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This is an exciting time to be a Bitcoin supporter. Asset manager BlackRock, along with many other companies, is trying to get the SEC to allow them to create a spot Bitcoin ETF. Now, this is not the first time this has been tried. The SEC has rejected many others who have wanted to create a spot Bitcoin fund. While it isn't certain that the SEC will approve BlackRock creating this fund either, I definitely believe that BlackRock has the best chance of getting this done. They are the largest asset manager in existence with around 10 trillion dollars in assets under management. If anyone can get the SEC to approve this ETF, it is BlackRock, and if they do get this ETF created, I believe this will be very successful.
I believe this will be successful for many reasons. One is that the quickest ETF to ever reach a Billion dollars under management is actually a Bitcoin themed ETF. Proshares created a Bitcoin futures ETF traded under ticker BITO that reached over a billion dollars in inflows in just two days. This ETF is different than the one BlackRock is trying to create. BITO buys Bitcoin futures which bet on the price of Bitcoin in the future. BlackRock is trying to create a spot Bitcoin ETF that matches the current price of Bitcoin. BITO proved that there was market demand for a Bitcoin themed ETF, and I believe that there is more demand for a Bitcoin spot ETF than a futures ETF.
If one buys Bitcoin, they have to decide where to store it. They can download a digital wallet and store their Bitcoin there, but if they lose the seed phrase to that wallet, they lose all of their Bitcoin. Many people who believe in Bitcoin do not want to deal with the headache of storing it safely. They don't want to make new accounts just to buy it. An ETF would allow people to invest in Bitcoin through the brokerage they already use and not have to worry about storing their coins.
People will also be able to hold Bitcoin in their retirement accounts through this ETF. It'd also be an easier way for asset managers to begin exposing their clients to Bitcoin and for corporations to invest into Bitcoin. I believe this ETF will open the doors to a lot of people wanting to invest in Bitcoin.
The fund hasn't been approved yet, and I don't know if it will be approved, but I am very bullish on the possibilities. Hopefully, the SEC approves this fund.
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Bitcoin is currently one of my best performing investments of 2023. The coin is up almost 63% YTD at time of writing. Compare that to the S&P 500 which is up 11.5% and Gold which is up 7.6% so far YTD at time of writing. While I do wish I had bought more Bitcoin than I did at the start of the year, I have to say that I am very pleased with how the asset is performing.
Bitcoin usually moves with the market. When the market is rallying, Bitcoin is usually up as well. When the market is in a downturn like last year, Bitcoin is usually down as well. While many look at Bitcoin as a contrarian to the market, that is just not the case, at least yet. Bitcoin is also more volatile than the market which means that when the market goes up, Bitcoin goes up at a higher percent, but when the market goes down, Bitcoin to goes down at a larger percent. While some view Bitcoin's correlation with the market as a bad thing, the market goes up more often than it doesn't historically.
No one knows for sure if this market rally will continue or not, but I believe that it will. With this in mind, I must also believe that Bitcoin will have a good year as well. Bitcoin is currently at around $27,000 a coin which is still far away from its previous all-time high of around $69,000 a coin. I don't necessarily believe that Bitcoin will reach its all-time high this year, and I hope that it does not as I am not done buying the asset and would much rather buy at lower prices than higher ones. It goes back to the saying "be greedy when others are fearful". Those who were greedy at the end of last year must be having a great year this year.
I previously wrote my thesis on why Bitcoin is valuable here - Why Bitcoin is Valuable - Finance by CWT - FINANCE BY CWT. Because I don't believe that these reasons have changed, I still believe in Bitcoin. With this in mind, I want to own as much Bitcoin as I can. There are only 21 million of them that will ever exist, and I want to own as much as possible.
While no one knows how the rest of the year will go for Bitcoin, one must admit that so far, Bitcoin is doing really well.
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Former venture capitalist, Balaji bet James Medlock a million dollars that Bitcoin would reach a million dollars a coin in 90 days. This took place on March 17, when Bitcoin was worth around $26k a coin. Bitcoin is currently trading at around $28k a coin. Now, I am an investor in Bitcoin as I believe that it has characteristics that make it valuable, but when I saw Balaji predicting a million dollars a coin in 90 days, I thought that that was crazy.
I made a video on this for our finance show which I will link below, but I wanted to make an article on this as well.
In order for Bitcoin to reach a million dollars a coin, Bitcoin itself would have a market cap of over 20 trillion dollars. It would be worth double Gold's market cap. It would be worth half of the entire U.S. stock market. Now, I do believe in Bitcoin, and I do think it's possible for Bitcoin to reach a million a coin one day. Do I think this will happen in the next 90 days though? Absolutely not.
