The World 'Beyond Bitcoin'

A $500 million pizza order... What you must understand about cryptocurrency... If data is the new oil... What will be 'bitcoined' next?... The world 'beyond bitcoin'...

They were likely the most expensive pizzas ever made...

I (Corey McLaughlin) am going to tell a story in today's Digest that many cryptocurrency gurus have probably heard before. But many casual observers probably don't know it...

In May 2010, back when bitcoin was a little more than a year old, a Florida man named Laszlo Hanyecz – a Hungarian immigrant, a contemporary of the pseudonymous bitcoin inventor Satoshi Nakamoto, and an early bitcoin "miner" – wanted to prove a point.

Hanyecz wanted to show that you could buy something with bitcoin...

So one night from his home in Jacksonville, he logged on to the BitcoinTalk message board, a place for early bitcoin enthusiasts to talk online. And he made an offer...

Hanyecz would give 10,000 bitcoins to anyone who would send him two large pizzas. Here's his original post...

What happened from there is now digital history...

Hanyecz got his pizzas – two large pies with all the fixings from retail chain Papa John's (PZZA). In exchange, he sent 10,000 bitcoins (then worth about $41 in total) to a 19-year-old American named Jeremy Sturdivant.

The obvious punchline to this story is that those pizzas turned out to cost more than $530 million. If you're feeling "FOMO" right now, this might soften the blow...

Sturdivant sold the 10,000 bitcoins not long later – when they reached $400 in combined value – to help pay for a trip. He figured a "10X" win was pretty good.

And Hanyecz sold all of his bitcoin before it reached $1 per coin... to buy a new computer.

What were they thinking?

We'll get to that part about human nature, but we share this tale today mainly to bring up a few other points about cryptocurrencies (and investing) that are valuable for everyone with an interest in the markets – or frankly, innovation.

First off, the media still bills the deal of pizza for 10,000 bitcoins as the "first commercial transaction" of bitcoin. It wasn't really that, but closer to a barter. (Anyone who reads the message-board thread, then or now, can see that here.)

The swap was made between two people who already had bitcoin accounts... The transfer was direct. Pizza just happened to be what they promised to exchange. It could just have easily been bubble gum or video games.

Sturdivant ordered the pizzas with a credit card from out of state, he said in a 2015 interview... And they arrived at Hanyecz's house the old-fashioned way. (We don't think the delivery driver got a tip in bitcoin.)

Here's what more than $530 million today looked like back then. Hanyecz posted photos (that's his then-1-year-old daughter's hand)...

This was the early, early days...

At the time, Hanyecz was "mining" – or creating – thousands of bitcoins per day. Thousands! And he was doing it with a relatively small amount of computing power.

Hanyecz had no idea what they would be worth in 10 years. If he thought the price would be greater than $50,000 for one bitcoin, we doubt he would have made the offer (and do it several times, as he reportedly did until saying no more in August 2010).

He wanted to simply show the possibilities for bitcoin, which he did... I'm spending much more time telling you about it today than it took for the exchange to happen.

The whole story shows that bitcoin at its core can be used for exchanges. But maybe more importantly, the story shows that it also represents a technology...

This is a distinction and idea that Crypto Capital editor Eric Wade says is critical to understand. It's what really got him thinking about the potential of cryptocurrencies...

This is lesson No. 2 from the 'bitcoin pizzas'...

Beyond the obvious price appreciation of bitcoin – which we've covered here in the Digest plenty – it's important to know that it's all possible because of the value of the technology that powers bitcoin.

That's blockchain, which might not be a new concept to you. If it is, though, that's fine, too.

It's hard to find somebody who can explain it in plain English. But as regular readers know... Eric can. As he wrote in the August 4, 2020 Digest...

[Bitcoin's] 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 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.

I'm not going to get into the nuances of blockchain today – the "nodes" and the "miners." That goes beyond how much space we want to take up, and Eric understands and describes it better than anyone we've come across.

This essay of Eric's on how blockchain works is a must-read for anyone interested.

I simply want to say that knowing bitcoin is based on the blockchain... and understanding what blockchain technology is and how it really works... is to unlock the true understanding of the long-run value of cryptocurrencies.

Thought of another way, if "data is the new oil" – as our Stansberry's Investment Advisory team believes – we want to first own the oil if at all possible to seek the profits.

That's cryptocurrencies.

Transferring 'dollars' – or pizza – is simply the first use case for cryptos...

It just so happens that a lot of people care a lot about money. And the mortgage crisis of 2008 and 2009 was fresh in the minds of a lot of people who had been burned.

So bitcoin came first instead of a "digital art blockchain."

But the crux of the original 2008 Nakamoto white paper on bitcoin describes it on the cover as a "peer to peer" electronic cash transfer system with no middleman. The concept has caught on over the past decade-plus.

Let's jump past bitcoin's price appreciation since the pizza days for a moment... even if there is much room for bitcoin's price to run higher.

If you feel that the biggest upside has already been realized in cryptocurrencies, we urge you to think again. Today, we're seeing what the world "beyond bitcoin" can look like...

