Despite the fact that there are more than 800 tradeable cryptocurrencies (I actually have no idea how many there are, who cares?), Bitcoin remains far and away the market leader. The price chart looks hyperbolic.

From $2,000 to $20,000 in the blink of an eye. Where to next?

I was happy when Bitcoin fell from its recent peak of $20,000.

In my opinion, this drop was a natural correction rather than the beginning of the end. The long-term upward trend remains unbroken (so far). But is this trend justified?

A lot of smart people think so.

Bitcoin Supporters and Their Predictions

Many classy, high-profile people think Bitcoin is the real deal.

John MacAfee is a big believer. He made a seriously gutsy bet on Twitter, committing to a lewd act if Bitcoin doesn’t hit $500K in value within 3 years.

And you thought Trump was blunt on Twitter.

Ronnie Moas, who years ago said Bitcoin would reach $5,000, now says the price will hit $300,000 to $400,000. He says the biggest critics are those who are invested in banks, which will suffer if Bitcoin really gains traction. And he’s intrigued by the supply-demand equation. I am too. Demand for Bitcoin is increasing, while supply is constrained by design (the total supply is limited to 21 million). This limit will be reached in the next century, and not before then, because there are limits to how fast Bitcoin can be mined. But it’s important to note that 80% of the 21 million Bitcoins that will ever exist are already in circulation. So inflation (which causes money to become less valuable as more is created) will remain low.

Tim Draper is long-time bitcoin investor. He famously bought almost 30,000 bitcoins from an FBI-led auction when they shut down the black market website Silk Road. He predicted the price of 1 bitcoin would reach $10,000 by 2018. As you know, that price was actually reached in 2017. But he made his prediction back in 2014, when the price was just a fraction of today’s price, so it’s an impressive call.

The CEO of BTCC (China’s oldest crypto exchange) Bobby Lee says the market price of Bitcoin can easily go back to $20,000 in 2018.

Peter Thiel is even more optimistic. Thiel compares bitcoin to gold and says it’s main utility is as a store of value (many have pointed out that Bitcoin has failed as a currency because it isn’t used as a medium of exchange). He also likes Bitcoin because it can’t be hacked or counterfeited — it’s protected by what he calls ‘the security of the math’.

Good Reasons to Buy Bitcoin

There are a lot of reasons to invest in Bitcoin. I won’t list them all. And I’m not going to get into numbers ...

I’ll stick to the most intriguing high level concepts, for now. I’m also not going to compare Bitcoin to other cryptocurrencies. I’m more interested in the overarching idea behind Bitcoin, rather than which coin is the best.

The main idea I want you to think about is this: like it or not, our lives are going digital.

As a consequence, the things we want and need are getting cheaper.

Need to catch a ride? Pull up your phone and get an Uber.

Want to catch a flick? Jump on Netflix. Or, if you don’t want to pay anything at all, just torrent something.

Need to find a job and fast? Forget about dropping off your resume around town. Go on a site like Upwork and connect with people looking to hire freelancers.

By leveraging the power of digitized, decentralized networks, companies are making things a lot cheaper and more efficient than they used to be.

Even things that have pretty much always been in the realm of centralized authority are moving toward decentralization …

Think about how telecom has evolved from large, continuous wired infrastructure, to discrete wireless connection points.

Think about energy. It’s becoming decentralized thanks to tech like solar panels and smart meters. And as a result utilities are struggling to keep up.

Back to Bitcoin …

Cryptocurrencies are basically digitized, decentralized currencies that are (in theory) cheaper to manage and trade than fiat currencies. Basically, if cryptocurrencies ruled, there’d be no need for banks as they exist today. You can literally store your cryptocurrency on a flash drive (though there are many storage options).

So here’s my #1 reason to buy Bitcoin: it’s a bet on the future disruption of the entire financial system.

But that’s not the only reason I like Bitcoin. Here are a bunch more:

It’s secure and cheap to transfer : Part of Bitcoin’s value is derived from its ability to replace fiduciary trust with mathematics (cryptography, specifically). This makes it, in theory, more secure than traditional currencies. It’s also easier to transfer — you can send it anywhere almost instantly for a very low fee (though lately fees have risen quite a lot because of increased network traffic … that’s a problem that needs to be solved).

: Part of Bitcoin’s value is derived from its ability to replace fiduciary trust with mathematics (cryptography, specifically). This makes it, in theory, more secure than traditional currencies. It’s also easier to transfer — you can send it anywhere almost instantly for a very low fee (though lately fees have risen quite a lot because of increased network traffic … that’s a problem that needs to be solved). It can’t be mismanaged by governments : Bitcoin might not seem like a good store of value for people living in countries with stable currencies (like the U.S.). The truth is most people in the Western world are using Bitcoin as a way to make money. We buy Bitcoin in the hopes of selling it at a higher price one day. But imagine living in a country with a government that’s so poorly managed or so corrupt that your hard-earned money is literally becoming worthless every day. Yes, these places do exist . If you live in one of these countries and you want to exert some kind of autonomy over your financial future, the idea of buying Bitcoin becomes very attractive. We’re spoiled here in the west. We can open an investment account at our bank and rely on a stable ROI. Plus, we don’t have to worry too much about inflation because our currencies are stable. But a big part of the world doesn’t enjoy this luxury. So a currency that’s decentralized and out of government control is very appealing.

