You don’t believe me? Here’s what I mean …
Imagine a cubic foot of ice at -50 degrees Celsius as it moves toward its melting point. Certain “triggers” in the environment can result in a drastic increase in temperature to -25o C, yet the cube of ice remains 1 ft. x 1 ft. x 1 ft.
Other changes in the atmosphere can raise the temperature further to -15o C, but the cubic foot of ice is still a cubic foot of ice. And on it goes.
Though an enormous change in the environment is required to raise the temperature from -50o C to -1o C, there is little outward change in the appearance of ice.
But…upon hitting zero degrees Celsius, its melting point, our cubic foot of ice undergoes drastic and IMMEDIATE change.
Similarly, the climate surrounding bitcoin (BTC) is changing as it heads toward its version of a “melting point” known in the cryptocurrency world as its “mainstream moment”.
Here’s a list of events that have taken place, or will take place, that could change the atmosphere in the global currency market, leading to the world’s acceptance of BTC, and the blockchain in general:
- April 2017: Japan became the first country to recognize bitcoin as a legal method of payment. That’s right. Roughly 5,000 merchants accept bitcoin in Japan. Because of this new law, that number is about to explode, as more than 260,000 stores in Japan made plans to roll out bitcoin as a payment method.
As the #3 market in the world, and a well-developed and technologically advanced country, Japan’s acceptance of BTC started a trend toward the legitimization of BTC around the world.
This was like moving from -50o C to -25o C.
July 2017: China announced that within 5 years, it would be a “cash-free” society. Despite recent regulatory measures, China is in the middle of a blockchain boom, and is embracing this technology as a safeguard against corruption, where corrupt politicians tend to divert much of the government funds sent to rural villages. So, the government is switching part of its benefits program to a blockchain in full compliance with Chinese law, that offers transparency and the potential to move its entire money supply to a blockchain-based digital system. Can you imagine what happens when 1.3 billion Chinese move to the blockchain?
Per Bloomberg: The Chicago Mercantile Exchange, "The world's largest exchange owner [CME Group] … plans to introduce Bitcoin futures by the end of the year."
At the moment, it’s difficult for “smart money” (institutional investors like hedge funds, money managers, sovereign wealth funds, etc.) to hedge their risk by buying cryptos.
As a result, they don’t own any bitcoin. But that’s about to change when the CME becomes the first major exchange to embrace BTC.
The Chicago Board Options Exchange (CBOE), the largest U.S. options exchange plans to launch its own bitcoin futures contract.
US Commodity Futures Trading Commission (CFTC) granted LedgerX authorization to provide the world’s first bitcoin options contract.
The CFTC is the governing body of all future exchanges in the U.S.A. They lay down all the rules. When they said they will allow derivative trading, it was like the pope coming down and kissing the ring.
This growth of bitcoin derivatives is another step toward the development of the digital currency as a more established asset class, could unleash trillions of dollars into BTC.
For instance, the CME Group is the largest owner of exchanges with a market cap of $69 Trillion, which dwarves BTC’s market cap at around $187 Billion (the market cap for all cryptocurrencies is about $300 billion).
If just a few percentage points move into BTC, it’s market cap could increase 7x.
A more conservative estimate puts the money managed by institutional investors at $30 trillion, if they put just 1% of their money into BTC, that’s $300 billion.
Bitcoin ETF: Items numbered 3, 4, 5, above are the 3 most important groups when it comes to trading derivatives (options and futures), all coming on board with respect to bitcoin will allow for institutional money to come in, and we may be in a place where the SEC cannot roadblock an ETF anymore. If the CFTC, CME, CBOE are successful, they will have paved the way for a bitcoin ETF, which some crypto experts predict will happen in 2018.
Fidelity Investments is adding a digital currency exchange to its website, making the exchange potentially available to its more than 26 million individual investors.
The company has partnered with cryptocurrency exchange Coinbase to make the feature available.
- October 2017: The head of the IMF raised the prospect of adding bitcoin to the SDR.
