Bitcoin Arguments: Pros and Cons

This is an excerpt from an email a friend sent me. Any thoughts?

For starters, I must admit that my purchase of Bitcoin was pure luck. My dad had been buying it for years and kept telling me to “get in.” So I bought some Bitcoin last December on the Coinbase.com platform. I noticed also that I could buy another crypto called Ethereum for about $8 on this platform. It was cheap…so I loaded up. When it rose to about $100 (which was a stunning surprise), I sold enough that covered all my initial purchases on both coins, so now if the price ends up going to zero on both, I won’t lose any money. I'll be even. For me, it’s all one big game for now. I have nothing to lose but still own enough to where it’s very exciting.

Understand also that there are thousands of Cryptos out there right now. They all have their own specific functions etc. I know almost nothing about how to use these tokens; for me it’s all about speculation.

A few months ago, Bitcoin split. (I won’t go into detail on why this happened, just know it did.) Thus, if you went to bed owning five Bitcoin tokens, you awoke the next morning with 5 Bitcoin tokens AND 5 "Bitcoin Cash" tokens. This is now trading at about $1,500 per token. Talk about easy money...

About a month ago, Bitcoin split again. This time when you awoke the next morning, you owned "Bitcoin Gold" in the same quantity as Bitcoin. Bitcoin Gold now sells for about $350 per coin. More easy money....

As for Bitcoin (which is basically considered the King of Cryptos), from what I understand only about 1 percent of the American population (as well as the worldwide population) owns Bitcoin. (Note: You can buy Bitcoin in pieces. For instance, you can buy $100 worth of Bitcoin, which amounts to about .01 Bitcoins. The cost to buy one Bitcoin is about $9,700 right now.)

As I was saying, virtually no one owns Bitcoin right now, but it’s important to understand that there will only be 21 million Bitcoins mined...ever. The program is designed to stop at 21 million. And because Bitcoin is a worldwide “currency,” it’s possible there could be billions of people one day chasing a mere 21 million Bitcoins or fragments of Bitcoin. And this is why some people think Bitcoin could go to $100,000 or even one million.

Think of it this way, right now anyone who owns Bitcoin likely owns more than one…and there are some people who own a lot. I personally own more than one but fewer than 10. And as of now only about 16 million Bitcoins have been mined. (There are only about 16 million Bitcoins in existence.) Thus, there are probably only about 3-4 million people who actually own Bitcoin WORLDWIDE. (So it's probably less than one-percent who actually own Bitcoin.) And so as the price continues to skyrocket, all of this demand will be chasing a commodity in extremely short and limited supply. It's kind of like squeezing the ocean through a small hose at the same time. You can see how this might send the price soaring.

Personally, I wouldn’t be surprised if Bitcoin hit one million or if it went to zero. I have no clue what to expect. (Note: Bitcoin is similar to gold in that it’s recognized for what it is. You can’t really use US dollars in Japan and you can’t use Yen in America, but you can use Bitcoin in both places. Thus, there is a worldwide market for Bitcoin.)

Therefore, I believe that the general public is JUST NOW starting to ask questions and consider buying it. I think over Christmas, when people are traveling and visiting family, they will finally be talking seriously about Bitcoin. Family members will be asking distant relatives what they know, and the excitement will grow. These were the same Bitcoin owners who last year were laughed at when they brought the topic up. No one will be laughing this year. It’s like the distant crazy uncle who is always talking about conspiracies was ignored last year when he started talking about Bitcoin.

Uncle: “Hey, everyone. I started buying Bitcoin.”
Family Members: “What’s Bitcoin?”
Uncle: “Well, it’s a digital currency, yada, yada, yada.”
Family: “You’re a crazy old man.”

But this year EVERYONE will want to talk to the crazy old uncle.

