Embracing Bitcoin – Seeking Alpha

I continually get news feeds streaming across my computer telling me how other countries are jumping on board with Bitcoin. But, I read in American financial sites that say to stay away from Bitcoin. The fact is, as a medium of exchange, Bitcoin has tremendous value and ability. As an investment class, Bitcoin continues to move higher, latest pauses on the road to $3k. Bitcoin, as an asset class is heading much higher based upon supply and demand. Articles are being printed showing that Bitcoin could eventually print $1 million dollars. While I can see Bitcoin $1 million dollars, I am going to focus on the crypto-currency's move into from four to five digits for now; that is far more easily accessible.

It is very easy for Americans to dismiss Bitcoin. By, and large, Americans think in only one type of currency; The U.S. Dollar. So, when I read articles on major financial website trashing Bitcoin, I have no problem trashing the articles; the disconnect with Bitcoin is more because of a lack of understanding. A perfect example of a country that is not only embracing Bitcoin is Japan. Japanese are embracing Bitcoin at a very rapid pace. Because of this, demand is pushing higher and higher, and so is price. I see this as being continuous. I see Bitcoin pushing past $3k and, in fact, eventually hitting $10,000.00 per coin with an eventual price target of $1 million for Bitcoin. This is the framework of why that is going to happen.

Whenever I sit down with anyone who asks me about Bitcoin, I always show anyone the daily chart from just the past year alone - below. I then tell them they should consider Bitcoin as an alternative and explain the reasons why. I go into the details about limited supply and no central bank as well as what is happening in the economies around the world. Again, Americans have a tough time with this simply because they cannot think outside of the U.S. Dollar box. Most Americans have never even traveled outside of the country; only 8% of Americans traveled outside of the United States in 2016.

Bitcoin is being embraced in Japan at an incredible pace. I have read several articles over the past two weeks alone where Japanese hotels, cash systems and other purveyors are adding Bitcoin into their economy. And, yet, in America, financial websites are warning to stay away from Bitcoin. I took this as a lack of education, if anything.

In Japan, the government has legalized Bitcoin - along with other countries. At the same time, the Bank of Japan is in the process of desperately trying to dilute their currency to create any kind of inflation possible. It is largely not working.

Here is a look at the central bank's "printing press" in action: As stated, their goal is to stimulate the Japanese economy and keep inflation at target, normal levels. They are not succeeding so far. Inflation at 0.4% on a year-over-year basis is not even worth bringing up; It is negligible. My bigger fear is that mountain of printing that the Bank has done.

In the meantime, savvy Japanese investors are scooping up Bitcoin at a rapid pace. Whereas Japanese Bitcoin exchanges were not even really a factor, since the first week of April when the government legalized Bitcoin, the Japanese exchanges are now neck-and-neck with America exchanges. This is just one of many countries where Bitcoin is not just a curiosity but is becoming a way of life and is being integrated into the economy at a rapid pace with 100s of thousands of pay stations and ATMs appearing.

Americans simply do not get Bitcoin and they may very well regret that later. There is a great deal of potential with Bitcoin as an alternative to banking; some 56 million Americans do not even have a bank account. Bitcoin, just like cash, does not have the extensive paperwork criteria like a bank account has. With some 56 million Americans not even having a bank account this is a significant opportunity.

Unlike the charts above showing the Japanese central bank attempting to dilute its currency, Bitcoin has not central bank. Instead, Bitcoin will only ever have 21,000,000 million coins. Because of that, the price of Bitcoin is going to continue to be pushed higher. In fact, unlike fiat currency, Bitcoin appreciates in value. The purchasing power of any fiat currency is always being eroded by a central bank, whereas Bitcoin's potential to continue to move higher. And, although this cartoon is a bit tongue-in-cheek, it is also very accurate: Compared to today, if you had invested $100 in Bitcoin in 2009, you would be worth about $75 million today. And, yet, there are people who trash the idea of Bitcoin simply because they do not understand the currency and what it does.

At the beginning of April, Bitcoin was trading at $900.00. It is now just above $2,650.00 and looks set to test the $3,000.00 level for the third time. That is a simple multiple of 3.5x in two months. If that happens again, even if it takes another 6 months to happen, or even 6 years, Bitcoin will rise to nearly $10,000. That is an impressive gain unmatched by other "stores of value" or asset classes. Whether the currency crosses the $3k level this time, I am not certain. But, I am certain it will push past eventually. It is a matter of when, and not if, given the limited supply and the potential widespread demand.

Bitcoin's limited quantity of coins is set. But, there are 7 billion potential users of the currency. The fundamentals continue to support Bitcoin moving higher and higher as more and more access is available. And, since this currency's track record is that it moves higher and higher, its appeal over fiat currency is gar greater.

I can very easily see a day when Bitcoin pushes past $10,000.00 per coin. And, I can see a day when there is another order of magnitude to the coin's value. Some savvy investors even see $500,000.00 per coin.

Bitcoin works because of the agreement that there is a price for it and its exchangeability for goods and services, or conversion into fiat currency. And, as more and more countries ensure Bitcoin is able to work unhinged, the demands for the currency will continue to move higher. That will push up price. It is an added value to the coin's appeal.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in COIN over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Embracing Bitcoin - Seeking Alpha