Bitcoin Will Change How You Think About Money Forever

Editor's note: Whether you like it or not, 2017 has been the year of the bitcoin.

The burgeoning cryptocurrency's emergence as an asset class has been nothing short of extraordinary. Today, bitcoin's market cap sits around $300 billion, making it larger than blue-chip companies like Wal-Mart (WMT), Intel (INTC), and Home Depot (HD).

One thing is clear: Folks who continue to ignore bitcoin and other cryptocurrencies could be missing out on life-changing gains.

Nobody is better-equipped to talk "cryptos" than our friend Tama Churchouse, who edits Stansberry Churchouse Research's Crypto Capital newsletter.

In today's Masters Series essay – originally published earlier this year in his free Asia Wealth Investment Daily e-letter – Tama explains why bitcoin is "real money"... and addresses some common misconceptions regarding the often-misunderstood cryptocurrency...

Bitcoin Will Change How You Think About Money Forever
By Tama Churchouse, editor, Crypto Capital

I'm writing this from 35,000 feet above the Pacific Ocean, and we're about to begin our descent into San Francisco.

On the obligatory Customs Declaration form, provided by U.S. Customs and Border Protection, I notice I'm required to answer "Yes" or "No" to the following:

13. I am (We are) carrying currency of monetary instruments over $10,000 U.S. or foreign equivalent... Monetary instruments include coin, currency, travelers checks and bearer instruments such as personal or cashier's checks and stocks and bonds.

Here's a hypothetical question: What if I had $100 million worth of bitcoin on a thumb drive in my pocket... Would I need to declare that?

What if I had my bitcoin wallet on my phone?

Or better yet, what if I didn't have anything at all except my public and private bitcoin keys – which are the "passwords" I need to access, spend, and transfer my bitcoin from any Internet-connected device – simply memorized and tucked away safely in the recesses of my brain?

Would I need to declare that?

I'm pondering this question because, despite bitcoin's increasing mainstream adoption and price appreciation, there remains huge debate and skepticism about whether bitcoin is really money...

Bitcoin is digital money that is created and held electronically. At the core of bitcoin technology is a super database called the "blockchain." The blockchain contains every transaction in the history of bitcoin and is accessible to anyone. A lot of people think that blockchain will eventually be used to process everything from stock trades to voting.

One of the positive side effects of bitcoin's march toward mainstream acceptance is that it pushes everyone to reassess their own personal concept of "money."

Plenty of critics say that bitcoin isn't real money. Why not?

Let's take a quick look at some of the hallmark characteristics of what we consider money.

1. Transferability

Can I move it around, and transfer it from myself to another party and vice versa? Yes.

Bitcoin is far more transferable than traditional fiat currencies (like the physical dollar, euro, and yen)... And it works just as well as any mobile transaction. I can open my phone and securely transfer $100,000 of bitcoin (or more) straight into your digital wallet in an instant.

Of course, you can hand me $100,000 in cash in a briefcase. But I'd need to count it, and check that the notes aren't counterfeit. And then I'd need to secure it. The bitcoin blockchain does all of the above for me. Once I've made the bitcoin transfer and you've seen the balance in your wallet, it's done. That's it. You own those bitcoins.

2. Usability

Money isn't much good if I can't use it. Can bitcoin be used to buy goods and services? Yes, and increasingly more merchants are accepting bitcoin as a means of payment.

Incidentally, as I write this, I'm scheduled to meet with the CEO of a company that is launching a service allowing you to spend your bitcoin the same way you would use a simple debit card. And you can use this service at more than 30 million locations globally.

Mainstream acceptance is growing every day. Bitcoin is already legal tender in Japan.

3. Scarcity

Central banks can, have, and continue to create tens of billions of dollars in fiat currency out of thin air. And as a result, currencies the world over collapse, time and again.

Try talking to folks in Venezuela about how much faith they have in the bolivar (the national currency), now essentially worthless. Or Zimbabweans, whose currency collapsed after hyper-printing by their central bank. Or the 1 billion-plus people in India who had their cash lifesavings declared no longer legal tender in an instant last year, when Prime Minister Narendra Modi made a surprise televised announcement informing them they had until the end of the year to exchange their notes for new ones before they would become worthless.

The West is truly spoiled when it comes to relative currency stability versus the rest of the world.

As for bitcoin, only 21 million will ever be minted – according to the bitcoin protocol – and only around 16 million are in circulation today. No central bank or government can "print" more bitcoin.

