Even if Bitcoin Collapses, the World is CryptoPermanent
In 1903, Henry Ford hired local attorney Horace Rackham to draw up the incorporation papers for the Ford Motor Company.
Mr. Rackham was paid $50 for his service.
But Ford gave Rackham something far more valuable...
The opportunity to invest in Ford's new company.
Rackham would become one of only 12 original shareholders... in on the ground floor.
Rackham wanted in. But he didn't have the cash to invest.
So Rackham went to the Michigan Savings Bank for a loan — yet he found getting the money not so easy.
You see, the president of the bank was skeptical of this newfangled auto and considered Ford a swindler. He told Rackham:
The horse is here to stay, but the automobile is only a novelty — a fad.
Fortunately for Rackham, he was able to convince the bank to loan him $5,000 anyway.
This loan bought Rackham 5.6% of the new Ford Motor Company and a seat on the Board of Directors.
By 1919, Rackham's Ford stock had already paid him $2 million in dividends... worth about $30 million today.
Then Henry and Edsel Ford bought Rackham's shares back for an additional $12.5 million.
Rackham's $5,000 original investment — the one the bank president called a "fad" — turned into $14.5 million.
Inflation-adjusted, Rackham's gain would be worth well over $200 million.
Today there is similar sentiment surrounding cryptocurrencies such as Bitcoin.
A few weeks ago, JPMorgan CEO Jamie Dimon sent the cryptocurrency market into a frenzy after calling Bitcoin a "fraud" and saying he'd fire anyone trading it for being "too stupid."
And Dimon isn't the only big name to slam Bitcoin...
Economist Robert Shiller says Bitcoin is the best example right now of a bubble.
Paul Krugman says Bitcoin is antisocial and impractical.
Joe Foster, fund manager at investment giant VanEck, recently wrote to his clients saying:
Bitcoin and other digital currencies are a FAD that has attracted the attention of programmers, speculators, and early adaptors.
But like the president of the Michigan Savings Bank, these guys fail to see the bigger picture.
Is Bitcoin in a Bubble?
The short answer is: yes.
But before the Bitcoin fanboys get their panties in a bunch, that doesn't mean price collapse is imminent.
The Bitcoin bubble is still clearly in an expansive phase. The price of Bitcoin cracked an all-time high yesterday of nearly $5,300. And it's still aiming higher.
In fact, I think the price of Bitcoin will be $7,000–$8,000 by this time next week.
And from there I don't see any reason why speculative mania couldn't drive the price of Bitcoin to over $20,000.
But let's just assume for a minute that the price of Bitcoin skyrockets to $20,000, then collapses. What then?
What happens after the bubble bursts?
The fact is, price bubbles occur in markets all the time. But when bubbles pop, it rarely destroys the entire market.
Just consider the real estate bubble...
Did the burst in the bubble completely stop people from buying houses forever?
Did the burst of the dot-com bubble kill the internet?
Did the collapse of the video game market in the early 1980s kill that market forever?
Let's even consider the most famous price bubble of all time: the 17th century Dutch tulip bubble.
It was reported that during this bubble, one bulb was priced five times higher than the average house at the time. And then, all of a sudden, the bottom fell out of the market.
But the market for tulips did survive over the long term. Of course, the price of tulip bulbs has fallen. But today the demand for the flower is so large that tulip production in the Netherlands is at a record high.
In the same way, after the Bitcoin price bubble bursts (and it will eventually), it's highly unlikely that a price collapse will kill the cryptocurrency forever.
It's even more unlikely that a collapse in the price of Bitcoin will destroy the entire cryptocurrency market permanently.
A change has occurred...
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The World is Now CryptoPermanent
Pandora's box has been opened. And there's no containing the crypto market now.
Bitcoin is simply one of hundreds of cryptocurrencies currently on the market. It could even go completely bust, and the crypto market would still continue. And the main reason is the usefulness of the underlying technology supporting all these cryptocurrencies: distributed ledger technology (DLT).
Simply put, DLT uses a large network of independent computers to verify and synchronize digital data. It's simply a system of independent checks and balances.
And right now, every major industry (not just banking and finance) is considering how it can implement this technology into its own systems. Just to name a few...
- Agriculture: DLT could be adapted to track grains and livestock through supply chain.
- Energy: DLT could allow energy producers and consumers to trade directly.
- Transportation: Airlines could use DLT to better keep up with frequent schedule changes.
DLT could even be used in the future to store identities digitally to build a secure electronic-voting system.
One day you might vote for the president on a blockchain or similar distributed ledger.
The potential is only now being discovered.
But there's a bit of a problem for investors...
You can't buy distributed ledger technology directly.
The only way most people know to get exposure to this incredible new technology is through owning Bitcoin or one of the other cryptocurrencies.
But I've found a "back door."
I’ve discovered a way to continuously profit from the Bitcoin and cryptocurrency market without having to own any digital currency or all the volatility that comes with them.
I need to wrap up for today, but if you're interested in learning more about my "back door" into the Bitcoin market, click here.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reaches hundreds of thousands of investors every day. Luke is also the investment director of Angel Publishing’s new Secret Stock Files newsletter, which helps investors leverage the future supply/demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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