Most people haven’t head of Special Drawing Rights (SDRs). Here’s a brief:
In 1969, the IMF created SDRs (Special Drawing Rights) to supplement gold and the U.S. dollar as international reserves. The SDR consists of a basket of national currencies, the elite of the elite: the USD, euro, Japanese yen, and the British pound. On October 2016, the IMF added the Chinese yuan (or renminbi). Experts predict adding the yuan to the SDR basket could attract trillions to the currency.
The IMF has nearly $300 billion in SDRs. That’s money that member states (almost the entire world) can use to supplement their official reserves. If BTC were added to the SDR, it’s potentially billions of dollars of new demand into cryptocurrencies, by national governments.
- The BTC “Coffee Tax” repeal: A New law is working its way through Congress, which would make every bitcoin (BTC) transaction under $600 exempt from capital gains taxes, removing the #1 obstacle preventing people from using BTC on a daily basis in the USA.
Up to now, if you bought a cup of coffee with BTC, you’d have to pay a 28% capital gains tax on the purchase, because in 2014, the IRS classified BTC as “property”. This banality is known as the “coffee tax”.
Under this “coffee tax” law you’d have to keep track of every single purchase you made along with the price you paid for your BTC, which is ludicrous because in this case BTC is being used as a currency, not property.
Once this law is passed, BTC will be treated just like every other currency, like the USD, euro, pound, peso, etc.
Bitcoin usage could easily double in the next 12 months, this alone, according to one of the researchers I subscribe to, could put BTC in the $20K range.
More and more retailers are accepting bitcoin in the USA, such as Starbucks, Microsoft, Dell, Subway, Expedia.com, and soon with the repeal of the coffee tax, at Amazon. Imagine the explosion of BTC just with Amazon with millions of product purchases.
In July, Japan made all digital currencies, including BTC, exempt from its 8% consumption tax. This led to 260,000 outlets announcing they would start accepting BTC as payment.
BTC is catching the attention of major companies like $15 billion mobile payment firm Square (SQ), which is testing a buy-and-sell feature for bitcoin on its cash app.
Metcalfe’s Law. Metcalfe’s Law says the value of a network is the square of the number of its users.
In short, it’s an equation that shows as more people join a network, the more valuable the network becomes.
Metcalfe’s Law is why Google, Facebook, and Alibaba are worth $689 billion, $500 billion, and $450 billion, respectively.
Tom Lee, a former chief equity strategist at JPMorgan, who now heads research at Fundstat, one of Wall Street’s top research firms, sees bitcoin as a social network, meaning as more people use them, they attract even more users.
Only about 25 million people out of the 7 billion in the world own cryptocurrencies. But bitcoin usage is growing at 122% per year.
As the global climate warms to acceptance of BTC, the above list of events could trigger bitcoin’s “mainstream moment”, making the possibility of a $25,000 bitcoin plausible.
Is BTC a bubble? It could be, but if it is, we are in the very early stages, which is why I wanted to get in ahead of the masses which are just around the corner. I learned my lesson from the dot.com bubble.
Though there will be several “corrections” along the way, the trend for next year is pointing up.
If you have read this far, please note:
a) I’m not a financial advisor, I’m just sharing my interest in blockchain technology which I think will change everything about the world’s economy.
b) That said, cryptocurrencies are the most volatile asset class there is, and of the +1,000 cryptocurrencies in existence today, most are fraudulent, which is why I pay for research from private researchers whom I trust with respect to alt-cryptos;
c) I only post about bitcoin (because it’s the world’s cryptocurrency reserve) and the blockchain in general (because the legitimate one’s are trying to solve real world problems, as opposed to someone simply trying to make easy money).
d) Don’t let F.O.M.O. rule your decision making (fear of missing out). Putting money in this asset class is highly speculative, it’s not an investment (there’s a difference). I only purchase what I’m willing to lose. So if the market takes a dive, I sleep well at night.