I also believe that the BIG MONEY (financial institutions, hedge fund managers, etc. – we call this the “Smart Money”) has yet to get in…but when they do, I expect the price could go parabolic. Thus, I want to say that we haven’t really seen the big run-up yet and we’re still just in the first few innings. But then again, I just don’t know.

Bottom line: I have made a good argument that Bitcoin could go to unbelievably high prices based on the tiny amount of people who are now involved and the number of people worldwide that COULD potentially get involved.

Also, the media (for the most part) has ignored Cryptos. When they do talk about it, they scoff. Jamie Dimon (CEO at JP Morgan/Chase) recently called Bitcoin holders fools and idiots and said he’d fire any employee trying to sell it to his customers. But if and when the media starts to report positively about Bitcoin, this could send the masses to the Bitcoin market and the price could go bananas. I should add that Bitcoin is supposedly going to be featured on some show this week, I think it's called Big Bang? (Sorry, I don't watch TV that much.) But if this show is as popular as I've heard, well, that might be the spark that lights the fire for the average Joes who just recently started seeing Bitcoin on their radar.

Let’s also keep in mind that when the stock market corrects (or crashes), people will be looking for another place to put money…FAST. Bitcoin? Maybe.

Keep in mind that as fiat currencies collapse worldwide (see Venezuela, Greece, etc) this too could lead people to Bitcoin…Maybe.

Truth be told, I simply cannot fathom that it could hit $100,000 or more. But if you asked me 6 months ago if $10,000 was a possibility, I would have laughed and said NO WAY.

But as with any asset, if you were thinking about buying, I would probably wait for a pull back (or drop) in price. Bitcoin has a history of volatility. It flies up up up up and up…and then drops immediately by 20, 30, 40 or even 50 percent. It’s crazy.

I am no longer buying any. I’m just going to hold what I have and see what happens. I don’t like getting into an investment and then “worrying” about it 24-7.

At this point, the conversation moved on to mining stocks and precious metals. It was all very interesting, but not really relevant to the topic.

Back to Bitcoin.
I just don’t know if it’s something worth getting into today or not. I don't know if the big runs are over or if they’re just beginning.

I DO KNOW this, however……..,

NEVER NEVER NEVER NEVER NEVER get emotional about an investment. If you’re thinking about buying Bitcoin because everyone else says to or if you think you’ll get rich quick, FORGET ABOUT IT!!!

I cannot emphasize this enough. There is no such thing as a get rich quick scheme. It’s a lie.
Also, whenever you buy Bitcoin (or a stock), someone is selling it. So you have to ask yourself, WHY IS SOMEONE SELLING THE ASSET THAT I’M BUYING????

I can assure you that 90% of investors are the fools that get in AFTER the big run. They get emotional and excited and simply buy into the hype….they chase the price up and then hold their asset until it finally reaches zero. As it’s falling they keep hoping and praying: OH MAN, GO BACK UP! And they end up holding it all the way to zero. They're afraid to take a partial loss and then end up taking a total loss.

Changing gears.

Bitcoin has increased 1000% in the last year. Ethereum is up over 5000%. Keep in mind that if your investment goes up by 20-30% in one year, THAT’S OUTSTANDING. Which begs the question: WHAT THE HECK IS GOING ON? This cannot continue....can it?

Bottom line: I have no advice. You might consider spending a few bucks here and there on Bitcoin just to get some skin in the game. If you hold Bitcoin or a fragment of Bitcoin, you’ll no doubt follow it and then learn more about it. And this will help educate you about the crypto world in general.

Then again, there is something else to consider: Is Bitcoin the currency of the future? If the dollar collapses (which I believe it will one day), will Bitcoin then become necessary to make purchases with? I do not know the answer to this question but it is worth considering and, therefore, perhaps it is wise to at least have SOME Bitcoin. But I’d also point out that some people think Bitcoin Cash could supplant Bitcoin and that Bitcoin Cash will be the future of money, not Bitcoin.

So many variables...so many unknowns.

Happy Hunting.