Eric Wade Answers Your Biggest Crypto Questions

Eric Wade answers your biggest crypto questions... Bitcoin's 'final boss'... What happens when the 'eco warriors' strike back?... The chances of a Rooseveltian-style ban... The bitcoin movement is a modern redefinition of church and state...

We're doing something a little different in today's Digest...

In short, we're starting with the mailbag that usually comes at the end.

You see, the topic of today's mailbag is cryptos. And right now, they're in high demand...

Over the past few weeks – with bitcoin's price shooting to new highs (it's trading for more than $51,000 today) and institutional investors and folks like Tesla (TSLA) CEO Elon Musk jumping aboard the train – we've fielded a lot of questions about cryptocurrencies in our feedback inbox...

And personally, I (Corey McLaughlin) have also gotten questions from friends who want to "give it a try" as well. (I've told them the same thing I did a year ago... Buy at least a little bitcoin through a reputable cryptocurrency exchange to get started, but no more than you can afford to lose – and you might want to check out the "DeFi" movement, too.)

So with this backdrop in mind, I sent a batch of the most frequently asked questions that have crossed our desk recently – valid concerns and big issues worth addressing – to my colleague and Crypto Capital editor Eric Wade for his answers and insight...

As we've said many times before, in their weekly updates and monthly Crypto Capital issues, Eric and his lead analyst Fred Marion explain the ins and outs of bitcoin and the entire world of cryptocurrencies better than anyone else we've seen.

Their subscribers have also had many chances to make eye-popping gains in bitcoin and lesser-known cryptocurrencies, some of which you can see each day in our Stansberry Hall of Fame at the bottom of the Digest. In short, we're fortunate to have Eric and Fred on the Stansberry Research team...

So I hope you enjoy today's Q&A. We'll start with thoughts on one of the existential threats for cryptocurrencies... Yes, one of the threats. It's not the only one...

First, paid-up subscriber D.S. asks about the chance of world governments just taking control of bitcoin...

Here are the details of the feedback for Eric...

Although I am a believer in the bitcoin story, I think many underestimate the various governments' power to exercise some level of control over its use through regulations or other means eventually. Think how they all control their fiat currencies now. I do understand bitcoin's current decentralization but governments will not simply stand by and watch their financial powers be eradicated without a fight. I expect them to get very creative to retain some control.

I've made money off bitcoin but do believe it's an investment to be very careful about. Until we see the various governments hands, I think it's may be too soon currently to equate it with gold. I understand China already has said it is developing its own "bitcoin." Please let me know your thoughts.

Eric noted that regulatory risk is a massive threat. Here's the rest of his response...

Crypto investors probably spend more time thinking about that risk than anyone on the planet. In fact, we even call regulators the "final boss" within crypto circles. They're literally the last obstacle to crypto becoming the bedrock of the global financial system.

Many people look at crypto bans through the lens of their home country. Fortunately, crypto is global. Let's consider India, for example. The country may soon consider a blanket ban on owning cryptos.

However, the country is working hard to become a technological leader. By banning the ownership of things like Ethereum (ETH), the country's citizens would be breaking the law by simply using, testing, and building applications on top of one of the fastest-growing technology platforms in history (remember you have to spend ETH to use Ethereum). Such a move would be like banning the Internet in the 1990s.

India's legislation is far from finalized and would need to pass through a committee first. We're optimistic it won't pass as-is. If it did, we'll begin to see something we've long expected... crypto propelling some economies forward and trapping others in the past.

No matter what a single country does, innovation is one of those things that's virtually impossible to put back in the bottle. If crypto becomes as large and pervasive as we believe it will, India would eventually be forced to rescind any ban. And any countries that might follow in their footsteps would, too.

Next, paid-up subscriber Rodney Y. wants to know why he should trust cryptocurrencies...

Having actually known a computer programmer use his computer program to add fractional cents to his account, I am still leery of digital currency – who created them, how do you determine if he/she had added some to his/her account every time the computer program has "created" more of them for "public distribution"? How are the individual coins' values set, except for the eager buyers' willingness to pay for them with the so-called fiat money?

Everything goes back to the dollar's value, when the coins are purchased through their use as currency. The computer programmer who ingeniously created the coins must be laughing all the way to the bank with all the investors' money.

From Eric...

The beauty of crypto is its transparency. We don't know exactly who created bitcoin, but we can see exactly how many bitcoin they own by looking at the bitcoin blockchain. We can also see that they've never moved or spent their bitcoin.

Since bitcoin's code is open source, anyone in the world can also download and review every single line to see exactly how it works. When I compare that to the fees and opaque transactions that happen in the traditional banking system, I prefer bitcoin.