Balaji's theory is that the U.S. is going to experience hyperinflation. One of the characteristics of Bitcoin that make it so appealing is the fact that it is not able to be inflated. There are 21 million Bitcoins in existence, and there is no one that can create more Bitcoins. There will only ever be 21 million coins. If the U.S. dollar does experience hyperinflation, it would make sense that people would start investing in Bitcoin. That's Balaji's theory.
I don't necessarily believe that the U.S. is going to experience hyperinflation, but even if it does, I don't think Bitcoin will be able to reach a million dollars in 90 days. There is a learning curve that comes with Bitcoin. People need to know how to buy it, store it, and not lose it. I think that that will take longer than 90 days.
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While I did buy more Bitcoin during its very low moments last year, I did not buy as much as I wish that I would have. I'm planning to hold my Bitcoin for a very long time, and I have no intentions of selling any of it. With this in mind, I saw Bitcoin's crash last year as a great time to buy more of the coin. Bitcoin has increased its price by over 35% since the beginning of the year, and while I am not necessarily convinced that Bitcoin won't see those lows again, I do wish I would have bought more Bitcoin.
Bitcoin's price fell in 2022 for various reasons. The main one was that with the current market conditions, people viewed it as a bad time to be invested in more speculative assets like Bitcoin. Instead, people made very conservative investments into businesses that they knew would survive. I mentioned before that this surprised me as I thought the high inflation experienced in 2022 would lead to more people wanting to buy Bitcoin as its inflation proof. That thought process was very wrong.
Inflation is now starting to decrease. The stock market has been rising. Crypto, as a whole, is rising. Bitcoin is very tied to the market itself. I've heard this as a criticism, but it is not. The market goes up more than it doesn't. It's a good thing Bitcoin moves with it.
With inflation decreasing, I could see more people going to the markets. While one would think that high inflation would be good for stocks as people would be more likely to invest since their money itself is losing value, that was not the case at all in 2022. With more people going to the market, I believe more people will go to Bitcoin as well. If I had to give my prediction on Bitcoin's price, I would say that I do think Bitcoin will end the year higher than where it is now. I believe that Bitcoin will be at around $35,000 a coin at year end. I hope that it ends the year lower as I want to buy more at cheaper prices, but I believe it will likely end around there. I believe this because inflation is decreasing, so I think Bitcoin will continue to increase this year as it keeps falling.
Bitcoin is currently worth around $22,700 a coin. It was worth around $16,000 at the beginning of the year. It'll be interesting to see how it ends the year.
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I want to start this article by saying that I am a huge fan of Charlie Munger, and I have learned a lot of my investing strategy from him and his business partner Warren Buffett. That said, I'm also a big believer in some crypto projects, and I invest in crypto. When I saw that he put out a piece saying that the U.S. should ban crypto, I knew that I had to read it. Here's my response to his article.
While reading the article he wrote, I will note that I do agree with some of the things he says. He outlines some problems with some crypto that I agree with. He mentions that the creators of new cryptocurrencies often get coins for "almost nothing" then states, “After which the public buys in at much higher prices without fully understanding the pre-dilution in favor of the promoter." This statement, in my opinion, is objectively true. This does happen.
Munger then stated that the U.S. should follow China's lead which banned crypto and pass laws to prevent crypto trading and the formation of new cryptocurrencies. This is obviously where I disagree with Munger. If he had simply stated that crypto is a bad investment, I would say that I respect his opinion but disagree and that would be the end of it. Calling for a ban, however, is very different. I believe that some cryptocurrencies are good, and I would like to see more good cryptos created. Even if one believes that there are no good cryptocurrencies, I still don't believe that they should support a ban of them as I believe that people should have the right to invest in what they believe in. If someone invests in a bad project and loses money, that was their decision to make. Thinking that someone shouldn't have the freedom to make that decision for themselves is an opinion I do not understand how one could have.
Munger then wrote, "A cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity.”
Some cryptos are definitely used as a currency. Bitcoin, for example, has been and continues to be used as a currency along with many other projects. One can argue if it's a good currency or not, but I don't see how one can argue that it's not a currency. Most cryptos get their prices from supply and demand and can be bought and sold, so I would consider it a commodity. One can also take loans out against crypto and pledge it as collateral which would in turn make it a security also.
