It has probably escaped a lot of people but the crypto and digital currency market is maturing.
Bitcoin will be heading back over $11,000 and Ethereum will likely hit $400 ( sustainably) in the next few weeks. Lesser mortals too are getting back into their stride. Even XCP has risen over 800% from its low.
Transaction costs are through the roof. I’ve seen Bitcoin miners charging $150 for a fast transaction and Ethereum has reached the unheard of level of $16 in some cases.
Why? The transaction costs reflect the urgency of what people are doing to get into – or out of – the market. We are back to the “blink and you miss it” days of three years ago.
But why the interest in holding crypto? Yes the blockchain does a superb job of transferring value, but why do you want to hold it?
The French have a saying, “ Plus ca change” which roughly translates as “The more things change the more they are the same.” And in the present situation never a truer word was spoken.
I’m referring of course to the macro economic situation where every Government on earth has literally magiced trillions out of thin air. It’s never mentioned how easy it actually is to do this, but believe me the old idea that they have to do something as mundane as to print money on printing presses, or do something esoteric, even if it were ever true, is simply nonsense. Weimar Germany with its barrow loads of Marks has nothing on the sums that are being created at the moment – and would appear to be going to continue being created for the foreseeable future. Bitcoin was born specifically to protect investors against central bank meddling, and continued concerns about how to manage global economies underscore its utility as a hedge against the consequences — inflation, inequality and the erosion of wealth.
Even if taxes are raised to pay for all this (and it would be a very foolish Government that tried to take cash away from people at this juncture) there is going to be the most almighty inflation that has ever been seen. I accept it won’t be like Weimar (Okay it might be) but it is going to make tin-pot dictatorships look positively frugal.
What does inflation mean? It means that everything you buy will cost more. So if a packet of biscuits is £1 today, in a year’s time it might be £1.50. That’s because, despite what Harold Wilson said in 1964, “ the pound in your pocket WILL be effected by the present situation”.
In the simplest terms, if you have £1 today you have £1 in say £5 trillion. In a year’s time it might be £1 in £7trillion. And because there are more GBP floating around there is the classic main-stream economic idea of too much money chasing too few goods.
But crypto currency allows you to row against the tide. Whereas inflation is built into the world fiat monetary system, Crypto currencies are actually marginally DE-flationary. In case you don’t think Governments will let inflation rip, think again. The Chairman of the US Federal reserve has decided that hey 2% inflation is too low. Let’s go for 4%.
Have you any idea what that means? Well 2% inflation means that £1 today is the same as £1.11 or thereby in 5 years. At 4% you need £1.23 . We have been so used to low inflation for so long, we have forgotten that in the late 1970s inflation reached 22% in the UK. 5 years of that would mean you needed £2.70, which is a quite terrifying reality. From 1900 to the present day, £1 would now require around £125. I always like to relate that the “penny post” when introduced was not actually that cheap. It equated to what is now 0.5p, but would be worth about £2.60
Compare that with crypto. If you have 1 bitcoin you will always have 1 bitcoin in 21 million. If you think that means that the Bitcoin price is NOT going up then I can’t help you.
As I have argued before, having some crypto available to you just might be the best decision you ever make. Remember, in any 5 year period, in the past 10 years, having just 1% of your cash in crypto would have had you outperforming every other investment.
Next year is going to be the biggie for currency everywhere, as governments try to decide what they need to do to get back to “normal”. I’m afraid I simply don’t believe that is going to happen and the massive money creation and inflation now coming down the line is going to perform the magic trick of transferring wealth away from the next generation. Buy crypto. And just as a reality check, Apple is now worth about £1.7 trillion. That’s more than the entire UK Stock Market
Don’t forget, Each new dollar reduces the purchasing power of every dollar in existence.