It's never a good idea to get too excited about Bitcoin prices as they can have a tendency to jump up and down some but, with Bitcoin hitting $640 at its peak during the last 24 hours, there may be signs of the next major increase in its value on the horizon. Its price has been a little dormant now since August and a move upwards is very much overdue. I am not in the business of predicting but the environment for the next big increase certainly exists now.
There are signs of potentially big disruptions ahead in general financial markets with market confidence hitting a low point in the USA. Over there it seems there is a sell off, right now, in both stocks and bonds. One or the other is quite normal, both together is not that common. And Europe is potentially facing a storm over a move forward in Brexit negotiations right on the heels of the German central bank problems of a few weeks back.
All of these signs COULD bode well for Bitcoin and I am, of course, for any increase in Bitcoin value. Bitcoin evangelists and pundits have been saying for a very long time that the $1,000 mark is not only possible but highly likely and soon. So, is this the start of a move toward that?
Who knows, but let's just talk seriously for a moment about what could be happening around the world. There are plenty of people out there that want to spread doom and gloom and panic about the world's financial state and, frankly, I don't enjoy that "Armageddon" approach but a few things have me a little worried...
China (which has been steadily buying up the rest of the world for decades), is in financial decline. The USA has eye watering, gigantuan debt. Most of Europe is, frankly, bankrupt. The pound is on a slide into hell with its lowest values against the dollar and the Euro since - well, forever!
And the natural safe haven for money historically (gold) is being so tightly controlled by the banks that anything beyond token gold investment seems impossible so, where can you put your money other than under your mattress?
The answer, of course, is in Bitcoin. Is there a risk in holding too much of your cash in Bitcoin? Of course there is, but isn't there a risk in holding too much of your money anywhere? How exposed and vulnerable would you be IF tomorrow you suddenly discovered that your bank would not let you have any of your money out? Couldn't happen? Think again, it absolutely could and would at the stroke of a Government pen IF that was seen as the last resort. And it has happened in a few countries around the world already.
Let's be perfectly clear anyway. Your money is not actually in the bank. All a bank has on site is token cash flow to meet it's general day to day demands. The money, once placed in a bank, is then absorbed in business running. Paying staff, facilitating their operations and then, if there is any REAL money left, it is loaned out instantly to generate profit.
The banks create a balance figure on your account (inside a computer) and then lends money to another party (whether it actually has that money or not) and it does this by creating another positive balance on the borrowers account. In exchange for that positive amount, it demands interest and loan repayments.
It is a curious and, seemingly, legal system of entering sums on a balance sheet and the amazing thing is, they can repeat this over and over again. A bank can lend money it doesn't have to multiple people at the same time.
It is true, it really can. So, a bank can simply create money out of thin air, just like a Government can.
If the banks were required to give us all our money back tomorrow, they couldn't. That is exactly what triggered the last major banking crisis in 2008. A couple of high profile banking institutions had more call on their cash than the cash they actually held. Net result, they sank into oblivion or were bailed out by Government. So, are banks safe and secure? I don't think so.
Risk is a natural bi-product of today's financial world. If you think you know a way to avoid risk, then please, tell me about it because I want to know. Just leaving money in a bank account of any description right now is resigning yourself to its erosion in value even if it doesn't literally disappear. There is no direction in the value of the pound and the dollar and the euro except DOWN.
Just look around at where the filthy rich keep their money. I can tell you it isn't in the bank! And here's the thing. It isn't just about not having it all or too much in the bank either. What a lot of people don't realise is that any financial transaction that delivers an asset in cash to another asset of a non-cash variety goes through the banking system in some way to make the transfer.
Any asset returning to cash goes the same way. but there is an exception. Once cash has been converted to Bitcoin it can be spent in Bitcoin. Think gift voucher but think gift voucher that is pendable anywhere. When you convert cash into a gift voucher, then the gift voucher can substitute cash and can be used to buy anything up to its face value. That is exactly the same as how Bitcoin works except that its value is decided by a free running market.
The transfer of the Bitcoin you have just spent, back into cash, then becomes another party's problem. This also theoretically applies to some other cryptocurrencies but the downside there is very few merchants (if any) want to take any crypto except Bitcoin. Bitcoin is the master gift voucher, other crypto's will only work in some very specific places. For example, there are a few places around the world that will except Ethereum but they are very few indeed. Yet Ethereum has a current value of $12.
Why is this? Because Bitcoin has already proven itself and the others haven't. The only fear that people have about Bitcoin is a fear created by supporters of the existing system. It is a fear stoked by Governments and banks.They claim that a Government or a big powerful bank can stop Bitcoin in its tracks. They simply do not get it. The harder they resist Bitcoin, the stronger Bitcoin gets.
That's the key point, right there. Traditional banking fears Bitcoin and what it can do but the structure surrounding Bitcoin is impenetrable by the traditional authorities because there is no central target to take out.
This was proven in China a few years ago. The Chinese Government threatened to completely outlaw Bitcoin. What happened when they did? More money than ever went into Bitcoin from China and we had the last real massive upward spike in its value.
You can't control something that has no central point of attack. Bitcoin is not controlled by anyone or even by a number of people or institutions. It is controlled by anyone and everyone who has the will to use it.
If you happen to own a number of solid gold coins and you want to give them to me in exchange for a car. No-one can stop you doing it. Likewise, if you want to give me £100 that you have in your pocket in exchange for something I own that is actually only worth £20 no-one can stop you doing that either. Or maybe £100 for something I own worth £1,000.
The point is, once control is away from the central banks, the Government (the cash in your pocket is in this scenario) you can do what you like with it. Bitcoin is exactly the same as cash. If someone has something you want and they are prepared to let you have it in exchange for Bitcoin, then no third part is required to make that happen. Banks, out of the picture, Governments, out of the picture. Now attach Bitcoin to a piece of plastic...
In simple terms, let us say that you have a plastic card funded by Bitcoin (I have 2 such beasts) and you buy your groceries at Tesco's or Sainsbury's or wherever, using that card. Once your Bitcoin has gone to the card facilitator and has been confirmed (takes seconds, minutes at most), it is now their problem. If they run into issues with moving cash around because of banks, it doesn't affect you.
Your Bitcoin transaction is confirmed and happened. It cannot be reversed. Some other parties have the risk now of moving cash to each other. Some banks now have the job of moving a theoretical balance from one account to another and changing the balance sheet.
This is what makes Bitcoin unique. The last time I checked, most major retailers would not accept gold in exchange for groceries or goods. But I use my Bitcoin funded debit card in such stores all of the time.
Food for thought. I would suggest that, even if you don't consider using Bitcoin for day to day expenses, it might be wise to have some of your money in Bitcoin as a back up.
And now for something completely different...
I couldn't resist the famous Monty Python link line. I have just finished writing a book about the Basics of cryptocurrency trading. Why? Well, it occurred to me that some of you may have the skill and interest to get ahead of the game in this field.
Cryptocurrency trading is a very new, very youthful market where we can all still shape the rules and it can be a lot of fun providing you keep it low key and don't get greedy.
It is a pursuit that can be pursued for very small amounts of money while you are cutting your teeth on the learning curve. My book will not teach you everything you need to know about making money from cryptocurrency trading but it will give you a very good grounding in the basics. Maybe I will write the "advanced book" later, I will see how it goes. But watch out for a message to tell you that the the first book is ready to download.
As always with my "stuff" I focus on making it all as simple and easy to follow as possible. I hope you enjoy the book should you choose to download it when it is ready. |