I don't agree at all that cryptocurrencies should be banned. I also don't agree that new projects shouldn't exist. I believe that people should decide for themselves what they want to invest in and what projects they want to support
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I recently published an article where I revealed my investment strategy for 2023. I did not mention cryptocurrencies in that article, so I now want to talk about my plans for buying crypto in 2023. Obviously, things might change with this, but this is my current plan. Crypto has suffered dramatically this year, and I do not know what next year has in store for the crypto markets. Will it recover? Will it continue to fall? I have no idea, and I do not believe that anyone does. I do, however, plan to add to my crypto holdings. Here's what I plan to buy:
One of the first posts I published on my crypto blog was my thesis on why Bitcoin is valuable. When I look at that article, all the reasons that I mentioned are still true today in my opinion. With that in mind, I still believe that Bitcoin is valuable. Right now, Bitcoin is trading at around $17,000 a coin. Bitcoin has fallen by around 64% so far year to date. With the dollar losing purchasing power in 2022, I admit that I did think that more people would flock to Bitcoin. I'll admit that I was wrong about that, but I do not think that I am wrong about Bitcoin as a whole. Time, of course, will tell, but since I believe in this asset long-term, I do not see any reason to not rejoice at having the opportunity to invest in Bitcoin at these lower prices. While I do believe Bitcoin will recover, I hope it does not too quickly so that I have the chance to buy more of it.
Ethereum is currently trading around $1,256 a coin. Ethereum is currently down around 66% year to date. Ethereum is a decentralized open-source Blockchain. The world's computer. I think that this technology has a lot of potential, and my opinion is that more and more creations will be built upon that blockchain. Ether is the native cryptocurrency of that blockchain and as more applications continue to be built upon Ethereum, I believe that the cryptocurrency itself will build in value. With that in mind, I believe it is a worthwhile investment for me to make. This is why I plan to invest more into it in 2023. The cheaper I can get the coin, the better as I believe it'll be worth substantially more than it is now in the next several years.
These are really the only coins that I am interested in. I'm not saying there is not other coins of value, and I'm not saying that I am positive I will only invest in these two. I like to invest; I do not like to trade. I believe that these two are the best assets to buy with that strategy.
This is what I plan to do in 2023 concerning crypto.
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Bitcoin has been having a rough year so far. The stock market is down, gold is down, real estate is down, crypto as a whole has followed that trend. Bitcoin is an asset that I want to own as much of as possible. I wrote my thesis on why Bitcoin is valuable here - https://www.financebycwt.com/crypto-blog/why-bitcoin-is-valuable and because of these reasons, I think Bitcoin will be far more valuable over the next several years than it is now.
When Bitcoin started to fall, I did continue to buy more of it. My goal is to own as much Bitcoin as possible and the price is something that I don't really care about too much. I mean, I care to some extent. I get a larger percentage of Bitcoin per dollar spent at $20,000 a coin than I do at $50,000 a coin so I obviously want Bitcoin to be cheaper than it currently is, but I don't care too much about percentage increase in Bitcoin. Why would I want something that I am planning to buy to be more expensive? Would not be the best strategy.
That said, when Bitcoin kept going down, I did temporarily turn off my buy orders. I started saving cash instead. This was because I believed that Bitcoin would continue to fall. I wanted to save cash that I could use to buy Bitcoin at a lower price. My main goal is to get my average price per coin down as much as possible.
I saw that Bitcoin was hovering around the $20,000 a coin mark for awhile, and it seemed to be steady at that point. I saw a lot of opportunity with that price point but then yesterday, something changed. FTX, which is the second largest crypto exchange, is having a liquidity problem. Binance was considering buying them to save them, but they saw so many problems with FTX that they decided they could not help. The downfall of FTX has caused a downfall of crypto as a whole, and Bitcoin is no exception.
With Bitcoin's new drop in price, it shows potential opportunity. It shows an even lower price point to accumulate coins at. It's already started to recover a little and is now worth around $17,000 a coin, but I do think that this is a good price point.
I plan to start deploying some of my cash into Bitcoin over a long time period.
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Nano, at time of writing, is trading at 88 cents a coin which is pretty far from its all time high of $37.62 a coin. It's been a very hard road for Nano holders which is unfortunate because Nano is actually a really cool project. Cryptocurrency, like the name suggests, was created to be currency. Unfortunately, many of the early day projects had trouble accomplishing this. The first cryptocurrency, Bitcoin, was created to be digital cash. The goal was to have a peer to peer payment system in place that was not dependent on any third party system. Unfortunately, Bitcoin had some problems becoming this, and many cryptocurrencies share these same problems.
People using Bitcoin as a currency were met with large fees every time they wanted to use it. Merchants often do not like using it because they have to wait quite awhile before they get the funds to begin with. Also, Bitcoin transactions use a lot of energy which has discouraged many people from wanting to use it.
