Should you Trade Bitcoin?

This one time Bitcoin was worth 44 cents and it went all the way up to 30 dollars and then it crashed back down to 7 dollars.

Then this other time, Bitcoin went from 147 dollars to 1100 dollars and then it crashed back down to 480 dollars. And this other time Bitcoin was worth 1100 dollars and it went up to 19,000 dollars and then it crashed back down to 3,800 dollars, but just today Bitcoin hit a new ATH (all time high) of 28,240 dollars. So, do you think it’s a great trading asset class? Well, I hope you do. But what is Bitcoin? Well, I know for some people Bitcoin is a scam and there is nothing you can say to those people that would ever change their mind. Then there's the other half of people who treat Bitcoin like a religion so don't you dare say anything offensive to make them feel uncomfortable. Well, let me try to squeeze through the middle of that crowd and talk objectively about what it means to have good money in the first place and if Bitcoin really is going to $1M dollars and beyond because for the first time ever Bitcoin crossed the psychological threshold of 20,000 dollars. If you use a Kardashian scale to predict Bitcoin value, it would eventually become worth a million dollars because it would become a type 1 civilizations form of money, which is money for the entire world. First I want to give credit to Bitcoin for teaching me what money actually is. One of the cool things that I got out of owning Bitcoin besides obviously making money from it is understanding what good money is. And that is very important to understand if you want to make money from Bitcoin trading it, or for long term because holding on to it is terrifying. Imagine holding a stock that's up 30% today but then down 50% tomorrow. It's scary. When we think about money it seems like such an easy concept to understand.

For example imagine that you are holding a hundred dollars note in your hand which you can physically see and touch and exchange for other goods. But money isn't something that we just flick on the switch, put in fabric on one end and get money out the other. It's something else entirely and to create good money is very hard. First, Bitcoin is not actually printed like the dollar. Instead, it's digitally created by a process called mining. But instead of Minecraft, imagine thousands of computers all over the world that are working hard to solve complex mathematical algorithms. That sounds wasteful and pointless but it does have a purpose and we can use the analogy of a Rubik's cube which contains all of the transactions that we have. So anytime I send you a Bitcoin and you send it to a friend, those transactions then get stored inside of a Rubik's cube and we can see which transactions they are because they're publicly displayed for everybody else. It's the public ledger that you can kind of think of as sort of the leader board or the scoreboard for gaming which is also why by the way the government loves Bitcoin because it makes tracing illegal or criminal activity very easy. Now all these transactions that get sent to the Rubik's cube are just going to be waiting there to be confirmed or made official. The way we make them official or to confirm them is we actually solve the Rubik's cube. It's a limited size. There's only so much data we can fit inside of one Rubik's cube which means that in every 10 minutes we have to jump to a new block with this entire process gets repeated over and over again. So just imagine that every time it gets solved, it cracks wide open and out of it come the Bitcoins basically. To keep things fair because technology and computers get better and better and they evolve and get more efficient, every 2016 Rubik's cubes or roughly in every two weeks the difficulty in solving these Rubik's cubes increases. That's just to make sure that we don't invent a computer that's suddenly powerful to just mine all of the Bitcoins out of the space. To control inflation, which is something that the governments of the world have typically not been very good about, Bitcoin was designed to be a deflationary type of asset which means that instead of printing more money over time, there's only going to be less Bitcoins introduced into the economy over time. This happens roughly every four years when a miner solve the Rubik's cube, that reward gets cut in half, and then in half again every four years systematically which is also why the last Rubik's cube will be solved sometime in the year 2140. So we've definitely got some time. But the reason that Bitcoin is so valuable on a technical level is because it is the best form of money that human beings have ever created up until this point in history. It's also very scarce. It's very rare and it's also the first one that we've ever made.

