₿₿ How to Play the Bitcoin Boom ₿₿
In 2017 in a piece here in Technology Profits Daily, I predicted the Bitcoin bubble a few months before it all came crashing down.
If you’ll recall, the cryptocurrency did just that in December 2017 through January 2018 — when from a high of almost $20,000 Bitcoin’s price plummeted and continued to fall for the next two years.
After that, Bitcoin’s price fluctuated up and down with stories of Bitcoin whales buying up the markets or selling off huge positions.
There was no telling what the price would do. It had no reliable trend that you could follow.
Then October of 2020 hit and a new narrative started. People talked up Bitcoin like it was digital gold.
Bitcoin finally surpassed its previous 2020 high. Everyone expected it to crash again just like it did back in 2017…
… But something different happened.
One by one, CEOs and institutional money started to jump in, announcing to the world that they bought hundreds of millions or billions of dollars of Bitcoin.
Bitcoin’s price action speaks for itself, as shown in the graph below.
See that little blip in 2018? That’s the great crash that everyone remembers. I still remember 2015, when everyone was saying the crash from $500 would be the end of Bitcoin…
That rise you see on the right is where the big players started to buy Bitcoin in bulk and integrate it into their banking and exchange systems.
First you had Square (NYSE: SQ) announce it would buy $50 million of it.
Then PayPal (NYSE: PYPL) jumped on board offering its customers to buy it through their platform.
Soon, everyone was supporting it.
Everyone’s been talking about Tesla’s billion-dollar purchase.
But — even more telling — is once critics of the cryptocurrency are jumping on board.
Visa (NYSE: V) and Mastercard (NYSE: MA) (Bitcoin was invented to get rid of middlemen like their companies) now have plans to integrate Bitcoin into their systems.
Therein lies the difference between 2017’s bubble burst and this.
Currency throughout history has needed power to back it up and make it legitimate.
Thousands of years ago, gold was money. Civilizations would use it for the exchange of goods.
Today, the U.S. dollar is backed up by the United States and its military.
My main issue with crypto over the years has been based on this concept.
Blockchain technology is amazing, but no one was backing crypto as a real, viable currency.
There was nothing to legitimize its use.
But now corporations and institutions are buying up Bitcoin in the billions, and allowing their customers to do so through their platforms.
This gives it value. This makes Bitcoin legitimate.
Unlike the U.S. dollar, though, there’s a finite amount of Bitcoin out there.
That means if demand goes up from these corporations getting in on the action, then the price goes up.
And think about it this way…
We aren’t even close to having Bitcoin fully integrated into every banking and trading system out there.
Just yesterday BNY Mellon, a bank that holds $2 trillion in funds, announced that they would open up their accounts for users to bank with Bitcoin.
Banks operate by taking the money you bank with them and investing those funds into investments and loans to get them more money.
It’s why when there’s a run on the bank, the banks can’t just give everyone their money back all at once. Physically, it’s not possible since much of it is held in assets elsewhere.
Allowing banking with Bitcoin means they’ll be investing with Bitcoin themselves.
There are plenty of credit unions, banks and hedge funds that still need to get on board, which means more demand, which means a higher Bitcoin price.
So How Do I Use This to My Advantage?
Nowadays, that question is a little tougher to answer.
While I’m bullish on Bitcoin’s current trajectory, I’d still be wary to bet the farm on the cryptocurrency.
Bitcoin’s known volatility means anything can happen. And a 20% or 50% loss from its current high could be devastating.
Follow the rule of “Never invest anything you can’t afford to lose.” Don’t invest with rent or money needed to put food on the table.
That being said, the most obvious way to invest in Bitcoin is to buy it directly.
The less obvious way is invest around what Bitcoin affects.
In 2017, it was easy to tie Bitcoin’s rise to a stock. Overstock.com (NASDAQ: OSTK) nearly mimicked Bitcoin’s rise and fall identically because it was one of the only platforms out there that took Bitcoin as payment.
Any of the companies I listed earlier is a safer play on Bitcoin. The cash influx for these companies from customers participating in Bitcoin purchases can only benefit them.
If you want a stock more directly tied to Bitcoin, consider Riot Blockchain (NASDAQ: RIOT).
They are a company that specializes in Bitcoin mining and aims to be one of the largest and lowest cost producers of Bitcoin in North America.
Expect major volatility in this stock in the coming months, but if you time it right, you could walk away a big winner.
I hold my breath to see what happens next for Bitcoin.
But in the meantime, as more and more corporations jump in, there’s nothing but upside for the cryptocurrency in this current market.
To a bright future,