Three Big Crypto 'Waves' to Watch Today
Editor's note: Yesterday we brought you the first part of American Consequences' November 2019 cover story on our colleague and Crypto Capital editor Eric Wade.
Today, we bring you the conclusion, including the three "macro" waves in the cryptocurrency world that Eric is tracking today. We hope you enjoy.
Three Big Crypto 'Waves' to Watch Today
In January 2009, the Bitcoin network got its start when Satoshi Nakamoto created the first "genesis block."
Today, there are just over 18 million bitcoins in circulation... all of them initially mined by individuals and companies... and most of them mined by those who realized the opportunity early, like Eric Wade.
"I grew up surrounded by the secrecy of a national nuclear weapons lab in Los Alamos, New Mexico. I liked cryptography and private-key/public-key encryption for a long time, so I may have stumbled backward onto bitcoin," Wade says. "My first feel of it was, 'This is challenging. This is really hard.' There wasn't any way to double-click the logo and it'll install itself or something like that. You had to build it yourself."
A Wired story titled "The Rise and Fall of Bitcoin" in November 2011 seemed to put the nail in the bitcoin coffin before it had even begun. The price of bitcoin had only reached parity with the U.S. dollar earlier that year. But still, there was a note of hope...
"You could say it's following Gartner's Hype Cycle," London-based core developer Amir Taaki says, referring to a theoretical technology-adoption-and-maturation curve that begins with a "technology trigger," ascends to a "peak of inflated expectations," collapses into a "trough of disillusionment," and then climbs a "slope of enlightenment" until reaching a "plateau of productivity." By this theory, bitcoin is clambering out of the trough, as people learn to value the infallible code and discard the human drama and wild fluctuations that surround it.
The earliest miners could receive 50 bitcoins for each block they mined. That was halved in 2012... and halved again in 2016. Mining is essentially a way of using computing power to lock down bitcoin transactions, with a reward of a chance at receiving a "block" in the chain.
"I remember the first time I downloaded the blockchain. It took hours. And now it takes days, because it's so big. And I remember looking at it and thinking, 'What the hell have I gotten myself into?'"
Wade declines to say how much bitcoin he mined, but in 2011 to 2012, it was possible to mine 100 to 250 bitcoins in a few days with a regular home personal computer... worth between $75,000 and $200,000 today. (Editor's note: At current prices, the same amount would be worth between $1.1 million and $2.9 million.)
But the monetary reward was at a secondary level. "You have that eye-opening moment of, 'Wait a minute, I'm downloading every transaction ever.' That's the value of the blockchain," says Wade. "I think that's probably why some of the early adopters of this just have it in their DNA now. It's because we had to go through that learning stage of why it's important that it's built that way."
As Don and Alex Tapscott put it in their book, Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World...
Imagine a technology that could preserve our freedom to choose for ourselves and our families, to express these choices in the world, and to control our own destiny, no matter where we lived or were born. What new tools and new jobs could we create with those capabilities? What new business and services? How should we think about the opportunities? The answers were right in front of us, compliments of Satoshi Nakamoto.
What's Next for Crypto?
Wade is watching three macro waves for cryptocurrency...
1. The first wave is simply overcoming new difficulties in buying and selling tokens. Many exchanges are now limiting the ability of Americans to access them, thanks to new federal regulations. As Wade wrote in his "Crypto Dark Age" article in the August issue of American Consequences...
Exchanges must now balance two opposing forces: the need to make money and attract customers, and the need to avoid regulatory trouble with the [U.S. Securities and Exchange Commission ("SEC")]. It's a balance between risk and reward.
Playing it safe by only listing a handful of cryptos makes it hard to attract new customers. But listing a questionable crypto – and attracting new customers – could get an exchange in trouble with the SEC. So many popular exchanges are choosing to limit the cryptos they offer.
However, the good news here is that bitcoin will likely be king... It's the oldest and the original cryptocurrency. And it's not in jeopardy of being removed from exchanges.
