Booms, Busts and Cryptocurrencies

Bitcoin briefly topped out above $20,000 in December. Then it hit a rough patch. As I type, bitcoin is trading in the $14,500 range. Many people wonder if this is the beginning of the end for bitcoin.

Here’s my answer to that: no, it’s not. Not by a long shot.

Pullbacks like these are normal, healthy, and even necessary. Nothing goes up in a straight line forever. And I still hold firm to my prediction that bitcoin will top $1 million by the end of 2020.

Famed venture capitalist Peter Thiel just announced he’s buying up to $20 million in bitcoin. Thiel is the co-founder of PayPal and an early investor in businesses like Facebook, Airbnb, SpaceX and Lyft.

Thiel’s no fool.

Look, I’m no Johnny-come-lately to bitcoin and cryptocurrencies in general. When I introduced my book Choose Yourself in 2013, I initially sold it exclusively for bitcoin. That was almost five years ago, long before most people had even heard of bitcoin.

Here’s what you need to know today:

The boom in cryptocurrencies is following the same script that has played out over, over and over again.

You see, every boom follows a sequence of three stages. Every single boom throughout history has followed this script.

The stock market boom in the roaring ’20s… the tech boom in the 1990s… the housing boom in the 2000s.

And now the booming cryptocurrency market is following this exact same 3-step script.

First, only early enthusiasts are courageous enough to invest in the new trend. That’s stage 1.

Then, institutional investors (the so-called “smart money”) jump in. That’s stage 2.

Finally, the public joins the party, triggering a massive explosion in price. That’s stage 3.

If you know how to use this roadmap, you could make an absolute fortune. And to help you understand how this 1-2-3 sequence works, let me show you what happened during the 1990s boom in tech stocks.

In the mid-1990s, most people didn’t even know what the internet was. In 1994, the morning show NBC’s Today had a segment where one of the anchors asked, “What is the internet, anyway?”

While most people were dismissing the technology as a fad, early adopters like myself were heavily investing in it. In 1995, I correctly predicted every company would need a website. So I started my first internet company to help big corporations get online.

That’s how I ended up building the first websites for American Express, HBO, Sony and Disney, among others.

That was stage 1 of the boom.

Only when Netscape went public in late 1995 did people outside Silicon Valley start taking the internet seriously. That’s when institutional investors started joining the party, with pension funds and venture capitalists making a fortune when companies like Yahoo and Amazon went public.

The additional flow of money from the “smart money” helped pushed tech stocks even higher.

That was stage 2 of the boom.

But the public was still not participating. In June 1998, for example, mainstream economist Paul Krugman predicted the internet’s impact on the economy would be no greater than the fax machine. It wasn’t until 1999 that the masses finally started to invest heavily in tech stocks.

With more people jumping into the market, tech stocks jumped even higher, attracting more and more people wanting to get a piece of the action.

And that was the third and most explosive stage of the boom, with the Nasdaq soaring more than 85% in 1999 alone.

I’m telling you this because my research shows that cryptocurrencies are following this exact same script…

First, early enthusiasts, then, institutional investors, and finally the public. Where are cryptocurrencies right now?

In stage two of the boom.

The public is still not invested. That’s why right now is so special. If you get in before the masses, you could see astronomical gains.

Getting back to the tech boom, I compare the current crypto boom to the dot-com boom of the late ‘90s. Yes, most of the dot-coms went bust and you never heard from them again. But some of the survivors went on to great things.

Think of Amazon. Amazon was trading for $10 in early 2001. Now it’s trading for over $1,200.

If you miss out on the crypto boom, I’m convinced you could be denying yourself the only chance you’ll ever have to turn a small $100 initial investment into an absolute fortune.

The total value of cryptocurrency markets recently surpassed the half-trillion-dollar mark. While this may seem like a lot, it’s important to put things into perspective…

The world’s gold supply is currently estimated to be more than $7.5 trillion. The global supply of paper money is estimated to be another $7.6 trillion. The total supply of money is even greater.

That should give you some idea of the potential growth in cryptocurrencies. I think we’re just getting started.

Are you still intimidated or unsure about cryptocurrencies?

Well, if you don’t have experience with digital currencies, you are not alone. Despite the massive investments from “the smart money,” despite all the newly minted millionaires, and despite this exploding market…

Most people don’t even know what a cryptocurrency is.

To this date, fewer than one in 10,000 people have invested in bitcoin. Just ask your friends, spouse and neighbors what they think of ethereum, litecoin and monero. I bet they’ll have no clue what you’re talking about.

That’s because the masses are not participating in this boom. Not yet!

Remember, the biggest gains in any bull market throughout history only happen when the public joins the trend. It’s the masses that will push cryptocurrencies to the moon.

I remain bullish on the long-term potential of cryptocurrency and continue to advise my readers to buy the dips.

I’m serious when I say that bitcoin could go to $1 million by the end of 2020, and that investors can turn even a small amount of money into a small fortune over the next few years.



James Altucher
for The Daily Reckoning

The Daily Reckoning