Dear Member,
Since December 15, 2018, bitcoin has climbed from lows of $3,200 to $8,100 today.
I believe bitcoin will continue to rise over the next few years and that we could see it go up to $50,000 in 2020.
The primary reason I’m so bullish is that I don’t think the market has even come close to pricing in next May’s bitcoin halving. As you know, after that point there will be HALF as much new bitcoin coming onto the market via mining. Bitcoin’s “inflation rate” will drop to just 1.8% at that point.
Our own Assistant Managing Editor Allison Brickell summarized how halvings have affected bitcoin’s inflation rate earlier this year:
Today’s chart shows how bitcoin’s inflation rate has decreased along with each halving. It went from more than 50% before the first halving in 2012 to around 10% before the second halving in 2016. After the second halving, it dropped to around 5%. It’s currently at 3.8% and is projected to drop to 1.8% once the third halving occurs in May 2020.
That’s the first half of the “perfect storm.” The second half is our rapidly deteriorating financial system. As I noted in my article about gold last week, we’re starting to see serious signs of trouble brewing in the financial system. Here’s the key piece from that article:
As Caitlin Long points out, the problem is that for every U.S. Treasury in the system, two or three banks claim to own the same bond. This is known as “rehypothecation.”
“For every U.S. Treasury security outstanding, roughly three parties believe they own it. That’s right. Multiple parties report that they own the very same asset, when only one of them truly does. To wit, the IMF has estimated that the same collateral was reused 2.2 times in 2018, which means both the original owner plus 2.2 subsequent re-users believe they own the same collateral (often a U.S. Treasury security).”
Her conclusion is the most disturbing part of all.
“What it all means is that, while each bank’s financial statements show the bank is solvent, the financial system as a whole isn’t. And no one really knows how much double-, triple-, quadruple-, etc. counting of U.S. Treasuries takes place.”
Add in the huge and growing federal deficit and record-high corporate debt, and we have a recipe for financial chaos. I believe governments and central banks will react as they have in past crises – by printing money, lowering rates and trying to kick the can further down the road. It will ultimately result in a chaotic financial period.
This is why bitcoin was created. To serve as an alternative to our increasingly fragile fiat system. I think the “digital gold” aspects of bitcoin will shine during this period. So for now, I remain focused on bitcoin in the crypto world. Eventually, the time for altcoins will come again, but unfortunately, I don’t think we’re there yet.
We’re headed for a truly chaotic period in financial markets. And I think that the primary crypto asset that will benefit from this, near term, is bitcoin.>