I am not a Bitcoin (BTC-USD) "maximalist." I do not believe that Bitcoin is the ultimate store of value, I think land is. I do not believe that decentralisation is the "Holy Grail" of finance, rather, I think it is merely a useful and necessary alternative path.

I do believe that Bitcoin is the superior cryptocurrency among all others, however, I am open to it potentially being superseded someday, though find it unlikely that happens anytime soon.
I do not believe that you will ever buy your pizza with Bitcoin (check ChatGPT why that is funny), but, you might use it to fund accounts cross border with local currencies.

What I believe most about Bitcoin is that it has become a "forever" piece of the international monetary system and it is about to hit a parabolic upshift in adoption, driving the price of Bitcoin well into six figures.

Key takeaways

• Bitcoin is not a Ponzi scheme, rather, it is a hedge against the dollar, inflation, central banks and international bullies
• Above all else, Bitcoin is an adoption story by people, companies and nations that have wealth to protect and transactions to make
• Emerging Markets are adopting Bitcoin as a hedge against the dollar getting too strong or too weak
• Bitcoin ETFs coming to market will drive billions into Bitcoin
• The next big jump in price to $100,000+ could come in the next 18 months as adoption leads to FOMO

My history with bitcoin

Here is my disclaimer on cryptocurrencies that I have put into articles since 2020:

The short story is that most cryptocurrencies are going to zero, but there will be survivors that rise to much higher price ranges. We expect Bitcoin and Ethereum to be among the biggest, if not the biggest. The world of Blockchain is far bigger than crypto though and we expect some big winners there too. This is a journey of separating winners from losers — Kirk Spano

I have traded Bitcoin (BTC-USD) since 2016. We have been profitable on 4 position trades (lasting quarters or years). I last sold Bitcoin in late 2021 just before an interview with Dr. Sean Stein Smith, who is a professor of accounting at Lehman Collage and serves on the Advisory Board of the Wall Street Blockchain Alliance.

In that interview, which was January 2022 just after Bitcoin had touched an all-time high over $60,000, Dr. Smith suggested Bitcoin would go to over $100,000. I agreed with him, but predicted it would correct to about $20,000 first. It did subsequently correct to the teens a about a year later.
About the time that Bitcoin was hitting prices in the teens, I published this article on Fundamental Trends.

Post FTX: GBTC Trades At Historic 42% Discount!

In that piece, I detailed my thoughts on the Grayscale Bitcoin Trust (GBTC) specifically and Bitcoin in general. I started accumulating both the Grayscale Bitcoin Trust in brokerage accounts and Bitcoin via an account at Coinbase (COIN) at that time. GBTC and Bitcoin became my biggest holdings at a combined 12% of my aggregate portfolios in February of 2023.

The Grayscale Bitcoin Trust and Bitcoin comprise about 25% of my net worth right now.

Bitcoin Is Real

By now you should know that Bitcoin was first introduced in a 2008 paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" under the pen name Satoshi Nakamoto.

The paper introduced Bitcoin as a decentralized digital currency system that allows peer- to-peer transactions without the need for a central authority or intermediary using what is called the "blockchain." A main tenant was the removal of a central authority for processing transactions and setting monetary policy.

The Blockchain Technology it was built on, created a grouping of transactions into blocks linked chronologically. The integrity and order of transactions are maintained through cryptographic hashing.

A mechanism called Proof-of-Work, is where miners compete to solve complex mathematical puzzles to validate transactions and add them to the blockchain. This process requires computational work and secures the network.

Those same types of computations is how new Bitcoin, on a schedule, are awarded. This is where the term "Bitcoin mining" has evolved from and bred an entire industry.

The paper describes how transactions are conducted using public and private keys. Ownership of bitcoins is associated with cryptographic keys, and transactions are digitally signed to verify authenticity.

This key system is what allows for anonymity and transparency at the same time. While transactions are recorded on the public blockchain, the identities of users are pseudonymous. This provides a degree of privacy while ensuring transparency in the system.

Ultimately, the paper concludes by emphasizing the potential impact of Bitcoin as a new form of electronic cash that operates independently of central authorities, allowing for secure, borderless, and permissionless transactions.

Since then, Bitcoin has been through a 15 year gauntlet of development challenges, disbelief, accusations, rallies, collapses, sporadic adoption, more accusations, threats to legality and finally regulation, not destruction or banning, by financial authorities.

Bitcoin Adoption Breeds Bitcoin Adoption

There are currently tens of millions of holders of Bitcoin. Various surveys and studies of the Bitcoin blockchain suggest that there are now over 100 million people who own Bitcoin across over 200 million "wallets."

According to World Population Review, India, China and the U.S. lead for most Bitcoin held. However, it is being adopted faster by the populations of other nations. Here are adoption rates per a recent study titled "Global Crypto Adoption Report 2023."

While the numbers cannot be perfectly verified, various easy to search studies show similar results. Recent headlines make the point as well...

And, it doesn't stop there, Argentina is copying certain celebrities who have taken a portion of their compensation in Bitcoin.