Things like non-fungible tokens ("NFTs") – linked to art, trading cards, or video highlights – are part of this story... in admittedly a dot-com-like bubble atmosphere, which our colleague Dan Ferris wrote about in the March 12 Digest.

I don't know enough about NFTs yet... and the prices of the Beeple art and LeBron James digital highlights sure seem to be in "mania" mode today, as Dan wrote. But the potential for NFTs, based on blockchain technology, is real...

As a writer and editor, I see NFTs – and blockchain technology, in general – as a way to allow content creators to actually make a steady stream of royalties from demand for their own work... and not have to work for a corporate-owned mainstream outlet, for instance.

This is all to say that when Hanyecz wrote in a later post on the BitcoinTalk message board thread, "I just think it would be interesting if I could say that I paid for a pizza in bitcoins," he was right...

It is interesting.

That brings us to another part of the "bitcoin pizzas" story most people don't talk about...

After Hanyecz wrote up his offer of 10,000 bitcoins, it took three days for someone to take him up on it...

For starters, not many people knew about bitcoin at the time.

And even among those in the small community, there was some hesitancy to help prove bitcoin's "use case" for what now looks like odd reasons. One user, BitcoinFX, wrote...

I would offer to buy you a pizza, but I'm not based in the USA, so they might think I'm a prank caller.

Talk about "risk averse."

And as I mentioned earlier, both parties in the deal were out of bitcoin not long after the transaction. This is the human nature part of the story.

Hanyecz told the New York Times a few years ago that he didn't regret his decision. But we find that a little difficult to believe...

Today, he works as a developer for an apparel company that, not coincidentally, accepts bitcoin as payment. He told the crypto-focused website CoinDesk in May that his company is treating bitcoin like a reserve cash alternative...

We've just been holding it and we're actually up a significant amount. We had some people check out at $3,000, we had some people check out at $11,000. The dollar cost averaging people talk about, it works really well.

To these facts, and for both buying and selling, we again remind you that you never need to be "all in" or "all out" of an investment or a speculation. This isn't a natural idea for many investors.

We've shared the following sage words from Gold Stock Analyst editor John Doody here before... And they are worth repeating today, with the "bitcoin pizzas" story in mind. As John told our Alliance Partners in a special video last May...

Do half. Buy half of what you would intend to spend or commit. That way, you'll be at least half-right. If it goes down, you can buy more. If it goes up, you're riding the half that you've already invested.

I think investors sometimes think they've got to spend it all right now. That's probably a mistake. Professional investors are going to add to winning positions and generally either pare losing positions or "average down."

The thought [behind "doing half"] is you have money in reserve if things either go right or wrong.

This guidance might go even more so for the "ultimate asymmetric bet" that is bitcoin, as our founder Porter Stansberry described it last summer.

As we said back then, the potential reward outstrips the risk of allocating a small percentage of your portfolio to bitcoin. And it's worth noting that since then... the price of bitcoin has surged from $9,000 to more than $50,000.

To be fair, it's easy to look back in hindsight and make comments about anything, good or bad...

But this brings us to our next point...

Most early inventions are regarded as dumb or worthless. At the very least, they're met with skepticism at the start. And to be sure, a lot of these "crazy" ideas do fail.

History is littered with examples. We won't get into them here.

But the innovations that succeed, really succeed... And more often than not, they tend to appeal to the "things that never change," as the talented financial writer and thinker Morgan Housel terms it.

These are timeless human wants and needs like convenience or lower price – in the case of Amazon (AMZN) this century, for example... or the gas-powered car compared with steam or electric cars around the turn of the previous century.

Here's another recent example...

For a few years, everyone wanted to become the "Uber of everything." There's a reason for that... It was a way of getting old things done, and getting from one place to another in a new way.

Think of bitcoin the same way... A new outlet could give us greater control over our own lives – and also be a faster solution to old problems.

I'm most attracted to the "un-inflatable" idea of bitcoin – the idea that, based on its code, there will only be 21 million bitcoins ever mined – and that it is a scarce asset that lives "outside the system" that continues to debase the U.S. dollar.

This system continues to fail a lot of folks who are simply trying to better their lives but find it impossible no matter what they do... They can't seem to get ahead with the money they have.

The price of bitcoin will be determined by the good ol' laws of supply and demand, as opposed to whatever Federal Reserve policies are. As legendary investor Stanley Druckenmiller said, "Bitcoin is like anything else: It's worth what people are willing to pay for it."

And in a world with roughly $13 trillion of negative-yielding debt on the books, the idea of an inflation-proof asset sounds pretty great to us.

But remember, bitcoin is also a technology. It's like an entryway to many other industries... And the "smaller" coins are the next logical place to train your attention in this revolution.

So we ask now...

What will be 'bitcoined' next?...

Many people today are already aware of bitcoin.

Now, they might not all be comfortable owning it yet. But certainly more people know about it than a year ago... or five years ago... or 10 years ago.

Just this week, Tesla (TSLA) CEO Elon Musk announced that you'll be able to buy the company's cars with bitcoin. That makes sense for the electric-car maker to increase the value of "cash" on hand – presuming bitcoin's price rises over time, as Musk believes it will.

