My childhood best friend, Jim, texted me recently. He was excited—he’d just bought a power supply for a computer off eBay, the first component in the crypto-mining rig he wants to build.
For the last several years, he has watched me mine cryptocurrencies such as bitcoin and Ethereum, and he never really understood the purpose. He regarded it as a pointless, expensive hobby. Now, he’s an acolyte.
He understands exactly what I have been preaching to him all along: that bitcoin and crypto are the future of pretty much everything.
It wasn’t me who convinced him, however.
It was all the banks, brokerages, insurance companies, and credit card firms he saw jumping into crypto. He decided maybe he should actually be a part of this.
As I told him, “Better late than never.”
Fact is, I was Jim five or six years ago. I scoffed at crypto. I was a stock market guy…a product of the 17 years I spent writing for The Wall Street Journal, a publication that (rightly) insists on skepticism when it comes to investment opportunities.
My attitude about crypto changed only because of my son.
He forced me to pay attention to crypto. He wanted to build mining rigs together as a father-son project. Instead of answering him with a kneejerk “no,” I took the time to research bitcoin and Ethereum…to really understand them.
That’s when I came to realize that the mainstream view of crypto was largely wrong and misinformed.
The mass-market media were positioning bitcoin as an electronic replacement for the dollar, and they were shooting down that notion.
I came to understand that bitcoin’s mission has never really been about replacing the dollar. The mission was promoting the underlying technology and creating an asset that one day might hold its value better than fiat currencies like the dollar.
In short, bitcoin was a technological revolution. It was burrowing into the castle, right under the noses of the castle guards, who were confidently insisting bitcoin would never have a place in the exclusive realm of “real” finance.
And now, bitcoin has a place in “real” finance.
Banks, credit card companies, Wall Street investment banks, money-transfer services, retailers, insurance giants—they’re all on the bitcoin bandwagon. This includes major players like Goldman Sachs, JPMorgan, PayPal, Venmo, Square, MassMutual, New York Life, Mastercard, and Visa.
These companies, too, were skeptics at first. With good reason. They deal with real people’s wealth. You don’t mess around with that if you want to remain a viable company.
Now, however, they recognize that the future is the blockchain, the computer coding technology behind all cryptocurrencies. Frankly, the blockchain can be confusing. It’s creating a financial system like nothing any of us have ever experienced.
For that reason, I understand why bitcoin is scary and intimidating. I understand why it is hard to wrap your head around an electronic currency that you cannot touch and which seems to exist in some sort of magical realm we cannot see.
But think about the dollars in your wallet: Do you pull them out of your wallet and stuff them into an envelope and mail them to your local utility company to pay for your electricity? No one does that. I’ll bet there’s a very good chance you go online and pay your bill electronically.
And your utility company, when it gets that money, is not converting your payment into physical Ben Franklins to pay its employees’ salaries.
All of that happens electronically, with currency that doesn’t actually exist in paper form. In fact, just 10% of all the dollars in existence today are physical dollars. Every other greenback is just an electronic blip.
You’re not paying your bills with real dollars. You’re paying your bills with bits and bytes.
Functionally, that’s no different than bitcoin.
Only the name is different…and, well, the fact that the Federal Reserve has no power to create oodles and oodles of new bitcoin like it does with the dollar, thereby eroding the value of every other dollar that already exists.
When I finally agreed to leap into the world of crypto with my son, I was buying bitcoin when it was in the $3,000 range, which was near its all-time high at that point.
But I never once worried that I was overpaying.
I firmly believed that bitcoin would lurch and plunge, and lurch and plunge some more as it marched ever higher.
Yep, the volatility is nuttier than an almond orchard, but this is a very new asset class in which just 3% of the world population is so far involved. There’s not a lot of stability. But that’s where the real returns are made…in the early, volatile phase.
Bitcoin is in the $45,000 range as I write this. And I believe it’s still a bargain at that price.
Just a few years from now, this price is going to be the equivalent of me getting in at $3,000…as bitcoin pushes toward a level that people right now might consider crazy.
At that point, people like Jim, who are just now catching on, are going to be happy they got involved in 2021.