Despite pleading opposition from the IMF, we have seen El Salvador add Bitcoin as legal tender. At least two other countries have borrowed from the IMF and subsequently bought Bitcoin, likely Columbia and Ecuador according to reports. The number is certainly higher though as the IMF does not support such transactions. The Central African Republic also adopted Bitcoin as legal tender.
Suddenly, just a few weeks ago, we got this headline regarding the IMF's Managing Directors comments in South Korea, on the IMF website:

• Leaving the Wild West: Taming Crypto and Unleashing Blockchain
• Remarks by the IMF Managing Director Kristalina Georgieva delivered at the MOEF- BOK-FSC-IMF
• International Conference on Digital Money - December 14, 2023, Seoul, South Korea

Emerging Markets Adoption

The above cases are examples of broad adoption of Bitcoin. Specifically, one should note the adoption by emerging markets nations. Why is that so?

There are two likely reasons. The first was addressed in Satoshi's paper which is the availability of financial services to the underbanked. Bitcoin is a potential solution.

The other reason that gets little attention, but that I have focused on for several years now, is that Bitcoin is a hedge against the dollar getting too strong or too weak. Why is that a reason to own Bitcoin.

At a conference attended by around 100 emerging markets nations, discussion of rampant inflation in nations due to a the dollar being too strong was at or near center stage. When the dollar gets too strong, many emerging nations, lose significant purchasing power, aka inflation or hyper inflation, due to weak local currencies.

Likewise when the dollar gets too weak, those same nations lose the ability to export as much and suffer lower earnings which results in lower standards of living.

Bitcoin derives its value from a limited supply and increasing demand. It's a simple economic relationship. But, here's where the emerging markets participation becomes very important.

Emerging markets are where the majority of growth in the global economy will occur in the next couple decades. Individually, with the exception of India and China, which are not really emerging markets in the same sense as smaller nations, most of the EM currencies are not useful outside of their domestic borders.

By emerging markets all adding some Bitcoin exposure, at the individual, company and national levels, they are banding together their economic strength. Think an emerging markets currency similar to what the Euro is for Europe, but decentralized, and with no political body interfering through manipulative policy.

Bitcoin is a unifying, but but decentralized currency among emerging markets economies. Further adoption by emerging markets is likely to continue.

Remember, Bitcoin supply is limited.

Bitcoin ETFs Are Here

There are at least 8 likely Bitcoin ETF approvals coming in January. Filings have been made in accordance with SEC requests and requirements, led by Blackrock (BLK), sponsor of iShares, which has never had an ETF filing denied.

The lowest estimate of inflows to those ETFs I have seen has been $14 billion in the first year, rising in the second year. I have no way to know and neither does anyone else really, but it is a big number.
Remember, Bitcoin supply is limited.

Institutional Adoption Of Bitcoin

We have seen companies like MicroStrategy (MSTR) and Block, aka, Square (SQ) already add Bitcoin to their balance sheets. According to CoinGecko it appears that 71 public companies already have Bitcoin on their balance sheets. Here are the five largest:

• MicroStrategy Inc. holds 158,245 BTC tokens
• Marathon Digital Holdings holds 13,286 BTC coins
• Galaxy Digital Holdings holds 12,545 BTC coins
• Tesla Inc. holds 10,500 BTC coins
• Coinbase Global Inc. holding 9,182 BTC tokens

Most companies that do cross border sales I think can be rightly expected to add some Bitcoin to their balance sheets. It might only be enough to facilitate transactions, but is an addition nonetheless.

Many banks and other financial institutions are also expected to add Bitcoin to their balance sheets. They will need it transact with certain customers and criminals (don't be shocked).
Remember, Bitcoin supply is limited.

Bitcoin Halving

What is a Bitcoin Halving? Simply put, on a regular schedule, the reward in Bitcoin for mining new Bitcoin is halved. The next halving is in April.

When Bitcoin was created by Satoshi Nakamoto, the initial block reward for miners was 50 bitcoins per block. After the first 210,000 blocks were mined, the reward halved to 25 bitcoins in the first halving event, which occurred in November 2012. Halvings have taken place about every 4 years since.

The next halving will leave the reward at 3.0125 Bitcoin per block.

This has had the impact of making future Bitcoin more valuable due to less reward for mining it. In other words, the price of Bitcoin rises to compensate the remaining miners. This has played out every time.

Bitcoin Investing Closing Thoughts

In a recent webinar I said that the coming rapid adoption of Bitcoin is going to be a massive shift in wealth from non-Bitcoin investors to Bitcoin investors. I believe that.

However, the shape of the rise in Bitcoin price will be similar to other manias. It will rise, then spike on FOMO, then crash, stabilize and drift higher again. Think Gartner hype cycle, except this is the big one coming for Bitcoin.

I strongly advocate adding Bitcoin as soon as possible to your portfolio. I have suggested taking a portion of long-term emergency money sitting in bank accounts and putting it in Bitcoin.

Another avenue would be treating it like gold. Many people put a few percent of their IRA and other accounts into gold holdings. I don't love that as I'd rather own physical gold, but, it's been a thing since I was a wet behind the ears broker.

Treat it like a company that just needs some on the balance sheet to make certain transactions or like emerging markets using it as a dollar hedge (against a strong or weak dollar).

I am not advocating putting as much into Bitcoin as me. I am being very aggressive for specific reasons and accept the volatility risk. And, I do not expect to trim my holdings until Bitcoin rises well above $100,000.

You should only invest as much as you would any other volatile uncertain assets, like any stock in other words.

Author

Kirk Spano 

CEO/CIO — Fundamental Trends

Kirk is an Accredited Investment Advisor and founder of Fundamental Trends and Bluemound Asset Management LLC. Kirk has been highly successful in helping DIY investors make sense of the investment world, and profit in stocks, ETFs and crypto.