It Doesn’t Matter if Bitcoin Has the Mother of All Crashes
It Matters Where it Will Be in 10 Years
People like ‘Big Short’ fund manager Michael Burry predict Bitcoin will crash — maybe it is time to average up.
I don't own a single Bitcoin
Or any other cryptocurrency. If you own Bitcoin, you have my respect. You have been smart; I have been dumb.
If I had made a modest $100 investment 6 years ago, it would now be worth $10,000 today — if I hadn’t been tempted to sell any on the way up.
And when the likes of Michael Burry warns of ‘Mother of All Crashes’ in Crypto, I’d have been foolish not to have at least sat up and paid attention. At the very least, I might have cashed in some of it.
Based on the beliefs of Harry Dent, my article Bitcoin is going to drop 94% in the next year created a bit of a furore and a flurry of criticism from the champions of cryptocurrency — I admit I can’t argue with any of the dozens of comments, even the ones that were slightly less than complimentary.
But I do have some thoughts
If Harry Dent is correct, that $10k investment is going to be worth just $600 in a year. Despite being up 600% on my original investment, I bet I’d still feel like someone had plunged me in the stomach with a knife and given it a twist.
I’d be gutted. I think you would too.
Will Bitcoin Crash?
Harry Dent thinks it will crash 94%. But he doesn’t think it will go away, he’s actually bullish about Bitcoin in the long term — a point that many seem to have missed.
Todd Kronenberg thinks:
“More likely it’s up 94%, or more, in the next year. Bitcoin looks to be bottoming now. Very unlikely Bitcoin is about to head into a bear market. It may go a bit lower than it currently is, but a year is a lot of time and the market is unstoppably growing when you get past the short-term panic. It’s a big world out there and a year from now a lot more of it will own bitcoin.”
Michael Burry thinks:
“All hype/speculation is doing is drawing in retail before the mother of all crashes. When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries. History ain’t changed,”
Neeramitra Reddy thinks:
“A 94% crash? That’s super unlikely. Even if it were to happen, it would rebound as quick.”
Who to believe?
Maybe you trust Daniel Kahneman, author of Thinking, Fast and Slow:
“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.”
Yeah, nobody knows.
They Accused Me of Being a FUD
Having fear, uncertainty, and doubt. There was me thinking it was just a healthy dose of Scottish scepticism.
I’m just like you. I take everything with a pinch of salt. I trust my instinct. I listen to my gut. I don’t try every new-fangled diet that’s all the craze until everyone jumps on the next bandwagon. They are as fickle as the in-vogue celebrity promoting it. I smile and continue to eat my fruit and veg.
Then my son told me he invested in a cryptocurrency.
You know that feeling we have when people close to us make stupid decisions? When they take up skydiving or shave their heads for charity. This wasn’t like that. This was like he’d joined a cult, got his nipples pierced and a tattoo of Charles Manson on his butt. I thought, WTF!
But I was wrong to think like that.
My judgement may have been clouded by the plethora of scams out there. Pundits are experiencing record levels of losses. I had a guy pitch me a cryptocurrency that pays 1% interest per day. My left eyebrow went on high alert.
Excuse me, 1% interest is 365% per year?
Yes, that’s correct.
How does a cryptocurrency pay any interest?
You just need to look at the figures.
So, if I invest $1,000 my investment will be worth $3650 in a year?
Yes.
Wait, is the interest compounded daily?
Yes.
Okay, that actually works out at $36,783 in a year, according to my compound calculator. Where does the money come from to pay that interest?
From new investors.
Who pays their interest? Or the interest on my $36,783 in the second year? Because that amounts to $1,352,931.
It’s a pretty obvious Ponzi scheme.
The Guy on YouTube
There is a guy on YouTube who speaks to the drivers of Ferraris, Lamborghinis, and Bentleys, “What do you do for a living?” He asks. Every once in a while someone answers “Crypto.” And I think, ‘Wait a minute! How long does it take to buy a Bitcoin? How do you do that for a living?’ Naive, huh!
You’re right, there are more cryptocurrencies out there than just Bitcoin. Here are a few:
Abulaba, Accolade, Achievecoin, Acros, Actinium, Adcoin, Add Token, Adhive, Adrenaline Coin, Aegeus, Aerocoin, Aetrernum, Agrolot, Aidcoin, Aiden, Aigang, Aiotoken, Aircoin, Airfio, Airporn, Akroma, Aladin Coin, Alax, Alchemy, Alcohoin, Alias, Alicoin, Aliencoin, All For One Business, All.Me, Allagescoin, Allahcoin, Allcoinguru, Alloy, Allsafe, Alpencoin, Alpha Technology, Alphacoin, Alphaomegacoin. Alphatech, Altbet. Altrocoin. Alttex, Ambit Mining, Americancoin, Americoin, Amero, Amherstcollege, Amigacoin, Aminacoin, Amkoin, Amlove coin, Anatomia, Animecoin, Anthonylogozzo, Apecoin, Apex, Aphroditecoin, Apollo18, Apollon, Appcoin, Appian, Applebyte, Aquachain, Araw, Arbitrage, Arbitraging, Archcoin, Areszcoin, Argus, Arion, Arkhash, Armoredcoin, Arrow, Artax, Asdasd, Aspect, Assetereum, Asspennies, Asstoken, Aston, Astrocoin, Asura Coin, Atbcoin, Atc, Arbitracoin, Atc Coin, Atidium, Atlas, Atm Cash Gold, Atmchain, Atomic Coin, Atronocom, Auroracoin, Aurumcoin, Australiacoin, Autorship, Avatarcoin, Avesta, Aycoin, and Azal Shop Coin.
