Have You Missed the Boat on Bitcoin?
Editor's note: Cryptocurrencies like bitcoin are here to stay.
But with prices trading at fresh all-time highs, many investors feel like they've already missed the big gains.
Not so fast, says cryptocurrency expert Tama Churchouse, editor for our Stansberry Churchouse Research affiliate.
As he explains in today's edition of our weekend Masters Series – the conclusion of a two-part interview conducted earlier this week – the gains are just getting started... and you have a rare opportunity to get in ahead of the big money...
Have You Missed the Boat on Bitcoin?
An interview with Tama Churchouse, editor, Stansberry Churchouse Research
Sam Latter: Switching gears a bit, I've read stories about people who weren't careful enough with their bitcoin accounts. These people have gotten hacked or sent their bitcoins to the wrong address. How can we trust that bitcoin is safe and secure?
Tama Churchouse: Bitcoin itself has never been hacked. The stories you hear about are intermediary crypto exchanges. Some people's wallets have been compromised. But the biggest point of failure is usually at the individual level. People clicked on a link they shouldn't have... They lost their private keys or forgot their passwords.
In bitcoin and in crypto, you should assume you can't recover your account. There's no "forgot my password" feature. So it's absolutely imperative that you take real responsibility with your passwords and recovery phrases. These are things of value that back up and restore a crypto wallet.
Bitcoin is safe and secure. But unfortunately, many people have rushed in and haven't taken the right precautions. And as a result, they've been compromised.
Sam: Bitcoin and the whole "blockchain" network in general relies heavily on the Internet. What happens if a global event occurs and the Internet goes down around the world? What happens to your bitcoins?
Tama: It's amazing how often I get asked that question.
When someone buys shares of tech companies like Apple or Netflix, nobody says, "Hey, what happens if the Internet goes down?" No one ever says, "What if the global mobile telecommunications network collapses?" It's really a strange question. But it only seems to crop up when it comes to bitcoin.
Let me be clear – for bitcoin to be compromised like that, you would need the entire global Internet to be down. And even then, you still wouldn't necessarily lose your bitcoin. You would lose the ability to transfer it, perhaps. You'd lose the ability to move it from point A to point B. But you wouldn't necessarily lose your bitcoin. It would still be recorded on a distributed ledger somewhere. There would still be a record of it. It's an extremely low-probability event. But with the small portfolio allocation we recommend dedicating to bitcoin, if something like that did happen, I think your bitcoins would probably be the least of your worries.
Sam: That's fair. Something else people seem to be skeptical about when it comes to cryptocurrencies is government involvement. We've recently seen China shutting down cryptocurrency exchanges, for starters. What's to stop the U.S. government or any other major government from banning the use of bitcoin?
Tama: Well, there's no chance that the U.S. government will ban bitcoin. It will try to regulate it, sure. And it already has, to a degree. You already have to pay capital gains tax on cryptocurrencies at the same rate as real estate. But ban it? No chance.
We've seen that kind of action from dictatorships. The Chinese government recently banned initial coin offerings (or "ICOs") and closed a lot of the exchanges. But what I'm now hearing is that ICOs are going to be allowed again with government approval in China.
So what we're going to see is regulation, but we're not going to see outright bans from any governments of significance. We'll see it in a few countries here and there, but I can't see any major government banning bitcoin. Look at Japan. Japan already passed a law in April allowing bitcoin as legal tender. Most developed countries are moving toward the path of regulation as opposed to banning it.
Sam: I was reading an interesting article from your colleague Kim Iskyan, who noted that JPMorgan CEO Jamie Dimon declared that bitcoin is "not a real thing. Eventually it will be closed." In addition to that, the "Wolf of Wall Street," Jordan Belfort, recently called bitcoin a "fraud." An article in the Wall Street Journal claimed that bitcoin is "probably worth zero," and even billionaire investor Howard Marks says, "Cryptocurrencies aren't real."
