Hedge Against Inflation
I got worried about my assets and savings when QE was introduced to save the economy. Everything shouts out at me that printing money can only lead to inflation and excessive money printing will lead to hyper-inflation like 1920's Germany.
However all we got was exploding Asset prices and not much inflation. An explaination as to why this is so can be found here. Banks have been mainly depositing their cash with the central banks. What happens when all that money finally gets into the real economy ? Scary. Banks are not lending because in a contracting economy there is little demand for productive investments. The only demand is for speculative investments in property and stocks. Would not surprise me if it turns out that banks are the biggest speculators.
I looked at Bitcoin after being introduced to it by my son. Studied it and felt that it was safe enough for me then and started buying a little each week. That was 2 years ago. My small investment in bitcoins have increased in value despite starting when the price of bitcoin was $600. As a hedge against inflation, the strategy has worked.
Bitcoin is guranteed to be limited to 21 million by maths. With increasing adoption by people all over the world its value can only go up, way up.
Planning For The Future
Most bitcoin early adopters are below 40. Saving for the future and bringing up a family is not easy. However for this generation bitcoin there is a once in a lifetime "bankable" option.
Consider possible future purchases by just saving 1 Btc today. Value $320
5 years - Buy a car
10 Years - Pay for children's education
20 Years - Buy A house
Depending on how much the price of bitcoin increases over the next 20 years these are possible outcomes. If you just left $325 in the bank there is no chance that it can achieve any of this growth. There is however, a strong chance that you will be earning negative interest. Your savings will actually decrease over time!
500 billion a year. Why is it so difficult to make a dent in this market? I thnk that this is the classic chicken and egg problem. Not enough places to spend bitcoins especially in developing countries and not enough people willing to spend bitcoins anywhere. Currency is still king and it will be hard to change that state of affair.
Like all catch 22 situations, someone will break that egg to make the omelette. When that happens the floodgates will open and we should see a huge surge in demand. Until then we can only wait..
Banking The Unbanked
Bitcoin can bring these 2.5 billion adults into the global economy. In the last 20 years China's growth have fueled the global economy. and yet China still has a large proportion of their adult population unbanked or underbank. Imagine the economic growth explosion that will emerge when marginalised people all over the world join the global economy.
Again it is the chicken and egg problem but perhaps, just as well, as we have yet to grapple with the sustainability aspect of this major change.
Gambling, Porn, Drugs, Crime and Terrorism
The dark and sleazy side of bitcoin usage. Without a doubt growth of the inernet was accelerated by the porn industry. Should we care? Should we design bitcoin to exclude such anti social activities before they take root ?
If money cannot be used for gambling, porn, drugs and crime then it is not very good money. Bitcoin psuedonymous and soon to be annonymous nature is a feature and should be guarded and never compromised. The work of enforcement agencies may be harder but then that is what they are paid to do. On the bright side, finding solutions around this problem may mean more jobs, and perhaps, even a new growth segment for the security industry.
Morals aside the march towards bitcoin use in this darker economy is on the up. Many casinos now accept bitcoin. Online gambling is quick latching on and micropayment channels will soon work its way into online porn.
Incorporating monetary tokens into social gaming brings on a new dimension to the game. A big difference to current token systems is that bitcoin tokens can be used in-game and off-game. Starting with Hyper, there are even more serious and well funded initiatives from companies like Everdream soft's Spells of Genesis and Voxelus's Voxel in 3D gaming.
Everdream soft will be the first to market and with its already huge user base of 250,000 Moonga gamers, Spells of Genesis is almost assured of success when it launches in Q1 2016. Spells of Genesis is built on the counterparty platform and uses the bitcoin blockchain. How this will expand the useage of bitcoin is yet to be seen but one thing for sure is that it will introduce bitcoin to a whole new generation of young gamers.
The info graph shows the spending per online shopper in each country. Multiply by number of shoppers and you get an idea of the size of the market. It is in the trillions of dollars.
What is the big deal with Open Bazaar and how will it threaten the incumbents in this industry? Well Open Bazaar uses only bitcoin for it's payment system. In addition there are no buyer or seller fees, It is a platform, on which many entreprueners, companies and startups will be offering aggregation services much like Google with search. When the whole world offer products and services on this giant uncensorable platform we need the tools to find what we are looking for.
The important point is that bitcoin is the currency that drives this economy. It is the only way that a shoemaker in Zimbabwe can sell to a customer in Mongolia.
Trading and Speculation
Big movements in prices have been link to price speculations mostly emanating from China. The chinese are particularly disposed to risk taking. Just walk into any casino where the chinese form a minority of the population. They will be overrepresented as a proportion of the clientele. Only a very small amount of the chinese population in China have any exposure to bitcoin. This will change and with it price volatility trending upwards.
For those interested in trading their way to a fortune, be prepared for the wild wild west of 24/7 unregulated trading. Many exchanges have come and gone taking with them their clientele's money and bitcoins.
Many travel companies will accept bitcoin for travel bookings. The biggest and one of the earliest is Expedia. Today there are also many companies offering bitcoin debit cards including Xapo and E-coin. Goes without saying that you first have to purchase your bitcoins.
Investing in Bitcoin startups
Because of the difficulty in assessing capital for bitcoin startups many were crowdfunded using bitcoins. Though angel investors have moved in of late, many startups still find that crowdfunding is the only way for them to gain access to capital.
The Next Generation
Every generation has it's breakout industry. We have the industrial revolution, the automotive, the computer, the internet and now fintech. Each new industry destroys jobs in the old and creates new ones in its place. There will be a rush to learn cryptography and blockchain technology just as there was a rush to learn computer science that many years ago, because, thats where the jobs are.
The young of today, will grow up with crypto currencies as second nature. They will be their own bank even before they can open a bank account. Their generation will grow up never needing the banking services that we now take for granted.
An industry that cannot keep itself relevant with its customer base is a sunset industry. Banking is on the decline. Brick and motar branches are being replaced with online apps. Backroom operations will be using blochchain technology to reduce staff numbers. The day will come when all the banking conglomerates will be replaced with names like Coinbase, Factom, Storj.
A financial crisis of enormous proportion is on the way. Our debt based economy have racked up so much debt that it is hard to anticipate how it will all unravel smoothly. More here.
Bitcoin Price Will Make Quantum Jumps
Bitcoin prices have always made quantum leaps every 2 years. I predict that the next price leap is to $600 early 2016. In part tied to the halving and huge rollout of apps and startups activity. I could be conservative.
Bitcoin Could Become A Defacto Reserve Currency
Bitcoin does not need to be officially nominted and adopted by IMF and the world bank. Just individual central banks holding some bitcoins will make it a defacto reserve currency. If this happens few individuals will be able to afford 1 whole bitcoin.
Econotimes : Study shows bitcoin may be a reserve currency
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