You're right that there is no fixed rate for cryptos. I view it as an almost perfect example of supply and demand economics. If there's market demand, the price rises. If demand slackens, the price falls. That stands in stark contrast to fiat currencies, which can be manipulated by money-printing and government policy.

Paid-up subscriber Steve P. discusses the energy output of 'mining' bitcoin...

It's quite amusing watching the bitcoin mania unfold. I use the descriptive term "mania" because this is what the atmosphere must have been like in Holland all those years ago when tulip bulbs were all the rage.

But what's even more amusing is how big companies with celebrity CEOs are jumping on the bandwagon and scrambling to be at the front of the queue to bestow their endorsement and praise on bitcoin. These are the same hedge fund icons and CEOs who are openly embracing ESG [Environmental, Social and Corporate Governance] policies and espousing their benefits.

Unfortunately, bitcoin and ESG are about as compatible as oil and water. That is, if this information from Almost Daily Grant's [newsletter] is anywhere accurate:

The digital ducats, which recently garnered the attention of Tesla CEO Elon Musk (who placed the bitcoin logo onto his Twitter profile three days back) make for an interesting dance partner with the sustainable electric-car maker. To wit, bitcoin's carbon footprint stands at 36.95 megatons per year, according to Digiconomist's Bitcoin Energy Consumption Index, equivalent to New Zealand's annual emissions. The Cambridge Bitcoin Electricity Consumption Index pegs the crypto's yearly energy use at 110.53 terawatt hours, topping the Netherlands' total electricity consumption and equivalent to 0.5% of total global generation. More than one-third of bitcoin mining is powered by less-than green coal energy, by the lights of the Cambridge Center for Alternative Finance.

With prices on the boil, those environmental headwinds are unlikely to abate anytime soon. Charles Hoskinson, the co-founder of the Ethereum cryptocurrency, told CNBC on Friday that "the more successful bitcoin gets, the higher the price goes; the higher the price goes, the more competition for bitcoin; and thus, more energy is expended to mine."

With this level of electricity consumption, electricity generated from coal burning plants, Bitcoin would appear to be in the crosshairs of Greta's next assault. What happens when the Eco Warriors go after Musk's scalp? Will he sell his bitcoin position? And what about all those CEOs and hedge fund icons? Will they choose Bitcoin over ESG?

By the way, if you are driving an EV that uses lithium-ion batteries, your CO2 and carbon footprints are greater than if you were driving an ICE (internal combustion engine) vehicle. But that's another discussion altogether.

And here is Eric's response...

It takes more energy to build a car than it does to birth a horse. But humanity has deemed cars more useful than horses.

Andreas Antonopoulos – a brilliant programmer and thinker who literally wrote the programming bible Mastering Bitcoin – answers this question another way... "Immutability is not a waste of energy. Christmas lights are a waste of energy."

That sounds tongue-in-cheek, but there's some hard truth in there. Before bitcoin, the world never had an immutable (that is unchangeable) database of information that can be used for financial transactions. The only way you can have such a database is by spreading the data out across multiple computers. Those computers must be secure and they must be owned by different people who often have competing interests.

We call such a network "decentralized." And the fact is, such networks require energy.

I look at it like a math problem...

Energy is expensive. Either the people using and contributing to the bitcoin network get more out of it than it costs, or the network collapses. After all, no one's going to contribute energy to the bitcoin network unless there are economic reasons for them to do so. Bitcoin's continued growth is evidence the world is getting more value from bitcoin than it's extracting.

We've also seen bitcoin-mining operations relocate to places where there is cheap energy. Frequently, that is seasonal renewable energy or energy that would literally be wasted (such as venting gas at fracking sites). We expect that trend to continue and for bitcoin mining to become almost entirely sustained by renewable energy.

Lastly, bitcoin is effectively doing the same thing as hundreds of thousands of banks and ATMs around the world... It's taking on the entire offshore-banking complex. It's taking on gold mining and credit-card networks. It's taking on clearinghouses, brokers, and other rent-seeking middlemen. It's attacking the accounting industry, the insurance industry, and the production and support systems built around fiat money.

Bitcoin will disrupt all of them, and we expect many traditional financial services will simply disappear in the coming years. As they disappear, all the electricity and – frankly – wasted human effort they consume will go with them.

Bitcoin makes finance radically more efficient. It's easier to demonize it since we can point the finger at miners. We can't as easily point the finger at all the traditional financial services that are grossly inefficient and destined to disappear.

And finally, paid-up subscriber Wynn S. wants to know if we'll ever see a Rooseveltian-style ban on bitcoin...

Maybe eventually you'll answer this concern... The government has demanded to know how much crypto we all own. Sure, we could lie. But if we wanted to cash it in (exchange it for Federal Reserve Accounting Unit Devices) how could we do that without setting off tripwires? The dollar, as soon as it goes through credit cards (and that includes PayPal, Western Union, etc.) is already a digital and thoroughly traceable currency.

