How Bitcoin Goes to $1 Million
Editor's note: Yesterday, our colleague and Crypto Capital editor Eric Wade made a compelling case for bitcoin's place in the global economy...
He also said that investors who realize this trend is taking off "are going to become fabulously wealthy in the process."
And now, Eric is back with more details about the coming financial "reset"...
In today's Masters Series essay, adapted from the August 4 Digest, he details why bitcoin could hit $1 million in the next decade... explains how another crypto's price could increase 40-fold in the near future... and offers "use cases" for cryptos in several industries...
How Bitcoin Goes to $1 Million
New millionaires will be minted... likely even billionaires...
We will soon see another bull run in bitcoin and cryptos of a magnitude that will put even the dot-com bubble to shame. And as I said last week, we're already seeing the first signs.
In fact, thanks to a single metric – scarcity – I believe that within eight years, bitcoin could be worth 100 times as much as it is today.
And the major catalyst ushering in this new age was the bitcoin "halving" event earlier this year...
Halving refers to the payouts, or rewards, that bitcoin "miners" receive for securing the network.
By cutting the rewards in half, bitcoin's "inflation rate" – the flow of new bitcoin entering the market – drops as well. This means bitcoin, as a currency, gets stronger over time as its inflation drops.
And that's why the next crypto rally is beginning now...
Anticipation of the 2020 halving dominated crypto-related headlines for more than a year. We wrote about it here in the Digest back on February 13...
Crypto enthusiasts know that these events happen roughly every four years. And in the past, they've boosted bitcoin's market price.
"Halving" was designed by the pseudonymous Satoshi Nakamoto when he or she developed bitcoin and its underlying blockchain code. It's designed as a way to limit inflation.
When it finally came on May 11, bitcoin's inflation rate fell to about the same as the U.S. dollar's (1.8%). And here's the key point...
Previous bitcoin halvings have roughly marked the starting point for huge run-ups in bitcoin's price. After past halvings, bitcoin has soared as much as 8,000%.
We expect to see similar gains this time around...
One model, known as the Stock to Flow model ("S2F"), takes a look at bitcoin's scarcity by dividing its supply (its "stock") by its annual production or inflation (its "flow"). Since bitcoin's future supply is known, we can use that calculation to project future price ranges.
By that model, as I shared in a Masters Series essay in early August, bitcoin could hit $100,000 sometime in the next four years and $1 million per token within the next eight years...
Variations on the S2F model show the price of a single bitcoin rising as high as $288,000 within the next four years.
Of course, all these models are based on what has happened in the past and what we know about the future. That means they're far from guaranteed.
But my own calculations are similar... And on a stage in front of hundreds of investors at the annual Stansberry Research conference in October 2019 in Las Vegas, I predicted that bitcoin will go to $1 million in our lifetimes.
I said it wouldn't be a straight move higher, but that bitcoin's appeal would become more widespread among investors and speculators.
Today, bitcoin is quickly going mainstream...
As the Federal Reserve and other central banks continue to print more and more money amid the ongoing pandemic, a lot of people are starting to understand the power and use for bitcoin and other cryptos as an alternative to the U.S. dollar...
As I wrote yesterday, even the U.S. government seems to be paying more attention.
On July 22, the Office of the Comptroller of the Currency ("OCC"), the Department of the Treasury agency that regulates the U.S. banking system, quietly released a letter explaining that it could take "custody" of cryptos on behalf of their customers...
In plain English, this means that, overnight, cryptos became as legitimate of an asset as the title on your home or car or a certificate of deposit. As I said yesterday...
I call it the single biggest news event since the bitcoin network hummed to life in 2009...
What the OCC letter does is clear the path so that every bank in America can let you swap between dollars and bitcoin instantaneously.
You won't have to set up any new accounts. And you won't have to move money around... You'll just have to click a button.
This adoption isn't going to happen tomorrow, but it's coming soon... And this is why you need to buy bitcoin today.
But here's another critical point I want to make so everyone understands the importance of what I'm talking about today...
While bitcoin introduced the world to the idea of computer-based currencies, it has also spawned a new wave of technological innovation across many industries...
To understand why, you've got to understand not just bitcoin but the technology that powers it. Here is a good primer on what I'm talking about...
Every crypto has a blockchain as its core technology. Think of the bitcoin blockchain as a giant Excel spreadsheet that shows the complete transaction history and location of every bitcoin.
Every 10 minutes, the spreadsheet gets updated as an additional "block" of new transactions is added.
Picture that as someone opening up the spreadsheet and adding thousands of new transactions to it. That's a new "block." A blockchain is merely a chain of new blocks.
Everyone can have their own copies of the spreadsheet. It's completely transparent.
Let's say Jim sends 1 bitcoin to Sally. When the transaction is processed by the blockchain, the spreadsheet is updated. Jim's balance is docked a bitcoin, and Sally's is credited one.
But who updates the spreadsheet? And how do we stop people from trying to make false updates to the spreadsheet, awarding themselves more bitcoin, or trying to send the same bitcoin to two different people at the same time?
