A few weeks ago we provided a bunch of information regarding Bitcoin for those trying to get a grasp on this cryptocurrency.\u00a0 If you missed it, you can check it out here:<\/p>\n
Literally within days of publishing that post, Elon announced that Tesla bought $1.5\u00a0billion<\/span> in Bitcoin and plans to accept it as payment.\u00a0 And what did Bitcoin’s value do?\u00a0 It went up 20.56% in a single day <\/strong>and jumped to $46,982 USD.\u00a0 Nuts.\u00a0 Honestly, just nuts.<\/p>\n Now, I read, listened, and watched all of these sources and I still do not feel like I have a good enough grasp on Bitcoin.\u00a0 There are a ton of words in the crypto space to try and grasp which can honestly get exhausting. From altcoins, to blockchain, to central ledger, to cold storage, to cold wallet, to distributed ledger, to ether, to fiat, to fork, to HODL, to halving, to hot storage, to hot wallet, to ICO, to miners, to mining, to open source, to satoshi, to Satoshi Nakamoto, to whales, and on and on and on<\/a> (and these are the more surface level terms). I still do not fully understand the mining process.\u00a0 I still do not fully understand how the deregulated networks function.<\/p>\n All that to say I truly wonder how many people who are investing in Bitcoin actually understand it???<\/p>\n Basically, for those who aren’t too interested in the topic to dig into those links provided in the previous post but want a quick and dirty breakdown – my understanding is that Bitcoin allows people to store value outside any fiat currency system in something with scarce units (only 21 million Bitcoins can be mined) and that value can be transported anywhere around the world.\u00a0 The idea is that it is the digital gold.\u00a0 And the thought is that it’s market cap (currently $962 billion<\/a> as of mid-February 2021) can one day become the equivalent of gold’s market cap (~$10 trillion).\u00a0 So this means we have a clear indication of Bitcoin’s market potential (10x if it replaces gold completely).\u00a0 Any maybe one day it becomes a global settlement network, a protection against the seizure of assets, and\/or a catalyst of currency demonetization in emerging markets.\u00a0 Many are estimating that by the end of 2021 the market cap will cross the $1 trillion threshold and that each Bitcoin will be valued around $100,000 USD.<\/p>\n My guess is that people see this gap of $962 billion vs $10 trillion and think Bitcoin is headed towards that $10 trillion figure someday as it will take over gold and you might as well get in while it’s undervalued.\u00a0 Of course, this is the intention\/goal\/hype with the idea that others will see the current price and want to get in knowing that it *could* reach $100,000 within a year.\u00a0 That’s the bet that everyone is making.\u00a0 Will Bitcoin continue to gain it’s popularity or not?<\/p>\n Like gold, it’s price improves when there are concerns about inflation and when governments spend a lot of money, as they are doing now.\u00a0 But it’s more finite than gold so supply and demand would indicate that Bitcoin’s price should rise over time.\u00a0 In reality, no one really knows how it will play out.<\/p>\n It’s open sourced, decentralized, uses encryption based on blockchain technology that is calculated by multiple parties on the network to verify transactions and maintain protocol.<\/p>\n It’s founder, Satoshi Nakamoto (who no one knows who that really is – guy, girl, group of people), created something with scarce units that can be traded in a decentralized way.\u00a0 So rather than the US government printing dollars (fiat currency) on a whim, Bitcoins cannot be magically created.\u00a0 Once the 21 million have been mined, there are no more Bitcoins to be had (so it’s said).\u00a0 As of this writing, 18.5 million Bitcoin have been mined with the remainder, less than 3 million, to be mined around 2140.\u00a0 So supply is capped.\u00a0 \u00a0The idea is this scarcity potentially gives it value – if there is demand for it.\u00a0 That’s the big ‘if’ that everyone is betting on.<\/p>\n Like gold, there’s no intrinsic value but its price goes up or down based on public sentiment and speculation.\u00a0 Investors will bid the price up if they believe the demand for Bitcoin will grow, or conversely, sell and drive the price down if they believe demand will fall.<\/p>\n Bitcoin has a 4 year halving cycle and during each 4 year cycle there seems to be a pop in the middle then a calming\/crash session but each new cycle starts off at a higher price (so far).\u00a0 From January 2012-January 2014 (2 years) there was a big bull run.\u00a0 Then from January 2014 – October 2015 (~2 years) there was a drop.\u00a0 Then from October 2015 – January 2018 (~2 years) there was another bull run up.\u00a0 Then from January 2018 – April 2020 there was a drop again.\u00a0 And now, we’re back on the climb again.<\/p>\n We are currently in the 4th cycle (since May 2020) and this tends to be a very bullish phase for Bitcoin as demand remains strong but new supply is limited.\u00a0 People are estimating that Bitcoin will go over $100,000 by Q4 2020.\u00a0 The media will continue to go crazy.\u00a0 But what happens after that?\u00a0 Likely there will be a dip.\u00a0 By how much?\u00a0 Who knows.\u00a0 And what will it climb to next?\u00a0 Will it continue to climb or will another cryptocurrency take over?\u00a0 Or will cryptocurrencies fizzle out all together due to some unforeseen circumstance that our present selves cannot see? (As Optionality author Richard Meadows would call an “unknown unknown”.)<\/p>\n The technology and logic\/algorithms behind cryptocurrencies are truly fascinating.\u00a0 I’m not dismissing that one bit.\u00a0 Trying to understand blockchain is very interesting.\u00a0 But will Bitcoin forever be a leader in this space?\u00a0 That’s where I personally have my doubts.