So here's the scenario. The Fed gets its own crypto up and running and then we get a Franklin Rooseveltian ukase [edict] to exchange all our bitcoin for the government version at the government exchange rate. Happened with gold [in the 1930s]! Hold any back, and how are you going to monetize a now illegal-to-hold currency?

Tell us why this can't/won't happen!

As Eric explains, we can't say that won't happen. But as he explains, we can say this...

Any ban would have to happen on a coordinated global level. Otherwise, bitcoin usage will simply migrate to more permissive jurisdictions and continue on its journey of disrupting the traditional financial system. The world is much more interconnected than it was during the gold ban. If a single country bans bitcoin, other countries are likely to welcome it – and the capital and financial innovation it brings – with open arms.

Remember, any government-issued crypto will come with the flaws fiat has today – an unpredictable supply, fickle monetary decisions, and sensitivity to geo-political events.

Scaling out, we see cryptos fighting a grand war for the "soul of money"... Just as the separation of church and state led to more freedom for humanity, we've entered a battle for the separation of money and state. Churches once had too much power. Today, we believe the state has too much power over our money supply. They've been poor stewards, and bitcoin and other cryptos present a different path forward.

This battle won't be won or lost over the next 12 months, but over perhaps a generation or even longer. Ultimately, we believe freedom will win.

If we've convinced you that bitcoin and maybe some other cryptos are worth owning, you might be wondering...

Where do I go for more?

It's Corey here again to close things out... As you might be able to glean from Eric's answers and perspective, there's no better person to follow to get to know the crypto space, the risks, and the opportunities than him.

Eric acknowledges the concerns, but he also has a lot of reasons for being bullish on bitcoin and other smaller cryptos that most folks haven't heard about yet. In Crypto Capital, he and Fred provide unmatched, detailed research on the use cases for various cryptos and why they will likely survive in the long run while others won't.

What's more, I can tell you from watching Eric and Fred's weekly video updates (which include more Q&A-style content like this) and reading the monthly Crypto Capital issues that they give an even-handed take on all things crypto.

It would be easy for them to bang on the table and scream, "Bitcoin is going to $1 million!" every day, but even though they see the path ahead for that to happen, they don't spend most of their time shouting it from the rooftops.

For instance, when bitcoin's price started to take off in the second half of last year, they gave instructions along the way to subscribers about what to expect (like short-term pullbacks) and to keep their goals for owning bitcoin in mind before making rash decisions.

In an update last month, Eric even asked subscribers what their biggest fear was for bitcoin or the other holdings in the Crypto Capital portfolio, so he could address the concerns. As he wrote...

I want your input. What are we missing? What else could go wrong?

I can tell you that not everyone in our industry will even think to ask these kind of questions of subscribers... It's another example of Eric and Fred's dedication and passion for their work.

As our publisher Brett Aitken wrote about Eric and Fred in Part II of our annual Report Card on Friday while handing out an "A+" to Crypto Capital...

I know how passionate these two experts are about cryptos. They put a tremendous amount of effort into their research before making any recommendations... They make sure they understand the need and use of any crypto they're considering as a recommendation.

Today, Eric believes a lot of money is still to be made in cryptos. But the window to make the biggest gains might be closing fast...

So if you like what you heard from Eric today and want to learn more, we encourage you to check out his latest presentation... He talks in much more detail about cryptos, shares how his trading strategy works, and explains how you can get started with Crypto Capital.

(Alliance members can check out Eric's work right here, including a special report about how to go about buying your first bitcoin if you've never done it before.)

And one more thing...

If you're using our Stansberry Investor Terminal, be sure to check out our dedicated "Crypto" page. You'll find news, charts, data, weekly video updates from Eric and Fred, and our own "Stansberry Ratings" (which Eric and Fred developed) for more than 500 cryptos.

'I Am the Central Bank'

"I am the central bank," says Stacy Herbert, an early investor in bitcoin and popular co-host of the Keiser Report. She tells our colleague Daniela Cambone that with bitcoin, "You are your individual sovereignty."

Herbert affirms that the world's most popular cryptocurrency is and will always be her investment vehicle of choice over other assets – including gold and Ethereum. She calls it the first "layer one money" since gold 5,000 years ago.

Herbert also talks about Tesla jumping on the bitcoin bandwagon, and who she predicts will follow suit. "I think you will see most of the action coming in from the hedge funds and the asset managers," she says...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

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We'll skip our "normal" mailbag today, given the format of this Digest. As always, send your questions and comments to feedback@stansberryresearch.com. As a reminder, we cannot provide individual investment advice, but we'll do our best to answer all the questions that we can.

All the best,

Corey McLaughlin
Naples, Florida
February 17, 2021