An event coming this spring has the potential to send bitcoin skyrocketing
A hypothetical …
It’s early July 2014.
Let’s say you’re mowing the lawn. It’s beastly hot, so you decide to step inside for some water.
As you gulp it down, your attention gravitates toward the TV which you’d left on earlier.
It’s the Fox Business network. A panel of analysts are discussing something called “bitcoin.”
You listen a few moments as the individuals debate the future of this strange new asset class and its viability as an alternative to fiat currencies around the globe.
“Bitcoin is there for the taking … I’ve become a believer” says one commentator named Matt McCall.
(For any new Digest readers, Matt happens to be the editor of Investment Opportunities here at InvestorPlace.)
Something about this idea appeals to you, so, on a whim, you throw a few bucks into it, then it slips from your thoughts. Until a few years later, when bitcoin mania kicks in …
Had you invested on July 1, 2014, when Matt McCall endorsed bitcoin on the Fox Business network, you would have paid about $641 per coin. By the peak of the mania on December 17, 2017, that price had surged to $20,089, according to Coinmarketcap.com.
That’s a gain of about 3,035% in just 41 months.
Now, you might be rolling your eyes saying “Yeah, Jeff, I know. But the bubble has popped now, those huge gains are over, and I missed the boat. I’ll stick with this roaring bull market in stocks.”
Okay. But consider this from a different angle …
Look below at what bitcoin did in 2019 compared to the “roaring bull market” in the S&P …
While the S&P had a phenomenal year — up nearly 29% (the strongest year since 2013), bitcoin’s returns dominated in comparison, climbing nearly 92%.
***So, why is bitcoin brushed aside by many investors?
Part of the issue is the volatility. Some investors see the chart above and instead of thinking “up 92% for the year” they think “I would have lost 44% had I gotten in at the wrong time in June.”
Another issue for some investors is they hitch their expectations to the past. They hear stories about bitcoin’s thousands-of-percent gains from yesteryear, and believe they’ve missed the boat.
Addressing the first gripe, yes, bitcoin is volatile. And it will continue to be volatile. That’s simply the nature of a new asset which most people don’t fully understand, which also isn’t yet widely accepted and owned.
For that reason, if you want to invest in bitcoin, you should consider it a speculation. We talked about how to position size for speculations in yesterday’s Digest about creating an investment plan. But just because an asset has more volatility, that doesn’t mean it should be avoided.
As to the second gripe, that the bitcoin bubble has popped and investors have now missed the boat, does making 92% in a year sound like “missing the boat” to you?
If your response is “well, yes, because I missed the chance for thousands-of-percent gains” then I’d ask you a question in return …
Are you sure that can’t happen again?
***Why it’s not too late for bitcoin to soar thousands of percent, even from here
Bitcoin has faced naysayers for years.
Back in 2014, American economist Nouriel Roubini, called bitcoin a “Ponzi scheme” and a “conduit for criminal/illegal activities.” In 2017, Jamie Dimon, CEO of J.P. Morgan Chase, famously called bitcoin a “fraud.” Now, of course, J.P. Morgan has developed its own cryptocurrency called JPM Coin.
Today, while fewer detractors are calling for bitcoin’s complete demise, the more popular argument is that the crypto has already peaked and has nowhere left to go.
But what these detractors conveniently forget is bitcoin’s historical performance relative to a key event involving bitcoin’s maturation — something called “the halving.”
Here’s Matt to explain:
Bitcoins are created by “bitcoin miners” who try to solve complex computer puzzles and are rewarded for doing so with an amount of bitcoin that’s already baked into the system.
The side-benefit for users is that the bitcoin miners create new bitcoin and verify blocks of transactions that come to represent the unbroken chain of transactions on the network. Miners also help secure the bitcoin network.
Right now, a miner receives 12.5 bitcoins for mining one block.
But soon, this figure will be cut in half — miners will receive only 6.25 bitcoins as a reward for mining one block.
The next halving is expected to take place in May 2020.
Now, the reason this is a big deal is because it has happened twice so far in bitcoin’s history, and each time it sparked huge rallies in bitcoin’s price.
Back to Matt:
(Halving) has happened twice before, and in both instances the price of bitcoin soared. The price action surrounding these halving events has been significant as well.
History doesn’t always repeat itself — but it often rhymes. The six months leading up to the first halving saw bitcoin prices explode from $5 to more than $12. That’s a 140% return! And the six months leading up to the second halving saw a price increase from $430 to $660 — a 53.5% gain.
But the real fireworks went off after each event. The year after the first halving saw bitcoin top out near $1,200. And a year and a half after the second event, bitcoin rallied up toward previous highs at $20,000. Those are profits of 9,500% and 3,000%, respectively.
As we noted in a prior Digest, “3,000%” is about one-third of “9,500%,” so even if we assume that this “thirding” of percentage gains happens again, that puts bitcoin on pace for about a 1,000% gain in the twelve months following the May halving.
In fact, German bank BayernLB predicts the 2020 halving will send bitcoin prices to $90,000 from around $7,300 as I write. That’s a gain of roughly 1,130%.
So, are you sure that bitcoin can’t surge 1,000%+ from here?
But let’s say you’re right, and it climbs only, say, 500%. Are you going to consider that a failure?
***Next Tuesday, Matt is holding a special live event called the 2020 Crypto Millionaire Summit
In it, he’s going to walk attendees through details of the coming halving, as well as the case for even greater gains beyond the May event.
But bitcoin is just part of the crypto opportunity. As we’ll dive into in a Digest next week, and as Matt will discuss on Tuesday, there’s also tremendous opportunity in what are called “alt coins.” These are basically much smaller crypto opportunities that are poised to generate even bigger returns.
To reserve your seat at Matt’s free event and learn more about the crypto landscape, just click here. Consider this your “taking a break from mowing the lawn” moment.
Here’s Matt with the final word:
(My) special summit lays out the need-to-know details that could make you a crypto millionaire in 2020. Please don’t miss it. It could be the most profitable decision you make this year.
Have a good evening,
Jeff Remsburg
