As many of you know, I have a personal fascination with cryptocurrencies, and specifically Bitcoin. It was a rough year for all the world’s blockchains, and the media gets never-ending joy from crypto bloodbaths. When reading all the obituaries for Bitcoin and blockchains remember this: it has all been written before. Since 2008, there have been many cryptocurrency booms and busts, but each bust’s bottom price is higher than the last. It’s an important factor to consider when reading the news.
Which is not to say there are not nefarious actors or unprofessional opportunists seeking to get rich quick in a nascent asset space. Exchanges get hacked and criminals run Ponzi schemes, but the Bitcoin blockchain has never been hacked, and it remains un-hackable with today’s computer technology. There are people worldwide building cryptocurrencies for good purposes and committed to cryptocurrency endurance with hundreds of billions of dollars invested in the space. There is more machine power today securing the Bitcoin network than during any other boom time in crypto history. While the market takes out the trash, I am not worried about Bitcoin.
I still believe cryptocurrency could be the future of money, and the Fed does as well based on their research into a truly digital, central bank currency. More importantly though, I still believe Bitcoin is bond insurance. By bond insurance, I mean it may be a good defense of a declining dollar. US Bonds are a promise to be paid in the future in US dollars. If the dollar were to decline in value, I believe that value would accrete to ‘hard’ assets like precious metals or cryptocurrency. Owning a very small piece of this asset class is something I do myself and often advise other investors to do, provided they have a long time horizon and a moderate tolerance for risk. If you have questions, I would love to dive into this further next time we meet if you have questions.