And as for the concern that bitcoin is purely "digital," it's worth remembering that more than 90% of all money that exists today around the world is not physical (i.e. not notes or coins).

When you're buying bitcoin, you're taking a view that more people around the world will accept bitcoin as a form of money. And with a total market cap of around $300 billion, I think it's a worthwhile view to take.

Don't Let These Three Reasons Stop You From Buying Bitcoin

Recently, after a long day of fly-fishing on the Yellowstone River in Montana, a group of us were talking about the day's fish count (specifically, the lack thereof) when, at some point, the discussion turned to cryptocurrencies.

I was attending a small, offsite annual investment meeting run by a U.S.-based Asian equity fund manager. The handful of partners in the room, each unwinding with a cold beer, collectively held more than a century of fund-management expertise. When it comes to financial markets, and Asia in particular, these guys know their stuff.

But bitcoin? Not so much. The whole idea was still new to them. And I was the resident sounding board...

Below are the issues that most concerned my fishing partners about the world of cryptocurrencies. If you have doubts or questions about this new asset class, challenge yourself, and read on...

1. "OK, Tama, but what if the Internet goes down?"

This was the first point of concern when it came to bitcoin. It's one that a lot of people have.

And if you take a step back for a moment, it's utterly absurd.

For example, I've never once in my entire life ever heard anyone question the wisdom of investing in Alphabet (GOOGL), Facebook (FB), or any other technology company because of the risk of the "Internet going down."

Similarly, I know of nobody personally (in developed countries, at least) who insists that all his personal monetary wealth be kept in physical notes and coins in his possession rather than at a bank (where your savings represent little more than numbers on an electronic ledger) – all because he'd "lose it all" if the Internet went down.

And in the event that the entire global Internet communications system permanently collapsed (which is what would need to happen for bitcoin to become totally worthless), you'd have bigger concerns than the small allocation of cryptocurrencies in your portfolio.

2. "What about the risk of hacking?"

In certain circles, bitcoin and cryptocurrencies are synonymous with hacking – thanks to some high-profile hacks of cryptocurrency exchanges. I point the finger at ignorant journalists who propagate their own poor understanding of cryptocurrencies to the broader public.

Just to be clear, cryptocurrency exchanges have been hacked. They are third-party platforms where it's unclear how customers' digital assets are being secured. That's why I've said repeatedly that you shouldn't keep large amounts of bitcoin on an exchange... When it's on an exchange, you don't own it – the exchange does.

Instead of leaving yourself at the mercy of an incompetent third party, you can take full personal control and accountability for securing it yourself. The safest place to keep your bitcoin is in a digital wallet. You can set up one of these online... And it's one of the first steps to getting started with bitcoin.

Bitcoin is one of the most secure assets an individual can own. But it's 100% up to the individual to secure it!

3. "What if the government bans bitcoin?"

In August and September, China announced a ban on initial coin offerings (ICOs). These are when companies create and issue cryptocurrencies to the public in exchange for bitcoin or ethereum (the second-largest cryptocurrency). I wasn't surprised by the ban, given the sheer volume of ICOs taking place – especially those with seemingly little to no business viability.

But China didn't "ban" bitcoin. And even if a government did want to ban it, the question is how? That cat's already out of the bag.

Bitcoin doesn't answer to any government. There is no bitcoin head office... no CEO... no board of directors.

What's more, major economies have no incentive to "ban" bitcoin. Any government that did would simply be saying, "We don't want innovation, technology jobs, new companies, or enterprise in general."

Now don't get me wrong – bitcoin is, and will be, regulated. (For example, don't think for a second that Uncle Sam is going to let you make 10 times your money on a cryptocurrency trade and not pay your "fair share" of taxes to the government's coffers.) But regulation isn't the same thing as an outright ban.

In conclusion... Bitcoin is a type of asset that's completely new to most people, so it's right to ask questions. That's a prudent approach when you're considering allocating capital to any venture, let alone one you're unfamiliar with. But don't let pre-existing biases get in your way.

When a new idea comes along, you don't have to accept it. But you can always choose to learn more.

Regards,

Tama Churchouse

Editor's note: Bitcoin has had an incredible run in 2017, returning more than 1,500%. But Tama says big changes are in store for bitcoin in 2018. Whether you already own bitcoin or you feel like you've missed out on this year's incredible rally... you'll want to pay attention to what he's saying. Don't delay – this presentation will only be available for a few days. Watch it here.