If this feels like "peak bitcoin," well, I wouldn't quite go that far. But it does show that bitcoin could be headed into a new realm of popular exposure... And for this reason, we still believe it's wise to hold at least some bitcoin in your portfolio.

But we also know many of you already do that today... So we're looking more beyond bitcoin now. And the truth is, we have been doing that for a while.

Most people would be lying if they said they could predict what the next piece of Beeple art or in-demand sports highlight converted into an NFT will be.

It's hard to get that one just right... but you can get closer than most.

Eric has described various industries that are ripe for blockchain disruption before like banking, cybersecurity, or supply-chain services. As he wrote in a Digest essay last August...

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.

What's more, smart investors who know where to look for crypto investments have the ability to make life-changing returns, with potentially just a small initial investment...

So we'll leave you heading into this weekend with some good news...

Next Wednesday, March 31, Eric will go live with a brand-new (and free) presentation to talk about the next six cryptos that he believes have staying power. He believes these cryptos are set to give early buyers massive returns.

These picks could be just as lucrative as bitcoin has been for early investors...

Not the pizza guys, though, which brings us to one final point...

Like bitcoin 10 years ago, most people don't have the time to research today's "smaller" cryptos or even where to look or how to buy them. But Eric does... and he has been sharing his information, guidance, and analysis with thousands of subscribers in recent years.

If you've noticed recently, his crypto recommendations – little-known to most folks – take up many spots in our Stansberry Research Hall of Fame and our list of Top 10 Open Recommendations. Eric's model portfolio includes five 1,000%-plus gains and an additional, astounding 17 triple-digit winners...

Even better, Eric believes more massive gains are possible, if only you know where to look. Just a small bet could lead to a huge payoff.

You don't want to miss Eric's free presentation on Wednesday morning... He will share all the details about what you can expect in the crypto space moving forward. The action begins at 9:30 a.m. Eastern time. We just ask that you sign up in advance to make sure you don't miss a minute. You can register for free right here.

(Existing Crypto Capital subscribers, don't fret... Be on the lookout for an e-mail from Eric about how you can instantly access the research that we've talked about today.)

When Money Becomes Candy

In an interview with our colleague Daniela Cambone, Extreme Value editor and frequent Digest contributor Dan Ferris doesn't mince words when it comes to the Federal Reserve...

"This is the age of the all-powerful, omnipotent central banker," he says, "and we know there is a fallacy there. Printing money and throwing it around like free candy is a dangerous game we are playing, especially with $2 trillion at a time."

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.

New 52-week highs (as of 3/25/21): American Homes 4 Rent (AMH), AutoZone (AZO), Home Depot (HD), Invitation Homes (INVH), 3M (MMM), and Waste Management (WM).

In today's mailbag, feedback on Brian Tycangco's Thursday Digest about central bank digital currencies ("CBDCs"). Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The question is, Who is going to control this digital currency? Government officials? The Federal Reserve? Who? It is interesting that a totalitarian communist country China is leading and pushing this digital currency...

"The power to control the currency is the power to destroy our freedoms. When another pandemic hits, do we want the government to control and lock down all electronic transactions in order to control the populist to do their dictates? Or prioritize how, when, where you can use your digital currency?

"You do know it will happen because evil human nature hasn't changed. A lot of people are amazingly GULLIBLE! At least I had the freedom and control of my money when I have cash in MY hands!" – Paid-up subscriber C.G.

"We already have an answer to cash, it's called a credit card and, it already gives us more privacy than any CBDC does or will do. This is because it is issued by a private institution, a bank or credit card company. They all have a long history of doing the best job at what they do because of the profit motive and trying to satisfy the customer.

"A credit card account can be funded just as easily as a CBDC account could. Just encourage banks and credit card companies to offer interest accounts and see how many of the unbanked will flood into the system. You never mentioned that many if not most of the unbanked in this country are illegal immigrants who don't want to be tracked by the government and can't show documents to open an account.

"Maybe that is the thinking behind the present administration, to make them all citizens in order to tax and control them just like they do us and, there would still be an underground economy under a CBDC system. As far as money laundering goes, cartels have more money than God and would still find ways to beat the CBDC system through bribery of politicians and banks like they do now." – Paid-up subscriber Pete M.

"The dangers of CBDCs are constantly being understated. If the government knows all your financial transactions, the extension of this knowledge is that they can restrict payments. So if you crave for a Krispy Kreme doughnut but are overweight, you may not be permitted to buy one – and will depend on a skinny friend to buy one for you. Just another smart contract on the CBDC blockchain – scary!" – Paid-up subscriber Nick A.

"Interesting article on the eradication of cash by Brian Tycangco. I guess if governments want to clamp down on cash in terms of how dirty it is during this COVID adventure, they had better ban the cell phone too. You spit at it while you are talking and take it everywhere you go transporting dirty germ COVID. To hell with it, just chip me now! Not!!" – Paid-up subscriber Brett P.

"Pardon me for questioning that our paper dollar bills are laden with germs. Even a germ couldn't live on a dollar anymore!" – Paid-up subscriber Bernie K.

All the best,

Corey McLaughlin
Baltimore, Maryland
March 26, 2021