Can you spot what they all have in common?
Yes, that’s correct — they are all dead. Passed on! These cryptos are no more! They have ceased to be! Expired and gone to meet their maker! Stiff! Bereft of life, they rest in pieces! They kicked the bucket, shuffled off this mortal coil! THESE ARE EX-CRYPTOS!
You can see the rest of the list from B to Z at 99Bitcoins/deadcoins.com. The latest count is 1659 cryptocurrencies that are no more.
I suspect the guys running around in Ferraris, Lamborghinis and Bentleys are behind some of them. If you have money, there is always someone willing to take it from you.
That Doesn’t Mean Bitcoin Is a Big Ponzi Scheme Too
If you invested in Bitcoin, you have every right to be smug. The likelihood is your investment has increased. You can sell some and take money out, you can buy some more — it’s still operating.
Although, you might still have some questions:
Who is this mysterious Satoshi Nakamoto?
This is the name used by the presumed pseudonymous guy or group who developed Bitcoin. The problem with Bitcoin is nobody knows who created it. It’s a mystery and that should raise a red flag, but it's been around for forever… so it must be fine, mustn’t it?
What if governments make it illegal?
China is cracking down on crypto — 90% of Bitcoin miners shut down. The article suggests that this might be a good thing for you. This gives every other Bitcoin miner a chance to extricate more from the deep, dark digital depths. Maybe your government isn’t cracking down on crypto, yet. But climate fears could change that.
Can you afford not to be in the game?
Warren Buffet can. He’s loaded. He’s so rich he could go to the coffee shop in Harrods and buy everything off the menu — I wonder what their burgers cost?
Warren Buffet studies companies. He looks at their balance sheet, their past performance, their fundamentals, their price to earnings, their debt, their competition, their viability, their management, and a load of other metrics I'm sure I missed. And then he uses all this information to predict its value. He’s quite good at it.
He can’t do that with Bitcoin. He can only guess what people will pay for it and look at a graph as it explodes upwards or takes a tumble. And still, he doesn’t own any. He doesn’t own any cryptocurrency and is adamant he never will.
“They don’t reproduce, they can’t mail you a check, they can’t do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person’s got the problem.”
That’s Warren Buffett and Warren Buffet isn’t you. Warren Buffett doesn’t invest in things he doesn’t understand and he doesn’t understand cryptocurrencies so he doesn’t invest in them.
If you invested in Bitcoin, it’s probably because you have a better understanding. You did your due diligence and concluded that your money would be better in Bitcoin where it is safe from money printing, market crashes and maybe even inflation.
The Case for Bitcoin
Robert Breedlove has an Undergraduate Masters Degree in Accounting & Finance. He was a certified public accountant and for many years he worked on the tax strategy for high net worth individuals. He has been involved in cryptocurrency and studying monetary policy and governments for the last four years.
Robert Breedlove thinks Bitcoin is special.
He thinks governments have got it wrong — and he’s not the only one. History tells us that issuing money (printing $/£/ etc) never ends well. If the inflation rate is 2% prices rise by 2% per year. But printing money is hidden inflation. If you have 100 dollars and print 100 more your currency has just been devalued by 50%.
“There are never enough dollars in the system to satisfy the debt it creates.”
He estimates by 2024 the US government will have to double its money printing. And he expects by 2030 they will have to quadruple that rate. This gives the US a monetary expansion rate of 145% annually. The world keeps printing money with abandon.
This is where Bitcoin seems to have the edge. There will only ever be 21 million Bitcoin. And Robert Breedlove makes these predictions for 2031.
- Bitcoin will have reached 20% of global purchasing power.
- In 2031 dollars, Bitcoin’s market cap will be about $250 trillion.
- Bitcoin will be worth north of $21.5 million per Bitcoin.
- Adjusting for inflation, that values Bitcoin at $1m today.
Final Thoughts
As a value store, Bitcoin would appear to take some of the heat out of inflation losses. There seems to be an unstoppable force gathering new Bitcoin investors.
If it isn’t one big scam, Bitcoin could upset the global fiat monetary economy. Who knows what that is going to look like in 10 years?
If Robert Breedlove is correct, a $100 investment in Bitcoin today will be worth circa $4,444 in 2031.
Perhaps it is worth putting a little something away and seeing what happens. If the crash predictors are correct and Bitcoin is in for a bumpy ride over the next 12 months, then it might be worth averaging up — buy a little now and again so you flatten out the ups and downs.
The right strategy would appear to be (if you can afford it) to stick with it and ignore the doomsayers and only use it when you need it.
All you need to do is research how to buy Bitcoin, find an app to buy it, keep it in a crypto exchange, sign up to a utility token platform, buy a utility token, learn how to use that platform…
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
