The Bitcoin price briefly touched $6,000 today, before correcting a bit. The price rise is being driven by a number of factors, including an upcoming Bitcoin Gold fork. Investors are buying Bitcoin in anticipation of this fork, as they will likely receive an equal number of new tokens in Bitcoin Gold for every Bitcoin they hold. The last time this occurred with Bitcoin Cash, investors receiveing an equal number of BCH coins worth over $800 each during the first week.
The price chart shows the rapid rise of the Bitcoin price over the past few months. Notice the past two corrections found support right around the 100-day moving average and the uptrend remains firmly in place. To the downside, there is near-term support at $5,000 and $4,650, with additional support around the 100-day moving average trending upward towards $4,000.
The hard fork is projected to occur in 5 days, on October 25. I expect the price of Bitcoin to continue rising up until the fork, potentially to as high as $8,000. But we are likely to see a significant correction after the fork occurs, as money shifts out of Bitcoin and back into some of the more undervalued alt-coins. This is the pattern observed during the last hard fork.
At the record high of $6,000 today, the total market capitalization of Bitcoin reached $100 billion. The market cap of all cryptocurrencies combined is around $174 billion, giving Bitcoin market dominance of 57%. The next closest cryptocurrency is Ethereum, with a market cap of $29 billion or less than one third of the value of Bitcoin. The image below shows the top ten cryptocurrencies by market capitalization.
It appears that China will not actually be banning cryptocurrencies and ICO’s, just regulating them. This news had a positive impact on prices of cryptocurrencies. To the dismay of JPMorgan CEO, Jamie Dimon, the price of Bitcoin has soared over 50% in the past month since he said “Bitcoin is a fraud.” There was a temporary dip on his comments and it appears that JPMorgan was buying the dip aggressively, for themselves or for their clients, even as Jamie was publicly bashing it. Lawsuits have been filed as this is illegal activity, but deep pockets and political connections will likely keep Jamie shielded from any justice. The price of Bitcoin is now up roughly 15x since he said “Bitcoin will not survive” back in November of 2015.
It is not surprising to hear Jamie Dimon make critical comments about Bitcoin and other cryptocurrencies. After all, this technology significantly reduces the need for traditional banking and may one day make it obsolete. Thus, it is a direct threat to his business and his personal fortune. As usually occurs, it seems the legacy systems want to fight rather than embrace this new technology. But even if they do embrace it, people are unlikely to continue using banks when there are other viable options. Lest we forget how they crashed the economy, wiped out millions in wealth, were bailed out by taxpayers and then continued doing the same things. Heads they win, tails you lose in this zero sum game.
While many talk about “banking the unbanked” with blockchain technology, it is probably better to unbank the banked and help society move away from reliance on these vampire squids. You can now send millions across borders, around the globe, in second, nearly free, with complete autonomy. Try that at your local bank using SWIFT.
We first covered Bitcoin for subscribers around $100 and officially added it to our model portfolio around $900. In 2017 alone, our investment in Bitcoin is up 570%! While this is a staggering return, it pales in comparison to the returns we have realized from our investment in Ethereum. The #2 cryptocurrency, which has built a smart contract platform, is up roughly 2,700% year to date!
Initial Coin Offerings (ICOs)
Beyond investing in cryptocurrencies that trade on exchanges, we have also been investing in initial coin offerings (ICOs) or token sale events. This is a way to become an early investor in disruptive blockchain companies before their coins are publicly traded. Many of those investments went up 4x to 5x in a matter of weeks. These were the opportunities traditionally only available to venture capitalists, the ultra rich or accredited investors. With this new funding model, anyone with knowledge of these ICOs can invest any amount is these high risk/high reward investment opportunities.
Thus, we created an ICO tracker that rates the various coin offerings on multiple criteria and assigns each company an overall score. Below is a screenshot of the tracker to give you an idea of the work that we do analyzing cryptocurrencies. Our top picks have been masked out of respect to paying subscribers, but you can gain access to it by signing up here.
Is it Too Late to Invest in Cryptocurrencies?
Many investors that were initially skeptical or hostile towards cryptocurrencies are starting to come around and asking if it is too late to buy. While I am not an investment adviser and do not have a crystal ball, I believe we are around the 2nd or 3rd inning of the cryptocurrency revolution. The blockchain is the biggest technological innovation since the Internet itself and it is probably in the dial-up phase of the Internet life cycle.
It is estimated that less than 1% of the world population owns any Bitcoin. As this number continues to increase, there will be more and more fiat money chasing a finite number of bitcoins. Only 21 million will ever be created and 16.6 million are already circulating. This is an obvious advantage of Bitcoin over fiat paper money.
While the value of Bitcoin has rocketed substantially higher in 2017, it is important to maintain perspective. At $100 billion, the value of Bitcoin is still significantly less than Facebook at $508 billion or Amazon at $475 million. But since Bitcoin acts as money, it is probably more relevant to compare it to the USD, which has over $1.5 trillion in circulation (15x the value of Bitcoin) or the physical gold market, which is valued at $8.2 trillion (nearly 90x the value of Bitcoin). And of course, Bitcoin is worth just a fraction of the value of all physical money in circulation ($31 trillion), the stock markets ($67 trillion) or all money including bank deposits (estimated at $84 trillion).
The chart below is a bit outdated now, but still helps to illustrate the points made above.
The bottom line is that we believe Bitcoin and other cryptocurrencies are headed much higher. While we expect plenty of volatilitly and sharp corrections ahead, we believe the price will climb towards $50,000 over the next few years. Thus, we do not believe it is not too late to start investing in this sector. As usual, you should perform your own due diligence, consider waiting for dips and look to buy in tranches over time. You can get our Contrarian Report investment newsletter, model portfolio, top cryptocurrency picks, ICO tracker, email trade alert and more by clicking here.
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