Bitcoin | Bitcoin: A Letter To Investors - Part 2

2nd Jan '21 by shauniekent

160 comments 5824 reads

Performance since part 1
In my previous article I outlined what Bitcoin is and why it is important.

I gave a summary comparison against other forms of money and suggested ways in which Bitcoin can be viewed above and beyond ‘money’. I also highlighted some common concerns and misconceptions. The reaction was as expected, some positive comments mixed with overwhelming disbelief, distrust and criticism – most of which I had heard before.

Since then, the Bitcoin price has risen 359% to $31,500. This is not a typo. It has surpassed its previous all time of nearly $20k in December 2017 – continuing a price cycle that has played out several times in the course of it’s history.

A lot has happened within and around Bitcoin in the last 9 months and in this article I’d like to share a few highlights. We’ve seen developing Capital markets with an increasing number of established funds and investment houses entering the space with significant offerings to clients as well as investments in Bitcoin itself. Below are a handful of the most compelling and interesting from an investors point of view:

Some notable investors getting interested:

And now financial institutions who previously criticised Bitcoin, seem to be joining in on the once ‘ridiculous’ price targets:

The above helps to demonstrate the growing trust in and understanding of Bitcoin as a financial asset. Larger names entering the space has accelerated in the last quarter and before long, given Bitcoins continued price rises, it will become quaint, or even financially ‘irresponsible’ to NOT have Bitcoin exposure.

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shauniekent

7th Sep '21

There are plenty of high price targets. I think Bitcoin easily hits $500k within 5 years based on it's continued adoption globally. Reminder nearly 1 in 10 in the UK own cryptocurrency now and the number is rising fast. UK is also behind the rest of the world.

Don't wait too long to get interested Wilkonz - wait for widespread consensus on anything and by definition you will be late. You make money by being early and right at the same time.

Bitcoin custody does take some knowledge, but done properly is next to impossible to steal. You are more likely to lose it by making a mistake.

Hi IncredibleMosesLeroy,

1. Tether – tether FUD has been around for years and years and has been debunked. I think if you want to use a stablecoin, I’d choose another eg USDC over Tether. Tether and stabelcoins are used as an onramp to exchanges eg Binance that don’t touch the fiat system.
Here’s a more detailed rebuttalif you want to look into it more closely.

2. Great question. The answer is multi faceted but Bitcoin is deliberately inefficient at the base layer – it deliberately sacrifices throughput for decentralisation and security. It will scale just like the internet did - in layers. Lightning for example is a layer 2 upon Bitcoin does millions of transactions a second privately and at almost zero cost. In 10 years almost no one will transact at the base layer.
Bitcoin is the invention of digital scarcity. This is the profound innovation. It has many characteristics that other cryptocurrencies lack – although their founders won’t tell you that while they are literally printing money and becoming stupidly rich (and out of sight storing their own wealth in Bitcoin btw).

3. I think you are damn right to be sceptical of high yields. Most will turn out to be ponzis and foulplay. Someone in the background is getting rich though and they will be out the door before the unsuspecting retail crowd.

4. The scarcer a money, the better it functions as money – as a store of value over time. The 21 million figure is not important, only that it never changes is important. Bitcoin is special because the rules that comprise it can be trusted to realistically never change. The supply cap will never change. A transaction will never be reversed. Its monetary policy is known and immune to political whims or manoeuvrings. None of this is true for other coins. This article is also useful for understanding one aspect of why Bitcoin is different :

5. Cryptocurrency exchanges are everywhere. Coinbase listed this year in the US for example and is one of the biggest brands. You buy ‘crypto’ with Paypal now. NYDIG recently partnered with a US banking systems provider and now over 300 banking brands in the USA have the ability to simply switch on ‘crypto’ for their customers – if they choose to - through their existing banking accounts. Scams and criminality make good news stories and capture our imagination but the reality is much more balance. Bitcoin and crypto are integrating at breakneck pace with the existing financial system – as well as being able to and existing separate from it.

6. As of today, Bitcoin is legal tender. If you want to understand how it works in practice it will take a little of your time to understand – but can all be found online.

Lots of great questions – and I’ve tried to answer briefly. I could talk to each question for an hour

whatmore1951

I decided to dip my toe in the water by buying Grayscale Bitcoin Investment Trust $GBTC but Hargreaves Lansdown say dealing is not permitted because the company does not issue a KID. This is a US company listed on a US exchange. Why would they issue a EU compliant KID? I assume it might be possible to invest by opening an account overseas eToro perhaps. All a bit frustrating.

