The U.S. Dollar is Garbage
There’s not much you can do about it. Look no further than a made up digital currency that can be mined from a Google Cloud instance. Bitcoin was $219 per coin in 2015, today it is priced at $35,000 per coin. There are a lot of bone head decisions I made in 2015. $1,000 (USD) a month put into bitcoin that year and I would have over $1 million worth today. Will the same bet pay off in the next decade? That’s for you to decide. My guess is no. But, I find it easier to find beaten up stocks than which alternative asset bandwagon to hop on next.
That said, there’s really no reason why the value of Bitcoin has to go up and up and up; however, in terms of the US dollar, it might keep going up forever. Back in 2014, I kept reading about how many VC’s were getting behind Bitcoin and it seemed likely to go higher, but the current run has been mind boggling. It has gone higher because people have been willing to trade more dollars per Bitcoin. Again, this is just as much about the destruction of the fiat currency as it is the power of the blockchain, yada yada.
Mining Bitcoin involves solving a computationally hard mathematical problems. The Bitcoin system consists of transactions (that is, transferring money between users), and these transactions are registered in a public ledger, called the blockchain. The blockchain, as the name suggests, is a linked-list of blocks of transaction data. Mining Bitcoin involves finding a valid next block, which in turn, gives you, the miner, a prize — currently, 12.5BTC for every block you find.
In 2014, with Bitcoin at $808 per, there were 12 million in circulation and 25 new coins are created every 10 minutes. Every few years the creation rate will be cut in half and Bitcoins will continue to be released for more than a hundred years. 25 new coins every 10 minutes means 2 blocks found 6 times an hour, 144 times a day, good for 3,600 Bitcoins. Fast forward to 2020 and only 1,000 Bitcoins are mined daily. That equates to roughly $29 million paid out to miners for securing the network. They’re paid for the work they do, capitalistic style as the market seems to be paying more for the harder work.
What will happen with the Securities Exchange Commission getting involved is anyone’s guess. BTC will likely be considered an asset and not a currency, just because of the sheer amount of capital that has been created out of thin air, by simply solving math problems. As far as society is concerned, the U.S. Dollar needs to keep its place in the world affairs and if BTC goes up further, the government may not have any other choice than to crack down.
Here’s a great video on how BTC actually works.
The Current U.S. Markets are Overvalued
I’m feeling a lot like Warren Buffett in 1969 when he wrote to his limited partners about the lack of good ideas. The value investor that isn’t having a hard time finding ideas today is likely fooling themselves because the money is burning a hole in their pocket. I get it. Money on the sidelines is losing value, but that seems better than continuing to chase the bubble.
Market valuations have been ridiculously high for a number of years in my analysis, but that hasn’t prevented even higher highs. The proverbial joint continues to be passed around, but the end has to be in sight. The world is drowning in debt. Global GDP is around $80 trillion. Global debt is closing in on $300 trillion. The total market capitalization of U.S. markets is $36 trillion.
This is exactly why these digital assets keep rising in value.
Debt.
Inflation.
Mistrust.