With the creation of Nano, crypto became far easier to use as currency. With Nano, there are no fees when transferring it. The transactions are instant which makes merchants more into the idea of accepting it. When they can receive the money essentially instantly, it helps merchants get over the fear of trying something different. Also, Nano is far more environmentally friendly.
With all these things being true, one must wonder why Nano isn't being more sought after as an investment. In my opinion, the answer is all about demand for cryptocurrency to actually be used as currency. To prove this hypothesis, I will point to Bitcoin itself. As I mentioned above, Bitcoin was created to be a peer to peer online payment system. However, that does not seem to be the reason most people are buying it today. A lot of Bitcoin buyers see it as a store of value. A digital gold designed to preserve their purchasing power. Bitcoin was never created to be any of these things and yet that is what a lot of people use it for today. I'll also point out that a lot of crypto projects today have nothing to do with currency at all. A lot of investors are investing into blockchain technology itself. The point is, crypto investors seemed to have moved on from cryptocurrency as currency.
To me, it's a shame. A cryptocurrency with no fees that processes transactions instantly helps accomplish the very reason that cryptocurrency was invented in the first place. The idea was to have a new money, and Nano does a good job of being new money. I do believe that Nano is the most undervalued project of all time.
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Bitcoin was created as a response to the 2008-2009 market crash. This experience showed many people problems with the traditional financial markets, and because of people's desires for an alternative, Bitcoin was created. It was created to fix problems. Bitcoin is a peer to peer payment system that cuts out the middleman. It works without banks and financial authorities. After the 2008 market crash, people did not trust financial authorities as they held them responsible for the market crash itself. At that time, a payment system that eliminated the need for them was very sought after.
With all this in mind, I believe that most people that have held Bitcoin over the last few years did not hold it to accomplish what Bitcoin was created to do. They didn't care about its value as a decentralized payment system. Everything was going to well where the value of a decentralized payment system seemed small. Bitcoin was always meant to be a currency but that is not why most people were investing into it.
Now that we are in a market downtrend of huge proportions, I believe that most of the people holding Bitcoin as a get rich quick method and other reasons of that magnitude have already sold out of Bitcoin. I think that this is a good thing. Most people still holding Bitcoin are doing it because of their underlying faith in the asset itself and a belief in what Bitcoin truly can accomplish. Personally, I am ecstatic about this because, to me, it seemed like no one was actually holding Bitcoin because they wanted it to be a real currency option even though that was literally what it was created for.
With this latest market downtrend, I think Bitcoin looks more appealing now than ever. Not because of the amazing price Bitcoin is currently trading at, but because the problems it was created to solve are more alive today than ever.
The U.S. dollar is experiencing massive inflation after the creation of a huge amount of more dollars. Bitcoin has a fixed supply so something like that could never happen to it. The distrust for banks and financial authorities exists now more than ever, and Bitcoin solves this by not having to go through these third parties. As inflation rises and the market continues to crash, Bitcoin, and what it can do for people that adopt it, becomes more and more valuable.
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Bitcoin and Ethereum are two of my largest individual holdings that is not an ETF. I am very bullish on these two cryptocurrencies, and since crypto as a whole has had a very bad 2022 so far, I wanted to give my thoughts on why the latest price decreases has not decreased my overall fondness of these two assets.
I have reoccurring buy orders for Bitcoin and Ethereum so that every week I invest a certain amount of money into each of these cryptos. If I find an investment that I believe in long-term, I always set up a reoccurring buy order so that I can invest in it over a long period of time. Bitcoin and Ethereum are both something that I want to own as much as possible of so I buy both every week regardless of price. A common opinion that I get told about crypto is that there isn't any actual value behind it. I disagree with this sentiment when it comes to Bitcoin and Ethereum. I believe that there is actual value behind both which is why I continue to buy.
I've already given my thesis on why Bitcoin has actual value behind it. One can read my thesis on it here - www.financebycwt.com/crypto-blog/why-bitcoin-is-valuable.
Ethereum is something that I also believe has real value behind it. I believe that insanely valuable businesses will be built on its blockchain. I believe that millions will do business on the blockchain itself through owning the coin. To me, this will lead to the coin having an insane amount of value in the future. I like to look at Ethereum's blockchain as a company and Ethereum itself as the shares and when I look at the potential the "company" has, I want as many "shares" as possible.
I don't care if Bitcoin or Ethereum goes up 20% next week or down 20% next week, I will be buying simply because the value that these coins have. I believe that these two coins will be two of my most profitable investments. I also want to use these coins to bring in revenue for myself through yield farming and staking and believe that that will be very profitable long-term as well.
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