BitcoinSachs, Editorials

It’s not a bubble, it’s mass adoption.

The thing that makes brilliant Hedge Fund managers, Wall St. tycoons, and various Magnates who they are, as powerful as they are, and definitely as wealthy as they are is a very simple thing that almost know one understands. Anyone can know something. Anyone can know a lot of things. The key is knowing what you don’t know, and the real brilliance is in knowing what you don’t know that you don’t know. I would explain that further, but to be honest, if you can’t make sense of that, a further explanation will also go over your head.

I want to start with The Silk Road take down because that’s a logical starting point as it was the event that set the perfect storm into motion, but alas better judgment will prevail and I’ll start further back.

The single most important ‘thing’ in any organization, country, company or currency is simply infrastructure. If I need to cite an example to illustrate this point please exit this post directly.  Keep in mind when I first got into Bitcoin it was hovering around $7, there was the Bitcoin.org site, an wallet link, a miner link, and a wiki link.  I don’t recall any exchanges at that point.   At the beginning of this year (2013), there basically wasn’t any infrastructure. Mt. Gox was pretty much the only player in the game which controlled what was it…80% of all transactions? It was a stranglehold. You see Bitcoin pushing over $100 and moving quick, you have the money, and you want to buy. How do you do it? Let me tell you how. First, you had to sign up for an account and to get ‘verified’ you must submit photo ID and proof of mailing. When I was going through this in Feb. they were 22,000 people behind on processing account verification. This amounted to roughly 4 weeks of pure wait time. You get that done and realize that the easiest way to move relatively small amounts of money to this place is through Dwolla. You had to do the same process, and you will spend two weeks doing the same thing. I had to move money from PayPal to the Bank, and Bank to Dwolla. That took about a week. Dwolla to Mt. Gox took nearly two weeks. Anyone doing the math on this? 9 weeks give or take based on where you were in line. I heard at one point that they were over 40k people behind in early April chasing $260. 9 weeks to get your money into an exchange to purchase a Bitcoin. Support? Terrible. DDoS attacks would shut Mt. Gox down regularly. Upgrades to their system would delay it further. I cannot imagine why there weren’t more people putting money in, and trying to get involved in the community. Oh wait, they realized it was going to take an eternity and by the time they did, boom, it crashed down to $58. Never mind, no longer interested, cancel, cancel, delete.

The news didn’t report any of that. No one interviewed anyone from Mt. Gox.  What did the news report? “Internet money called Bitcoin collapses and lots of people lost their life savings.” Which looks an awful amount like a Ponzi scheme, right? Gee, I wonder how they connected those dots. No one ever bothered to ask real questions, set up their own accounts, or do this thing we used to do called investigative journalism.

What went on behind the scenes after the big collapse and yo-yo recovery was that Venture Capitalist had come flying in from all angles. All of these entrepreneurs saw new business, new ideas, and went to work.  Needless to say, you don’t see fruits of those labors overnight.  You don’t see them for a while actually.  What we lacked in April was infrastructure, multiple exchanges, ease-of-use, UI and UX, options basically.