That's the job of bitcoin "nodes" and "miners." They're computers that run software to support the bitcoin network and keep it operating smoothly.
Miners are run by individuals or groups of people who contribute money toward buying powerful computer systems, known as mining rigs.
Why do people contribute time and powerful computers to the bitcoin network? Because they can get compensated in bitcoin.
But to get that honor, these computers must first solve a complex mathematical problem, and compete with others doing the same thing.
The first miner to solve the problem wins 6.25 bitcoin, and they get to post the next block to the blockchain.
Bitcoin itself has been a proof of concept for blockchain technology...
Its success has shown the world it's possible for independent and fragmented entities (miners) to enable strangers with their own computer power to exchange value with no need for intermediaries.
And it can be done in a completely transparent, verifiable, and open way.
To put that another way, the bitcoin blockchain is single-handedly doing the job of more than 100 years of financial infrastructure.
It's the Federal Reserve, the U.S. Treasury, the banking system, and auditors all in one package...
It's immune to government control (and government manipulation). And with a fixed supply of ultimately just 21 million bitcoins... it can't be inflated away.
No other currency in history can claim that... not even gold, which suffers a form of inflation as miners dig more of it from the ground.
That's why many people describe bitcoin as "Gold 2.0."
And that's why I anticipate that bitcoin's underlying blockchain technology will "reset" our financial system, as I wrote yesterday.
But cryptocurrency can change the world in other practical ways that many people don't envision yet. Take the "reset" of big banking, for example...
This is something our founder Porter Stansberry covered in his "Capitalism in Crisis" video, which went live recently. (You can watch it right here for free if you haven't already.)
Banks like Goldman Sachs (GS) and JPMorgan Chase (JPM) have entire teams and buildings dedicated to confirming and spot-checking the trades and transactions their firms make.
It costs them billions of dollars every year. But one crypto could change all of that... It represents the reset of big banking.
What if an independent-payments platform could automatically execute when certain conditions came true?
That's the essence behind "smart contracts."
Ethereum, the world's second most-popular cryptocurrency, proved smart contracts are possible when it launched in 2015.
It rapidly grew to become the second-largest crypto token by market cap. It allows developers to write computer code for financial transactions. That's why some people call it programmable money.
Think of Ethereum as a global computer network that entrepreneurs and computer programmers can build the apps of the future on. The Ethereum network is powered by ether. And the network is so powerful because...
- Money and payments are built into it.
- Users can own their data, and apps don't spy or steal from them.
- Everyone has access to an open financial system.
- It's built on neutral, open-access infrastructure, controlled by no company or person.
Ethereum is at the very heart of the reset of big banking...
Just look at the decentralized finance ("DeFi") movement. Thanks to Ethereum's automated smart contracts, developers have been able to use it to create all the services you can get at banks.
For example, you can now lend out your Ethereum and earn interest on it, you can borrow Ethereum, you can use it to get insurance on your crypto holdings, and you can build an automated crypto portfolio with it.
You can even trade derivatives and options directly on Ethereum.
As of last weekend, more than $14.2 billion of value was locked into smart contracts running on Ethereum. That was up from $1.1 billion just five months ago and up more than 2,000% in 12 months. And we expect that number to continue growing rapidly.
As DeFi grows, Ethereum is looking more and more like an international banking system. But it's more efficient, open to everyone, and offers products that are impossible in traditional banking systems. As entrepreneurs bring things like credit scoring to Ethereum, we could see the launch of mortgages, car loans, student loans, and more – all directly on the blockchain.
Essentially, Ethereum provides a way to codify, decentralize, secure, and trade just about anything instantly. And investing properly here will yield huge returns...
For instance, my Crypto Capital subscribers locked in 100% gains (in dollars) on Ethereum in just three months, and we still think it could go up another 40 times from here as it morphs into a trillion-dollar asset.
My subscribers have booked 16 triple-digit winners this year alone, the latest coming earlier this month. But it's definitely not too late to get in on this trend. We believe bigger gains are still to come.
The reset of both the dollar and big banking alone will affect every household in America. And honestly, it will spread across most of the world.
Yet there are more "resets" that cryptocurrency will push ahead, too – like credit cards, online and in-person banking, supply-chain breakdowns, and fraud.
Believe it or not, I'm only scratching the surface of crypto's potential here today... There are plenty more "use cases" and much more to the crypto story than most people understand.
Bitcoin grabs the headlines – and for good reason. But I hope by now you can see how the technology that powers it can potentially "reset" our financial system and disrupt industries all over the world.
Good investing,
Eric Wade
Editor's note: By now, we hope you can understand why Eric believes cryptos could change banking forever. What's more, he says savvy investors who know where to look could make life-changing returns... potentially with just a small initial investment.
That's part of the reason he joined Porter via video during the recent "Capitalism in Crisis" presentation... They discussed how a slew of events could devalue the U.S. dollar.
During the presentation, Eric talks much more about cryptos... how he sees them fitting into our world moving ahead... and why every investor should own a little bit of crypto today. If you haven't already tuned in, we urge you to check it out right now for free.