William K

Thanks shauniekent. Today's dip in the crypto index & around 10% off bitcoin has encouraged me - might be able to get in below $40K.

Luthrin

8th Sep '21

September's DVLA Personalised Registrations online timed auction starts today (closes 14th Sept).

The registration BTC 601N is up for sale with a starting price of £250.

https://dvlaregistrations.dvla...

GBTC is a huge and well known fund. The FCA in their wisdom banned crypto derivatives/products at end of last year for retail. You can now only buy the actual asset itself in the UK - unless you have a 'pro' account with a broker/spreadbetter.

If you want any help choosing an exchange to buy Bitcoin from in the UK - let me know.

I think you may have timed it nicely. Remember Bitcoin is very volatile - but over a longer time frame returns more than compensate. Small position sizes make volatility unimportant within the perspective of a portfolio. (but i'm sure i'm teaching you to suck eggs!)

I would appreciate a shortlist of exchanges or similar.

I am over 70 and I thought when I croak it would be easier for my kids to see my bitcoin holding in my HL account with everything else.

As for the FCA if they are so clever how come there is so much fraud and scam activity? I can lose money on unregulated funds promising 12% returns but not invest in a US investment trust.

Thanks

mwjackson

I would recommend Coinbase or Coinbase Pro for any beginners.

Fees are not cheapest, but they are the largest, most capitalised, an e-money institution in the UK and a listed entity on the NASDAQ and offer £150k protection guarantee for UK accounts that have been hacked.

https://www.coinbase.com/produ...

Coinbase - probably most user friendly but often goes down during busy periods.
Coinbase pro - a bit more complicated than Coinbase
Kraken - another well known exchange
eToro - another well known brand that have moved into crypto
Revolut - another well known brand that have moved into crypto

Coincorner - Isle of man based exchange

My personal recommendation though is Coinfloor. They are a UK based exchange since 2013 with the lowest fees (last time i checked). Historically they have acted in good faith and in the best interests of Bitcoin - which cant be said of say, Coinbase. (the link is a referral link btw, i may receive literally a few pence if you use it, but feel free not to)

GrahamF

25th Sep '21

Well, China has now banned crypto

https://www.bbc.co.uk/news/tec...

And it seems that they are not content to just ban internal trading, it is also illegal for its citizens to deal with exchanges in other jurisdictions.

The regulatory risk has always been extremely high with Bitcoin. And it’s only real selling point, scarcity, disappears if too many people want out at the same time because it has no intrinsic value. So, what if another significant country bans it? Squeaky bum time!

gus 1065

And yet the price fell “only” 3% or so on the news. Barely a ripple compared to the typical intra day volatility of BTC. Presumably China’s actions were pretty well flagged. The party regime seems to be disappearing down a rabbit hole of clipping the wings of anything it feels it can’t exert complete control over. It will be interesting to watch the clash between the Chinese government’s desire to control and the individual citizen’s desire to speculate/gamble.

Gus.

26th Sep '21

The CCP aren't idiots. Expect an official digital yuan on a state-specific blockchain (so not ethereum, bitcoin etc) at some point in the not to distant future.

1st Nov '21

Many people zoom in on a Bitcoin chart and yell Tulips without more than a moments thought - each new peak is succesively higher than the last - making it look like Bitcoin is just one big pump.

I find it helps to show people a log chart of Bitcoin where the periodic rises and falls demonstrate something more interesting - the secular adoption of a new monetary asset over the course of 11 years and counting.

If history repeats, we are about to see a final few months of blow off price action, followed by a decline, a bottoming and then a continued march upwards. Prepare yourself accordingly, the next few months will likely bring the crowds, a manic fervour and over excitement and a peak at something between $200k and $400k. The real prize however is much much higher and much further in the future.

8th Nov '21

Bitcoin hits an ALL time high in £GBP.

I expect the next 3 months to go much higher before a large correction, bottoming and then resumption of its long term trend upwards.

dmjram

12th May '22

"Fortune is reporting that if Coinbase goes bankrupt, then users with funds tied up with the company will no longer have access to them, which fundamentally undermines the entire point of cryptocurrency."

FreakNomad

Anyone with any crypto should have it in private wallets.

Further down the thread, holding on exchange was suggested as a solution to other issues.

"If you are at all worried about it, then keep your Bitcoin on exchange. It will pass to next of kin just like a bank account."

14th Dec '23

Just a heads up - my third 'Bitcoin letter to investors' wil be posted soon. Let me know if there's anything you'd like me to cover or include.

Rusty2

I can't wait.

Bitcoin: A letter to Investors - Part 2

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Shauniekent

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