Payne's Perspective: December 21, 2020: Mythical Creatures: Bitcoin & Krakens
What a wild week that saw several records created all over the place and superstar performances:
Individual market indices are hitting all-time highs with the Russell 2000 mid-year charge gaining momentum.
The vaccine distribution has sparked optimism, but the current economic reality of mounting lockdowns could not be ignored. It has gotten to the point where Congress has its back to the wall and should bring in the new week with another round of economic stimulus.
More well-known white shoe businesses and Wall Street firms are buying and singing the praises of Bitcoin. Mass Mutual is buying $100 million’ worth, and Guggenheim Partners Scott Minerd said Bitcoin should be worth $400,000.
Meanwhile, there are still disbelievers that wonder why someone would take hard-earned dollars and convert them to cryptocurrency. I think the time has come that everyone should own some Bitcoin. How much depends on risk tolerances and overall investing goals.
What is Bitcoin?
Bitcoin is a digital currency created in January 2009 following the housing market crash. It follows the ideas set out in a whitepaper by the mysterious and pseudonymous Satoshi Nakamoto.1 The identity of the person or persons who created the technology is still a mystery. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies.
There are no physical bitcoins, only balances kept on a public ledger that everyone has transparent access to, that – along with all Bitcoin transactions – is verified by a massive amount of computing power. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Despite it not being legal tender, Bitcoin charts high on popularity, and has triggered the launch of hundreds of other virtual currencies collectively referred to as Altcoins.
I will admit, however, to still not being confident about Bitcoin. Even though it’s foolproof software, the program was designed to limit the number of coins that could ever be mined. I also continue to worry about governments-limiting cryptocurrencies or offering other alternatives.
How can any government stand by and watch their fiat currencies be upended by Bitcoin and other cryptos?
Big Money - Not Dirty Money
There are concerns that Bitcoin is used by nefarious figures from organized crime to terrorists. And that will have to be addressed. But make no mistake; these shadowy figures already facilitate their crimes with paper currency (see above) and shady bankers.
Take a look at the table below. Nothing has come close to the returns of Bitcoin over the past year. It averages 206% annualized returns.
Wall Street Exuberance & Roaring 2020s IPO Frenzycf
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