold bars weighs about 31 pounds. That makes it difficult to transport. Now, imagine trying to transport billions of dollars’ worth of gold… That’s more than 15 tons.
Second, gold’s liquidity is all in the paper market… not the physical market. Much of the world’s gold trading occurs in the futures market. People are buying and selling paper contracts for gold, not physical bars.
Analysts estimate that for every one bar of physical gold traded, there are 200 bars of paper gold traded. So if you get frozen out of the financial system, you can’t easily sell your gold.
Like gold, it’s nobody else’s liability. That makes it hard to confiscate.
But unlike with gold, you don’t need vaults to store your bitcoin. You can store billions of dollars in crypto wealth on a thumb drive.
And bitcoin is more liquid than physical gold, too. You can trade it online 24/7 without any need to lug around heavy bars.
That’s why Teeka says bitcoin will win out over gold as a new reserve asset…
I believe we’ll see central banks put bitcoin on their balance sheets at some point soon. And it’ll completely change the game.
Just as U.S. Treasuries, European bonds, and gold are major reserves today… bitcoin will become a part of a country’s reserves in the future.
That hasn’t happened – yet.
But we’ve already seen significant steps in this direction.
That’s going by figures from crypto analytics firm CoinGecko.
The biggest holder is Nasdaq-listed business intelligence software maker MicroStrategy (MSTR). It has about $4.7 billion in bitcoin on its balance sheet.
Next comes Tesla (TSLA). It holds bitcoin reserves worth nearly $1.9 billion.
And overseas companies are turning to bitcoin as a reserve asset as well.
Since last March, Meitu, a Chinese company behind a popular photo-editing app, converted $50 million of its treasury reserves into bitcoin.
Over that same time, Aker ASA – a Norwegian industrial investment company that usually invests in fossil fuels – converted $60 million of reserves into bitcoin.
And last April, Nexon – a South Korean videogame maker – converted $100 million of its reserves into bitcoin.
Especially central banks in countries that fear getting on the wrong side of Washington.
They’ll be looking at what happened to the hundreds of billions of dollars’ worth of reserves Russia thought it had saved for a rainy day. And they’ll be thinking hard about how to make sure the U.S. and other Western governments can’t do the same to them.
Gold is a traditional way of doing that. But as Teeka laid out, bitcoin has several advantages over gold.
We’ve already seen individuals and corporations adopt bitcoin as a reserve asset. The next frontier is central banks.
You just have to be clear about one thing: Even though the long-term trend for bitcoin is up, there’ll be plenty of volatility along the way.
Back to Teeka for more on that…
I predict bitcoin will hit $500,000 by 2025. But what it does in the meantime, I have no clue. It could drop as low as $20,000 this year… or rise as high as $100,000. We just don’t know.
The good news is you don’t need to know. You just need to get the big call right. If that happens, everything else is just noise.
So if you have cash you want to put to work, consider buying some bitcoin today.
If you’re starting out, Teeka recommends buying just $200 of bitcoin and becoming familiar with how to store it.
You can find out more about how to do that in the free cryptocurrency quick-start guide Teeka and his team put together.
And if you already own some bitcoin but want to build your position, now is a great time to do that, too.
Just don’t forget to always maintain a diversified portfolio. Teeka recommends you hold no more than 10% of your overall portfolio in bitcoin… with as much as another 2% set aside for other cryptos.
Regards,
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Chris Lowe
March 14, 2022