Bitcoin had stabilized near $120 for what seemed like several months.  Limited upward mobility.  The startups still haven’t come to market, and everyone was still licking their wounds.  Mainstream Media wrote off Bitcoin for the most part.  In swoops The Silk Road takedown.  There was mass confusion when the news first broke.  It seemed like a raid on Bitcoin at the moment.  The price drops dramatically in the hour or two after news broke.  Cooler heads started to prevail, I release “Bitcoin Is Here To Stay” on Scribd which was viewed several thousand times.  It took a moment for everyone in the community to digest the news.  You had to sort the fact from fiction.  The news had talking heads and pundits filling the airwaves, print and internet with completely bogus reports and accounts.  Quick refresher, Ross Ulbricht was never a ‘Drug Kingpin’ nor was he a ‘Drug Lord.’  He in so many ways in exclusive relationship to The Silk Road is no different than Meg Whitman was to eBay or Craig Newmark is to CraigsList.  Essentially, you have a eCommerce site that allows users to post items for sale.  All 3 sites have had numerous connections to drugs and other illicit materials.  No one has ever claimed Meg or Craig are criminals for it because their corporations respond to and remove the material whereas The Silk Road has zero oversight.  They are claiming Ross is a criminal due to negligence.  I will be tremendously excited to see how that portion of his criminal case plays out in court.  We won’t get into how many children have been sold as sexual servants on CraigsList and how not a single charge has ever been whispered about in relation to Craig Newmark.  That’s a quick lesson into that, how all this plays into Bitcoin and the economy is that Ross set it up to use Bitcoin for payment.  Which is actually both brilliant and really stupid depending entirely on if you are smart enough to ‘wash’ your coins.  Long story short, Bitcoins are incredibly more traceable than US cash ever dreamed to be.  Easy to track.  An article came out after his arrest claiming $2B worth of Bitcoins passed through his site, which at the time would have meant every single coin multiple times had been through The Silk Road.  Well, that was the logic.  That would be very faulty logic because it occured to no one that a single coin passed from A to B, B to C, C back to A, repeat would should hundreds and and thousands of transactions into the billions of dollars with virtually the exact same coins.

The Silk Road crashes, the price falls immediately, the news reports that Bitcoin is tied to Drug Lords, and that EVERY bitcoin is in drugs.  That’s a PR disaster of biblical proportions, agreed?  How do you beat bad PR like that?  Rally.   My article thanked the FBI for shutting down The Silk Road because it legitimized Bitcoin.  The recovery in itself speaks louder than the best article or the loudest voice.  The price climbing after the raid indictates that everyone was wrong the entire time.  Few used Bitcoin for illicit activities.  It’s thriving once the cloud went away.

The Chinese enter stage left.  I was skeptical about their role.  Admittedly, I was very wrong.  I had to go back and remember a book I had read about doing business with the Chinese.  As Americans, we are brainwashed into thinking only in terms of America.  It’s terribly faulty wiring and a horrible disposition, yet one we are taught from birth.  What I learned about the Chinese is that they are not capitalistic and opportunistic in the same sense that we Americans are.  They are not ones to pump and dump.  They are from a very conservative Communist republic that has been a very loyal and nationalistic country that puts family and community above self.  
The Chinese are not like us Americans at all.  It’s important to understand the distinctions.  I am not claiming to be an expert, but this is what I’ve discovered so far.  Look at what the Chinese do.  They are textiles and farming.  They have a billion people.  The average income is alright comparatively to the world.  The average to less than average Chinese isn’t going to be a Bitcoiner.  The wealthiest probably won’t be either.  It basically leaves the upper to middle class.  I would assume their kids will get an emphasis on finance, math, science, technology and computers.  They have disposable income, and that’s who you are seeing getting in right now.  I would venture they are in for the ride not a flash in the pan.

The Chinese government is an interesting story all by its self.  Why would they lift the Great Wall and allow Bitcoin?  If the Yuan can’t takeover the Dollar, what’s the next best thing?  Take power away from the Dollar, and do it with your own people.  It’s a zero-sum game in that sense.  They already own a massive chunk of our debt, they announced they will no longer be buying up American dollars, and have pushed their people (And the largest surplus in the world) into Bitcoin and have sense become the largest players in Bitcoin that is just in it’s infancy.  If we are playing Chess, the Chinese just announced “Check.”  Very impressive.

Let’s review this perfect storm.  The recovery and push for legitimacy.  The Chinese are introduced in grand fashion to Bitcoin and create a frenzy.  Startups are starting to enter the market.  BTCchina becomes the largest exchange.  Cryptsy becomes the first and only exchange that has any UI/UX work in it aside from CoinBase which is poised to become a serious player in the years to come.  Coinbase will become the Facebook of Bitcoin.  It’s easy. It’s friendly.  Cryptsy will be more of a Twitter as it has a lot of options and works in dozens of it’s derivative alternate coins.  You are seeing better mining equipment, much better communication, and ‘expos’ are becoming quite trendy.  CoinKite, BitPay and Bitcoin ATMs are being introduced slowly abroad to build next-layer infrastructure.  This will connect major retailers and restaurants to the community.  There are countless other factors converging at this moment in history, but this is why it’s not really a bubble so much as a long overdue mass expansion.

