Why I Changed My Mind on Bitcoin

Friday of last week, I wrote about the enormous impact blockchain technology could have on retail transactions.

Verifications blockchain tech makes possible could end counterfeiting. It could end lost or stolen goods.

Plus, it could allow for immediate transactions and for goods to be shipped minutes after a confirmed purchase, as opposed to hours or days.

That’s just a quick look at consumer-focused applications.

Banks, brokers, money managers. There are blockchain tech implications for all those jobs too.

Instant stock transfers. Fee-free, immediate ledger reconciliation. The mind reels at the possibilities.

To date, we’re just scratching the surface of how blockchain tech could remove barriers, costs and complications.

Truly, no exaggeration, the long-term promise is a new era of commerce.

That’s blockchain. Blockchain isn’t bitcoin, however.

Before we float away on these rosy dreams, we need to look at the bitcoin/cryptocurrency landscape as it exists today.

Bitcoin’s Worth $94 Billion… and Counting

Initial coin offerings (ICOs) are all the rage right now. New tokens hit the airwaves near daily, sucking up investor interest and making their backers into millionaires.

Bitcoin, trading as I write at $5,696, is up $800 in the last week.

Ethereum trades for $334.

In January, you could get one for $9.62.

By total market cap, bitcoin’s now a $94 billion-plus enterprise.

Ethereum’s at $31.8 billion.

There are now 12 (12!) separate cryptocurrencies with market caps over $1 billion.

Smart money. Dumb money. Undecided money. Call it whatever you want.

There are now tens of billions of dollars invested in cryptocurrencies. Much of it from people who as recently as a year ago would’ve scoffed at the idea of putting money on the line for a digital currency.

This, rightly so, should give you pause. It should make you think of runaway real estate speculation, Pets.com and tulip bulbs being exchanged for diamonds.

I fully admit as recently as a few months ago I shared that opinion. I’ve written to you about it many times.

Here’s the thing…

Every time bitcoin “forks” make news or the Chinese government “cracks down” on cryptocurrency trading or bitcoin prices suddenly dip and then recover…

… cryptos get a fresh injection of news-cycle energy. The mainstream financial media fall all over themselves to explain what happened and why.

Cryptocurrencies have a hold on the public consciousness right now like few assets in history have ever achieved. And yes, many of those that did achieve such news power were classic bubbles.

Return of the “Golden Geeks”

Dot-com stocks made headlines daily in the 1990s.

Netscape’s Marc Andreessen, for example, was on the cover of Time on Feb. 19, 1996, with the headline “The Golden Geeks” and the following text:

They invent. They start companies. And the stock market has made them INSTANTAIRES. Who are they? How do they live? And what do they mean for America’s future?

“Instantaires” was a popular buzzword at the time for folks who became millionaires or billionaires “instantly” after taking a new website public.

Sound familiar?

My point is the cryptocurrency bubble’s going to pop at some point.

In its aftermath, real long-term players will emerge.

And years from now, we’ll all look back at the fortunes we could’ve made in both blockchain tech and the best-of-breed cryptocurrencies like bitcoin.

Netscape isn’t an independent company today, for example. But Marc Andreessen’s still a billionaire.

Blockchain and cryptocurrency tech is here to stay. The changes we’ve seen so far are just the start.

My position’s evolved. Yours should too, if it hasn’t already.

For Tomorrow’s Trends Today,

Ray Blanco
for The Daily Reckoning

The Daily Reckoning