"Bitcoin, you should think of it as buy and hold forever. There may be some macro times that you can take advantage of price irrationalities," says Wade. "You still have to have the common sense. If I woke up tomorrow and bitcoin was $1, that's irrationally low, and I would buy the daylights out of it. And likewise, if I woke up tomorrow and it went from $8,000 to $100,000, I would say that's irrationally high. I'd sell at least a piece of it, and then try to buy it back later."
2. Next, the crypto world needs better products – social media, storing things, or tokenizing real-world assets. Think about fairly mundane activities – like streamlining transactions, improving databases, or keeping records. Or it could be something irresistible... an app or a service that's right around the corner.
Wade likes to "own technology that companies who don't want to build their own technology will need" – comparing them with owning the railroads, steel mills, and refineries as the U.S. was industrializing.
3. And finally, the third wave is broad adoption. That's when real participants realize that a crypto token solves a real problem that they have – like the wallstreet.com domain did for Wade as an e-mail address. That domain, of course, ended up being worth $1 million.
So could we ultimately see a single bitcoin valued at $1 million?
We're All Time Travelers
If you're an average American looking to save for retirement, you have to protect your savings for upward of 50 years.
But the U.S. dollar has lost 96% of its value since 1913. And it's lost 60% of its value since 1984. Money creation since 2008 alone, Wade says, makes the parabolic move of the prior several decades look insignificant.
On the other hand, bitcoin had no value for the first year and a half of its existence. Since then, its price has gone "up and to the right"... with some ups and downs along the way.
And because of the way it's built, bitcoin is guaranteed to have low inflation – only a small percentage of coins can continue to be mined as time goes on.
"Cryptocurrencies are 'retraining our brains,'" says Wade. "It's showing that saving beats spending... and it's detaching money from government control."
Wade mentions that he recently wrote a movie script about time travel... and how the travelers can plan for an unknown future for what money will be worth.
"It's now being read by the producers of Designated Survivor, the producer of Vampire Diaries, and Justin Lin's (director of Fast & Furious) production company. The point being that cryptocurrencies are designed to outlast every other kind of money."
After all, in the long view, an unlimited supply of inflationary dollars will be chasing a limited supply of bitcoin. And Wade expects that bitcoin will outlast every other government-printed currency.
So a $1 million price level for bitcoin isn't just possible... it's inevitable, according to Wade.
And if he's right, it would only be one of many "firsts" in which he's been at the forefront.
How to Get 'Hilariously Rich'
For a while, it seemed easy to get ridiculously, outrageously wealthy with cryptocurrency. The New York Times published an article in January 2018 titled, "Everyone Is Getting Hilariously Rich and You're Not."
The wealth is intoxicating news, feverish because it seems so random. Investors trying to grok the landscape compare it to the dot-com bubble of the late 1990s, when valuations soared and it was hard to separate the Amazons and Googles from the Pets.coms and eToys.
Of course, the 2017 to 2018 extremes didn't last. But as the Times pointed out... amid the dot-com bubble fever and insane valuations were also some of the most innovative businesses in the world – which are now some of today's most valuable companies.
Is that true for bitcoin, cryptocurrencies, and the underlying blockchain technology today?
Wade says absolutely. "Volatility's high. The market's going to have to pass $1 trillion in market cap – and right now it's around $200 billion – before the volatility gets lower... That's when people will start thinking of it as growing into its next phase."
Regards,
Steven Longenecker
Editor's note: More and more people are starting to understand why bitcoin and cryptocurrencies have a place in today's global economy. And Eric is at the forefront of this emerging industry as one of its foremost experts.
To learn more about cryptos, where they're headed, and the little-known lucrative opportunities in this space, be sure to watch the latest free video from our founder Porter Stansberry, which debuted last week.
Eric joins Porter about halfway through this "Capitalism in Crisis" event to discuss the compelling reasons to invest in bitcoin today and make what Porter calls "the ultimate asymmetric bet."
Click here to join the thousands of subscribers who have watched the video already. It's well worth the time.