<\/p>\n It’s truly amazing to see what’s been happening over the past few months.\u00a0 Demand has surged from institutional buyers as many of them eye Bitcoin as a hedge against inflation.\u00a0 Outsized government budget deficits, stimulus money, and a decline in the US dollar all factor favorably for Bitcoin.\u00a0 More and more retailers are joining the party and allowing retail purchases to be completed with Bitcoin.\u00a0 The recent rally since October has been nuts.\u00a0 Many Bitcoin believers are saying “I told you so” and “this is just the beginning”.\u00a0 Any maybe it is.<\/p>\n At one point I was considering buying some QBTC<\/a> and putting it in my TFSA or buying a fractional amount from Bitbuy.\u00a0 But then I saw the premiums they charged on top of the 1.95% fee and I was less than impressed.\u00a0 I told myself if\/when it got back down to $20,000 USD I’d throw a little in.\u00a0 And then I just kept watching it go up.\u00a0 Literally just last week I decided to pull the trigger and put 1% of our portfolio into the new Purpose Invest ETF that goes by BTCC<\/a>.\u00a0 BTCC is North America’s first bitcoin ETF on the Toronto Stock Exchange.\u00a0 It traded over $160 million on day one<\/a>, just crazy. Gemini Custody secures all BTC for this fund and Gemini Clearing clears every BTC transaction for this ETF.<\/p>\n This is purely a speculative\/FOMO play and I recognize that completely.\u00a0 Can it get hacked?\u00a0 I have no clue but I sure as hell hope not.\u00a0 Gemini is supposedly safe but we shall see.\u00a0 We purchased $10,000 USD of BTCC.U at $10.14 per share on it’s launch date (which is when BTC was valued around $51,000 USD) which is honestly insane to be writing but here goes to the unknown.<\/p>\n Now, that’s not to say that I think Bitcoin is going to the moon.\u00a0 I do think it will reach the $100,000 mark as more and more institutions and high net worth individuals put anywhere from 1-5% of their portfolio in.\u00a0 (Will that actually happen?\u00a0 Who knows, but that’s my view.)\u00a0 Will it remain high long term?\u00a0 Will it cross over the $500,000 mark ever?\u00a0 $1,000,000?\u00a0 This is where I have my personal doubts but who knows.\u00a0 Is it’s current price even sustainable???<\/p>\n Here’s our plan for the 1% of our portfolio that we put in:<\/p>\n I understand we are gambling at this point.\u00a0 We are speculating.\u00a0 We are\u00a0not<\/strong> Bitcoin fanatics.\u00a0 In fact, I think there are still many flaws to it.\u00a0 Yet here we are investing in it.\u00a0 It has first mover advantage and I wonder if that’s enough to sustain it long term.\u00a0 Mid life crisis anyone?!?\u00a0 So lets dig into some of the cons I’ve come up with.<\/p>\n Now, how could someone coming up with all those cons go out and then purchase Bitcoin?\u00a0 I have no idea!\u00a0 I’m constantly thinking about the various cons when I also consider what it *could* be in the future. Because we are at a great point with our finances, I\u2019m ok risking 1% of it. It may sound counterintuitive to some, but since our work setup is so sweet, if it means working another 2.5 months to make up for a loss, so be it. Can you tell I\u2019ve been teeter tottering on this topic!?<\/p>\n Please do not go and make a decision just based off of our thoughts and opinions.\u00a0 Educate yourself.\u00a0 I truly hope our previous post which outlined many of the pros and cons to Bitcoin helped provide some clarity on the subject to you.<\/p>\n How long will we hold Bitcoin for?\u00a0 I honestly am not sure.<\/p>\n We understand those who do support Bitcoin and are not here to tell you you’re crazy. \u00a0We also understand those who are completely avoiding it like the plague. There are constantly new topics coming out on this subject – both for the good and bad. \u00a0Our word of advice is to only invest as much as you’re comfortably prepared to lose.<\/p>\n I’m genuinely curious as to how many people who hold Bitcoin actually understand what crypto and Bitcoin is.\u00a0 Sure they may have a small grasp on it that it\u2019s intention is to be the digital gold or the hedge against fiat currency, but who actually understands the intricate details of it?\u00a0 Who understands how Bitcoins are mined?\u00a0 Or about the backbone of blockchain technology?\u00a0 I’m going to guess less 25%.\u00a0 What do you think?<\/p>\n Before wrapping up today’s post I wanted to give a shout out my friends Martina, Jarin, and David for all the back and forth conversations we’ve had on this topic over the past few months.\u00a0 Thanks for dealing with this yo-yo rollercoaster! \ud83d\ude42<\/p>\n What are your thoughts on crypto and Bitcoin?\u00a0 Do you think this is the classic follow the herd trading going on or do you think Bitcoin is going to the moon?\u00a0 Do you own any?\u00a0 Do you think you ever will?<\/p>\n If you liked this article and want more content like this, please support this blog by sharing it.\u00a0 Not only does it help spread the FIRE, but it lets me know what content you find beneficial.\u00a0 Writing is NOT my strong suit and it honestly takes me hours to write each post so the more encouragement the better!\u00a0 Engaging in the comments below keeps me motivated.\u00a0 You can also support this blog by subscribing to receive emails anytime a new post is published.\u00a0 Thank you FImily!<\/p>\n We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.\u00a0 Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:<\/p>\n A few weeks ago we provided a bunch of information regarding Bitcoin for those trying to get a grasp on this cryptocurrency.\u00a0 If you missed …<\/p>\nBitcoin 101<\/h2>\n
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My Personal Beef With Bitcoin<\/h2>\n
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Support This Blog<\/h2>\n
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