Investing in Bitcoin: What’s Different about Bitcoin This Time…

As I write this, Bitcoin [BTC] is climbing…

It’s only a few dollars shy from reaching a record high of US$23,000 or around AU$30,000.

The Bitcoin price is now way past its all-time high of US$19,783 in December 2017 after a 20-fold increase from US$1,000 in March that year. And it’s a 220% increase from the beginning of this year.

It’s funny though…

Last time around, in 2017, there was a lot of buzz. Everyone was talking about bitcoin and the price was constantly making headlines. I have several friends that went ‘all in’ then and a few were even developing their own crypto projects.

This time around though…crickets.

The run-up has been a lot quieter. There’s been no flashy headlines with price updates…no hype…no mentions of tulips, fads or frauds.

Instead, bitcoin has stealthily been climbing higher.

What’s different this time is that the run-up has not so much been driven by retail investors, but by institutional investors.

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Investing in Bitcoin

Earlier this year, PayPal launched a service allowing customers to buy hold and sell cryptos from their PayPal account. People can also use bitcoin to buy stuff on their platform.

At the same time, Square allowed bitcoin in their cash app and also bought US$50 million in bitcoin (or 4,709 bitcoins). The company said the reason behind their investment decision was that ‘Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose.

Visa also has been taking some steps recently through partnerships, which still need Visa’s approval.

As Yahoo! Finance wrote:

Visa’s steps might hold the biggest potential for mainstream adoption.

2020 has seen the announcement of a handful of bitcoin-related credit or debit cards with Visa’s imprimatur: Coinbase, the largest U.S. crypto exchange, will offer a Visa debit card that lets customers spend crypto from their Coinbase accounts (though amid the price surge, most people are holding onto their bitcoin as an investment, not spending it) and earn crypto rewards (1% in bitcoin or 4% in stellar lumens); Binance, the largest non-U.S. crypto exchange, is offering a zero-fee Visa debit card that offers cash back rewards based on how much of Binance’s token (BNB) the customer holds; Fold, a bitcoin rewards app, will offer a Visa debit card that offers bitcoin rewards in place of airline miles or cash back; BlockFi, an exchange that offers interest on customers’ crypto holdings, will offer a Visa credit card that gives 1.5% cash back in bitcoin.

And then more recently, Mass Mutual, a US insurance company has also invested US$100 million in bitcoin.

Why?

As they said in their press release, the investment gives them a ‘measured yet meaningful exposure to a growing economic aspect of our increasingly digital world.

What’s pushing the price this time is more acceptance and institutional investors.

It’s something my colleague Ryan Dinse and I chatted about during our Christmas party last week. If you are not familiar with Ryan, he’s been involved in crypto for years and is the editor of Crypto Flip Trader.

I always enjoy talking to Ryan. Not only because he is a great bloke, but he always has interesting insights. So if you’re interested in getting involved in this space, you should check out Ryan’s upcoming online event: The Crypto Fast Lane Summit.

It’s happening on 23 December and it’s completely FREE. You can check out all the details here. I’ll definitely be watching too.

But as I was saying, as Ryan confirmed, this time around he didn’t get any calls from acquaintances or long-lost relatives asking how to get into bitcoin. It’s mostly institutional.

In my mind, we could see much higher prices for both bitcoin and gold in the new year.

For one there’s been massive increases in the money supply.

Below you can check out the massive spike in M1 in the US. M1 includes things like cash, deposits and traveller’s cheques.


Port Phillip Publishing

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Australia’s money supply has also had a growth spurt during this time, as you can see below:


Port Phillip Publishing

Source: RBA

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I mean, it’s simple law of supply and demand. When there’s more money around, your money will be worth less.

And then there’s also the war on cash which has been ramping up during the pandemic.

Regular readers know I’ve been talking about central bank digital currencies coming here, here and here. Which will make it easier to impose things like negative interest rates. And bitcoin (and gold) are both a way to escape that.

Anyway, that’s all from me for this year. Our next weekend Rum Rebellion will be in the new year. I wanted to take this chance to wish you and your family happy holidays and all the best for the New Year.

Best,

Selva Freigedo Signature

Selva Freigedo,
For The Rum Rebellion

PS: In a brand new report, market expert Vern Gowdie warns of the dangers waiting in a post-COVID-19 world. Plus, he outlines the steps you should take now to protect your wealth. Learn more.


Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.


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