The Winklevii were correct in stating that Bitcoin was vastly undervalued.  It still is at $1,200.  It will be over $100,000 by this time next year.  There is too much momentum.  When businesses discover how much money they will save in transaction fees (upwards of $10k a year) over credit cards, and individuals discover they don’t need to pay to give the banks their money interest free to invest for the banks profit, the growth will dwarf what we’ve seen.

What’s next?  India.  Indians are tech savvy.  They are developers, while it’s true there are a lot of poor Indians, there are also a lot with a good amount of money and the tech smarts to get in the game.  I was being told about the Rupee problem.  Where they have to import gold as Rupee is backed by it, and it’s a huge pain in the ass and it virtually ensures a large part of the populace stays off the grid and unbankable.  They lack access to computers or internet – but when Bitcoin comes viable through proper Indian infrastructure you’ll see a smartphone boom and a Bitcoin boom simultaneously.   See Kenya for Smartphone, Desktop, Internet references.  Most people there have smartphones instead of computers.  Once all of this happens, the bulk of mining will sway to India, cheap labor and electricity and the tech know-how.  A very smart person would start building a mining farm in India instead of the Cloud.

People talk about bubbles.  Sure, going from $500 to $900 in a few hours is a bubble, that popped in a market correction and exceeded that point steadily.  There will be a ton of market corrections over the next few years.  It will not be without bumps and bruises along the way.  That’s just part of the gig when you’re blazing a trail.   What is interesting is if you paused to look at how long it took to go from $0.004 to $9.  Then $9 to $30, $30 to $90, $90 to $267.  Notice how those intervals in time keep shortening.  $200 to $300, $300-$500, $500-$900, $900-$1200.  Notice those intervals.  Anticipate larger leaps faster.  You are seeing the Billionaires like Sir Richard Branson paying attention.  I’ve been hearing rumblings about uber elites wealthiest money managers making moves to enter Bitcoin.  A $1,500 price jump in an afternoon isn’t far away.  After that, a $10,000 jump isn’t that far.

Bitcoin isn’t even a wet dream of what it will become.  People say that it cannot sustain it’s growth.  I am too lazy to look this up, but find the first place to buy an MP3 music file.  Find their volume.  Track that each year until iTunes came on and what they did in sales.  I am betting the graph looks a shit ton like Bitcoin.  Or for that matter, look at internet users in 1991 to 1995.  We are 1995 internet.  Imagine what Bitcoin will be in 18 years.  Bitcoin is worth less than what J.P. Morgan paid in a single fine.  Bitcoin will one day be worth more than the world’s largest bank.  Someone tell me what the price of a Bitcoin would be at $3T.  Right near $200k a Bitcoin – at fully mined capacity, or more likely, $250k+ and that’s just a single bank.  Does that put things to scale yet?  A million dollar Bitcoin is very possible, if I may be so bold, likely.

I will finish this off by saying that you haven’t missed the boat.  Please stop with that.  Do the math.  If you buy $100 today at $1,200.  If it reaches $100,000 it’s worth $8,333?  That’s not bad.  If it hit’s a million you’ve turned $100 into $83k.  Setup a reoccuring buy on your Pay day and even if it’s only $10-$15 let it accrue.  I’d recommend diversifying it at Bter.com or Cryptsy.com with alt-coins.  I like Zetacoin and Yacoin because their price point, quantity, quick transactions and I think they are vastly under priced.  Buying a Zetacoin today is like buying a Bitcoin 4 years ago.  A single Zetacoin right now is worth 0.00005 BTC.  You can easily buy 30k-50k worth without breaking the bank.  If Bitcoin hits $100k, then those Zetacoins (30k) if they themselves never increase in value would be worth $150,000.  If they increase in their own right, they are worth exponentially more than that.   That’s how you make millions.  With that said, the first Trillionaire will be minted in digital currency in the next 4 years.