So Bitcoin has a lot of advantages over other forms of money and here's a few examples. To be considered a good form of money, money has to have five things and the first is called divisibility. So gold for example is pretty bad because I can't divide it exactly and precisely to however much you need and then pay you for any goods. The dollar is only divisible up to 100 pennies. Bitcoin on the other hand is divisible up to 100 million times into individual units called satoshis which is a tribute to the creator or the group of people who created Bitcoin. The reason that divisibility is so important to a type 1 economy is because it allows us to go more on demand and one that's based on consumption. For example when we pay for our phone bills we pay on a monthly plan. Well, imagine we paid for only the data that we used up to the precision of eight decimal points if that's how precise we need to be. That allows us to transition to a potentially better form of taxation because instead of taxing people's incomes, we'd focus on taxing people's consumption levels. So if you're somebody wealthy and you're a billionaire with yachts and jets and mansions and Lamborghinis, you'd instead be taxed on the consumption and the effects that you'd have on the environment. The second thing a good form of money has to have, is durability which means how strong money is. So gold for example is pretty bad because you could easily melt it down and mix it in with impurities therefore just destroying its entire value. The dollar is arguably even worse because you could destroy paper money pretty easily as well. The third thing that it has to have, is that it has to be rare. That seems like an easy one for good money to have but it took human beings a really long time to come up with a standard that we were all happy with because the people that lived near the beach, obviously wanted to use seashells because that was rare. So it took us forever to settle on the gold standard just because we found out that gold was relatively evenly spread throughout the earth and it was hard to get for pretty much everyone equally. The dollar is the exact opposite of that because we print the dollar, sometimes in the billions of dollars per day. That's also why people say that your money loses to inflation. It loses value because we continue creating more and more every single day. The last thing a good form of money should have is uniformity and acceptability. By acceptability, it means to be accepted worldwide from your local grocery stores all the way to your website. The second thing is uniformity which means it should be exactly the same from each unit of measure where you can't tell the difference between the two. That's also referred to as fungibility. Fungibility just means that there's no way for us to discriminate from one unit to the other. Bitcoin actually has a problem here because we can trace the origin of each Bitcoin from wallet to wallet back to the beginning which means in theory, the government can look at where your money has been and then argue against you that your money was involved in some illicit activity, therefore we're going to repossess it and now it's ours. So as you can see that some Bitcoins that are pure and weren't involved in anything sketchy would be more valuable than ones that aren't. But I do think that it's eventually going to be solved because it's a privacy issue solved by things like shufflers and mixers. So for example if Bitcoin A was stolen and Bitcoin B wasn't, what you would do is you would then break it up into satoshis and then you would mix the two up together before sending that transaction which means now you don't know which coin was A or B. Now the problem solved. All of this stuff about money, we've known for a long time but it's finally now that institutional hedge fund managers are starting to realize it and they're finally starting to see the light. That's why we're seeing billions and billions of dollars poured in from their hedge funds into Bitcoin. But that's the narrative. The reality is that those people are extremely intelligent and they along with corporations and banks have quietly been buying Bitcoin behind the scenes, all the while telling everyone else that it's just a scam. That's because back in 2017 it wasn't cool to admit that you had any Bitcoin.

Now it's cool among the rich kids to admit to themselves how much money they actually have in Bitcoin. By the way by rich kids I mean very intelligent very successful billionaire hedge fund types that have finally started to reveal their bags to us. So December 16th was a monumental day for investors because it broke past the psychological barrier of 20,000 dollars and it's seemingly increasing every second. The best part about this, is that this time unlike 2017 its smart money because this time we don't have a crazy spike in Google searches and all these retail investors that are FOMO-ing into it. That'll be part of the process soon, but for now it's just smart money at the addition of PayPal accepting it and all these other institutional investors that are joining in, along with the biggest factor of them all which is economic uncertainty and the Federal Reserve’s policy of infinite quantitative easing. This is not normal and should not happen in a healthy economy but when times like this happen, that's when assets like gold and like Bitcoin increase in price like crazy. In fact we even had Scott Minerd who is the Chief Investment Officer of Guggenheim Investments who just recently publicly came forward and admitted that his billion dollar hedge fund was buying Bitcoin since it was at 10,000 dollars. His team believes that the fundamental value of Bitcoin is 400,000 dollars.

So there's no telling how high the Bull Run will go but in the meantime be ready for a wild ride as we continue to crash forward and set new record highs. If you are investing in this, please be careful when investing and don't put in more than 10% of your net worth into this asset unless you're a huge believer and you 100% understand every concept of Bitcoin. If you can hold on to it and if you don't speculate too much on it, I do think you'll be highly rewarded. Additionally, due to its volatile market and because it has no opening or closing value, you can trade it 24/7, hence traders just love Bitcoin as a trading instrument.