“We are at risk of losing the entire system right now,” Raoul Pal commented.
Bloomberg was profiling a long list of famous investors about a particular event set to happen to bitcoin early next week. But its experts focused as much on the downfall of the traditional financial system as the emergence of bitcoin.
Here’s another quote which explains more:
Venture capitalist Tim Draper predicts Bitcoin could hit $250,000 by 2022 or the first quarter of 2023. “Bitcoin adoption will spread because Bitcoin is simply a better currency than any of the political currencies that are tied to governments and political whims,” he said, citing fiscal and monetary stimulus as possible accelerators for adoption.
Let me ask you, what would it mean to you to have a second, alternative financial system if there’s a collapse of the one you currently use?
A way to move and spend money, which isn’t placed into the same sort of lockdown that the financial systems is. Which can’t be placed into lockdown.
I think that’d be immensely valuable. In fact, I know it.
I’ve spoken to Greeks and Cypriots who were struck down by financial martial law during their debt crises. I know how valuable it would’ve been to them to be able to bypass the capital controls that the EU imposed.
Not to mention the story in Venezuela, where bitcoin is one of the few ways people can get their hands on crucial foreign goods.
But could financial martial law really happen here?
Exposing some of your wealth to cryptocurrencies is an obvious way to diversify your wealth and build security for yourself in case of a crisis.
The whole point of owning crypto is that it faces different risks to what you see in the rest of the financial markets. Which means it will surge or fall in value for different reasons than your other investments. That’s exactly what you want from diversification.
The real question is whether the likes of bitcoin are negatively correlated to your other investments as some claim. Will bitcoin surge if the financial system busts, as the quotes above suggest?
The obvious answer is no – it will likely be impossible to buy bitcoin in a proper financial lockdown. That’s not great for the price…
However, those who already have bitcoin will be able to move funds, make purchases and preserve their wealth far better than those stuck with normal money.
That is why the value of bitcoin rises in anticipation of a financial panic. People want to get their wealth out of the fragile financial system. And bitcoin is one place to go.
Like I say, I’ve identified a few others here.
I think we can all agree the financial system is looking fragile right now. Have you prepared yourself to escape it with some of your money?
Then click here.
Thing is, it’s actually on the supply side that the real action is in bitcoin. While the central banks of the world print money ever faster, bitcoin is going to slow down. Thanks to a specific piece of code written into bitcoin at the point of its creation, there will be another “halvening” soon.
What is a halvening?
I can’t reveal everything here. My colleague and fellow Aussie Sam Volkering will explain it far better here.
The first time I met Sam was the first time I heard about bitcoin too. If I’d listened to his advice to buy bitcoin back then, I wouldn’t have spent a lot of time and money searching for a home loan over the past year…
And so, this time, I suggest you listen to him about the halvening. But let me explain it in its simplest terms.
If you get a negative supply shock, what happens?
The most famous example is the oil shock of the 1970s, which unleashed widespread inflation around the world. Not to mention oil shortages.
The economics is simple. If there’s less of something, its value rises.
A Covid-19-related example is easy to come by. Beef prices are going nuts in the US as plants with infected workers get shut down. The interesting thing there is that cattle prices aren’t rising because of where the supply shock is happening – in processing.
When it comes to Japanese toilets, it’s the opposite. The component parts have suddenly exploded in price because of Covid-19 in China. Japanese toilets are sold out, but are not really rising in price. Toto’s profits plunged because it can’t source parts without paying premiums.
I don’t know which example bitcoin is closer to. The halvening is a supply shock, as far as I understand it. It changes the ability of more coins to be “mined”.
But is that like Japanese toilets or American beef? Find out from Sam Volkering here.
His Crypto Profits Extreme webinar will take you through what’s about to take place in the engine room of bitcoin in far more detail. And how to profit.
As I see it, we have both a demand and a supply story for the bitcoin price to begin its third surge.
Will you be along for the ride?
Editor, Southbank Investment Research