I am sure I have some things I missed or got wrong or you just want to argue.  There is a comment section knock yourself out.

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9 thoughts on “It’s not a bubble, it’s mass adoption.

  1. Steven A says:

    What a great big picture article that puts everything back in perspective. I was thinking the same thing the other day, that this is 1995 internet all over again. Time to correct my mistakes of that era!

  2. Mathew says:

    Good article until you started advertising alt coins that add little to no improvements to bitcoin but serves people that pump and dump alt coins.

    How about invest in things that will improve bitcoin fundamentally like zero coin or even emunie.

  3. Jeff Walker says:

    You’re dead on except for diversifying into altcoins. Until there is an altcoin that is vastly superior to Bitcoin you’re just wasting money you could be putting into Bitcoin. There is not one altcoin out there that would survive a catastrophic Bitcoin failure. They depend on the same ideas that created Bitcoin but only have a ghost of the infrastructure, in the best of cases. If a truly innovative altcoin comes along, it will be obvious – you don’t have to start feeding every copycat just in case. Otherwise, great article.

  4. Pingback: IT’S NOT A BUBBLE, IT’S MASS ADOPTION. | NewsBitcoin.com

  5. Adam says:

    Thanks for a great article!

    I got alot out of reading it but I still would like to ask you to write some more about alternative cryptocurrencies. You say that you believe in Zetacoin and Yacoin. I have been looking around and get and idea about what alt-coin invest in but I have a hard time separating them and to see what makes them need , unique and not the least…innovative compared to the already bigger existing players. I hade never heard about Zetacoins and Yacoin before I read your article. I had not heard of Cryptsy either but now I have an acoount and I can see they sell SOO MANY different coins I get all confused. I have invested in Feathercoins due to the secure system they offer but I want to get involved in others aswell. I would so much appreciate If you could give some more good arguments about what to look for in an alt.coin and what it is that makes them interesting for the future :) Thanks in advance! Adam

  6. Sameer MA says:

    Bitcoin is a great innovation. It looks like BTC is not purely a currency but a protocol for currency, store of value (saving), transfer of wealth, a global stock etc. The protocol can always be improved- XPM prime number mining as PoW and faster, PPC uses Proof of stake etc. As interest grows around BTC, more people around, next best coin based on protocol will be evolved.

    In a hypothetical free world, a next better coin will overcome BTC. There will be competition among coins. So, it is very unlikely that BTC can rise exponentially, only if there is no alternative, monopoly.

    Indians can make their own coin, so as Chinese, but it has to be disruptive enough to gain enough value. As more people are involved, innovators and entrepreneurs will come up with better protocol or, coin. Bitcoin is like first successful Internet company, not only one. So, BTC is being $1 M each is a little bit far fetched. But overall crypto-world will be more than trillion dollar Industry!

  7. Funny @BitcoinSachs is getting called out for giving financial advise that if followed would have been in the thousands of percent profit! Keep that kind of advice coming.

  8. Excellent article! As long as the markets are FREE & FAIR, digital currencies will rule the financial world & take power away from global criminal Central Banksters who are printing debt like crazy.

    Why the hell should I pay Visa, AMEX or MasterCard a ridiculous ‘fee’ for using their fiat plastic cash when Bitcoin and other digital currencies have dirt cheap or non-existent rates??

    Perhaps there’s room for maybe 3 or 4 digital currencies — similar to most eCommerce sites allowing you to pay for your goods & services in US$, Euros, GBP, AUD, Swiss Francs, etc. via plastic or via sites like PayPal & MoneyBookers (now Skrill).
    To each his own.

    Sooo, how EASY is it to buy goods & services with Zetacoin for example?? When I click the ‘CheckOut’ button, will Zetacoin be an option?? How difficult is it to add this option to popular Open Source shopping carts like OpenCart, Magento, TomatoCart, BroadLeaf, PrestaShop, ZenCart, OSCommerce et al??

  9. Pingback: 1000 euros : when will the BTC reach this step ? | BitcoinMagazine.org

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