I got my Tuesday afternoon email from John yesterday: “OK for tomorrow’s Money Morning? What do you want to cover?”
I tinkered with the idea of platinum – I haven’t covered it for a while and it’s had something of a turnaround since the Great Rotation began last week.
But really there’s one big story. It’s a story I’ve been banging on about for as long as I can remember (2013 was the first time I covered it in MoneyWeek) and that is bitcoin. It’s off on one of its rocket rides.
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How high could bitcoin go on this bull run? One banker says $318,000
I’ve been a bitcoin bull since forever. So much so that I wrote a book about it in 2014 – the first book on bitcoin by a recognised publisher, so I’m told. But I’ve been particularly bullish about it this year.
When coronavirus hit and central banks decided they were going to solve the situation with unprecedented use of their money printers, I urged readers into bitcoin and gold – money that politicians can’t debase. I’ve not stopped saying, “make sure you own bitcoin!” all year.
The way to play bitcoin has been to acquire as much as is humanly possible – whether by buying, mining or working for it. Then hold onto it for dear life. Buy, hold, forget. What was less than a dollar in 2011 was then worth tens of dollars. Then hundreds of dollars. Then thousands. Today it sits at $18,200.
But in its evolution it has displayed a repeating pattern. It rallies hard and fast for six months to a year and its price multiplies many times over. There is a speculative frenzy. Then the bubble goes pop.
Each time, bitcoin falls hard and fast, and gives back maybe three quarters of the gains it just made, although it remains several times higher than when it started. Then we have a year or two of consolidation. Everybody forgets about it – and then it goes off on one of its runs again.
In 2011, it went from $0.20 to $32 – then collapsed all the way to $2. In 2013, it went all the way to $1,200 – before collapsing back to $200. In 2017 it went to $20,000 – before collapsing back to $3,000. And here we are three years on, in another one of those periods of consolidation, closing in on the old highs of $20,000.
Where does it go once/if it gets past $20,000? $318,000, says Citibank analyst Tom Fitzpatrick. Not some random off the internet. But an analyst from reputable, respectable Citibank.
This contrarian indicator is saying that bitcoin is still a ‘buy’
These kinds of predictions are normally a warning. But then I saw this on Twitter yesterday from actress Maisie Williams. If you don’t know Maisie Williams she played Arya in Game of Thrones and is very much one of the cool kids.
When an actress such as she is asking about an investment, that would normally be a “sell” signal. It’s a classic shoe-shine boy moment. (Joe Kennedy – JFK’s dad – claimed he knew to get out of the stockmarket in 1929 because he started getting stock tips with his shoe shine).
But this is bitcoin. First up, it’s one of the few investments in history where ordinary people were ahead of the institutions – that’s the beauty of its open-source evolution. In bitcoin’s case when the institutions (eg Citibank!) start tipping it, that’s your shoe-shine boy moment.
But look at the response Williams got. And her following is young people – and bitcoin, as a new tech, has been very much an investment for the young and tech savvy (oldies prefer gold); 53.4% said don’t buy bitcoin, while only 46.6% said she should. Bitcoin’s almost as divisive as Brexit!
If a figure closer to 80% were saying “buy”, I would take that as a sell signal. But the majority is against – that means there are plenty more potential buyers still out there who don’t own yet. It means there is plenty more potential upside in this run.
I shall be watching that $20,000 level like a hawk. The way things are going we could even see it today. Bitcoin is really moving. That’s the thing, as I often say. You want to accumulate during those periods of consolidation, when it’s loathed. When the rocket launches, such as now, it moves so fast it’s hard to get a seat. Bitcoin’s doing what it always does. It’s going to the moon. Then it will come back down again. Probably to a level considerably higher than where it took off.
To those who say it’s a bubble, I say this: it is a new tech. You always get bubbles around new technologies – railways, the internet, it doesn’t matter. What’s more, bubbles accelerate investment. The tracks were laid thanks to the railway bubbles of the 1800s, the cables were laid because of dotcom.
It’s tulips, you say! Well here we are nearly 400 years after the tulip mania of 1637 – and Holland still rules the roost in the global flower market. A bubble is nothing more than a bull market in which you don’t have a position. Of course it’s a bubble. It’s the ultimate bubble. It’s a new tech that is also a new system of money. Even Marvel Comics would struggle to design a prototype that is any more bubbly than that.
Bubble or not, bitcoin’s potential is so enormous, you have to have some exposure. Just in case its biggest advocates are right.
Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.
Dominic Frisby (“mercurially witty” – the Spectator) is the world’s only financial writer and comedian. He is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. He is the author of the books Bitcoin: the Future of Money? and Life After The State. He also co-wrote the documentary Four Horsemen, and presents the chat show, Stuff That Interests Me.
His show 2016 Let’s Talk About Tax was a huge hit at the Edinburgh Festival and Penguin Random House have since commissioned him to write a book on the subject – Daylight Robbery – the past, present and future of tax will be published later this year. His 2018 Edinburgh Festival show, Dominic Frisby's Financial Gameshow, won rave reviews. Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art.
You can follow him on Twitter @dominicfrisby
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