Tama: These folks are all suffering from something called default bias. This is just a way to say that they're falling back on their pre-existing notions and assumptions. When people fear or don't understand something, they tend to dismiss it. That's the case with Dimon. I worked for JPMorgan for six years. I have a huge amount of respect for Dimon. But the way he was talking about bitcoin suggests that he just doesn't understand how it works. And that's common.
Earlier this month, UBS Chairman Axel Weber, the former president at Germany's Bundesbank, said, "I get often asked why I'm so skeptical about bitcoin, it probably comes from my background as a central banker." He's exactly right. That is why he's skeptical of bitcoin. Because you can't just print it, like you can print money at a central bank.
A lot of these big names just haven't taken the time to really understand what actually is going on at a finer level. I have yet to hear from a truly respected financial authority who's said, "Hey, I've spent the past month researching bitcoin and blockchain, I've spoken to all the brightest people in the space, and my conclusion is it's all garbage." At least I could respect an informed opinion, but a lot of these guys simply don't know what they're talking about.
The final thing is, Dimon and other financial institutions should be concerned, because not just bitcoin, but blockchain is coming to eat their lunch. They should be worried.
Sam: People have compared what's going on in cryptocurrencies with the 1990s dot-com bubble, where new technologies promised to change the world. As we all know, while the Internet did eventually create massive disruption, many of these companies went to zero when the bubble popped. Shares of even the best companies suffered huge declines that they weren't able to recover for years, or even decades.
As recently as January, bitcoin prices were trading around $800. Today, they're sitting around $5,700. They're up more than 600%. The gains in many other cryptocurrencies are even bigger. Ethereum is up from less than $10 in January to more than $330 today, a gain of about 3,200%.
How can we make sure that cryptos aren't in a bubble today? Why we haven't missed the boat yet?
Tama: I'll break that question down into two parts.
First, certain cryptos in particular are absolutely in bubble territory. And by that, I mean their prices are in no way, shape, or form justifiable, based on their underlying premise, business, and uses. And that's just part of a speculative mania. On the other hand, bitcoin's total market value at the moment is around $95 billion. That sounds like a lot, but bear in mind that Apple has more than twice that amount in cash on its balance sheet.
Bitcoin's total value is relatively small today, but it could potentially become a global decentralized, digital reserve asset. A global reserve currency, if you will. And if you were to compare that with the money supply for a country like the U.K., that's a $2 trillion money supply for a population of 60 million to 70 million people.
Going from bitcoin today to the U.K.'s narrow money supply implies a 25-fold increase. That's where bitcoin has the potential to go, and then some. I'm not suggesting that you pile in and bet the ranch on it. What I'm saying is this is a massive asymmetric bet. There's a possibility that bitcoin goes to $100,000 or higher. The upside potential is just tremendous.
I understand the concerns. And we'll absolutely see a huge shakeout of the crypto market. Most of them aren't worth your time. But blockchain is here to say. And so are a lot of these cryptos. At the end of the day, it's just too big of an opportunity to pass up.
Sam: You and Porter are hosting a free live event on Thursday at 8 p.m. Eastern time. Tell us a bit about what to expect from the event.
Tama: I'm thrilled to be a part of the event. And we have a few surprises... like a special guest. I can't reveal his identity yet, but he's a multimillionaire bitcoin investor and a CEO of a blockchain company that has generated nearly half a billion dollars in revenue in just three months.
And we're going to share a free report for attendees detailing exactly how to buy into bitcoin, along with a couple of recommended cryptocurrencies to buy today. It's going to be a fantastic event. I can't wait.
Editor's note: Cryptocurrencies are on a tear. They're vastly outperforming stocks, bonds, gold, real estate, and just about every other asset class. And it's one of the best opportunities to make huge, life-changing gains right now. But you can't buy everything – you must know how to separate the legitimate opportunities from the junk. On Wednesday at 8 p.m. Eastern time, Porter and Tama are hosting our first-ever bitcoin event. You'll learn everything you need to know to get started. Sign up for this free event here.