: Bitcoin might not seem like a good store of value for people living in countries with stable currencies (like the U.S.). The truth is most people in the Western world are using Bitcoin as a way to make money. We buy Bitcoin in the hopes of selling it at a higher price one day. But imagine living in a country with a government that’s so poorly managed or so corrupt that your hard-earned money is literally becoming worthless every day. Yes, . If you live in one of these countries and you want to exert some kind of autonomy over your financial future, the idea of buying Bitcoin becomes very attractive. We’re spoiled here in the west. We can open an investment account at our bank and rely on a stable ROI. Plus, we don’t have to worry too much about inflation because our currencies are stable. But a big part of the world doesn’t enjoy this luxury. So a currency that’s decentralized and out of government control is very appealing. Bitcoin creates value : Contrary to what many experts have noted, Bitcoin can be considered an asset (albeit a non-traditional one). Occasionally, a ‘fork’ occurs from the main Bitcoin blockchain and a new cryptocurrency is created. Bitcoin Cash is one example. Before the fork, it didn’t even exist. But if you owned Bitcoin, you received an equal amount of Bitcoin Cash. This is like a dividend, though not as predictable and regular. And today, Bitcoin Cash is worth around $2,500. Again, if you owned Bitcoin you got Bitcoin Cash for free. That’s one major benefit of holding bitcoin rather than other cryptos. It’s like the lead train, with other smaller trains occasionally branching off the main tracks. So Bitcoin does seem to generate income, like an asset, when forks occur.

: Contrary to what many experts have noted, Bitcoin can be considered an asset (albeit a non-traditional one). Occasionally, a ‘fork’ occurs from the main Bitcoin blockchain and a new cryptocurrency is created. Bitcoin Cash is one example. Before the fork, it didn’t even exist. But if you owned Bitcoin, you received an equal amount of Bitcoin Cash. This is like a dividend, though not as predictable and regular. And today, Bitcoin Cash is worth around $2,500. Again, if you owned Bitcoin you got Bitcoin Cash for free. That’s one major benefit of holding bitcoin rather than other cryptos. It’s like the lead train, with other smaller trains occasionally branching off the main tracks. So Bitcoin does seem to generate income, like an asset, when forks occur. There’s a fixed supply — sort of like gold, but even more fixed actually since gold reserves are a bit of a gray area. We don’t know exactly how much gold is out there. Both Bitcoin and gold continue to be mined, but with diminishing returns. So, unlike fiat currencies, Bitcoin isn’t susceptible to inflation, which erodes value and forces owners to either buy more assets or invest in businesses. Today, the simple act of owning Bitcoin generates a return due to the fact that demand outstrips supply. Note that this is bad news for Bitcoin as a currency . It’s the opposite of inflation (deflation) and discourages spending, which is bad for a healthy economy.

— sort of like gold, but even more fixed actually since gold reserves are a bit of a gray area. We don’t know exactly how much gold is out there. Both Bitcoin and gold continue to be mined, but with diminishing returns. So, unlike fiat currencies, Bitcoin isn’t susceptible to inflation, which erodes value and forces owners to either buy more assets or invest in businesses. Today, the simple act of owning Bitcoin generates a return due to the fact that demand outstrips supply. . It’s the opposite of inflation (deflation) and discourages spending, which is bad for a healthy economy. It’s relatively safe from human error : Bitcoin exists within a framework where software developers, not politicians, make logical design decisions. This is a big draw for Libertarian-minded folk, who dislike the idea of trusting the government to manage their money. Governments are prone to printing money to address financial crises. And what that does it make everyone’s money less valuable. That can’t happen with Bitcoin.

: Bitcoin exists within a framework where software developers, not politicians, make logical design decisions. This is a big draw for Libertarian-minded folk, who dislike the idea of trusting the government to manage their money. Governments are prone to printing money to address financial crises. And what that does it make everyone’s money less valuable. That can’t happen with Bitcoin. It has momentum on its side : Converting Bitcoin back to fiat currency creates a taxable event. But gains from holding Bitcoin, or converting Bitcoin into another cryptocurrency, are not taxable. So there’s a big incentive to leave your money in Bitcoin or other cryptocurrencies. And that’s exactly what people are doing.

: Converting Bitcoin back to fiat currency creates a taxable event. But gains from holding Bitcoin, or converting Bitcoin into another cryptocurrency, are not taxable. So there’s a big incentive to leave your money in Bitcoin or other cryptocurrencies. And that’s exactly what people are doing. High valuations in the world of stocks and bonds are also likely contributing to the flow of money into Bitcoin, as investors hunt for greater returns than the market can provide.

Sounds great, right? Well, it’s not all sunshine and roses. Here’s the thing …

Bitcoin hasn’t turned out the way it was supposed to.

It was SUPPOSED to be a digital currency that could be used to buy things worldwide without having to incur large fees for exchanging currencies. The idea was to keep transaction costs very low by removing the middleman (banks) from the entire process.

The problem is, due to huge demand and current limitations of the network, transaction fees are actually very high. Plus, it’s virtually impossible for a store to price products in Bitcoin when the currency can fluctuate 10–30% in a day.

So Bitcoin has failed as a currency.

That’s OK. Currencies don’t make good investments anyway. And Bitcoin has morphed into something different … (more about this later).

What About the Bitcoin Skeptics?

Reasons To Stay Away From Bitcoin

There are many reasons to avoid Bitcoin. But below are, to me, the most troubling.

No moat. No IP: Bitcoin could be the MySpace of cryptocurrencies. It could disappear tomorrow and most people probably wouldn’t care or even notice. Since Bitcoin has failed as a currency, we’re left with a store of value, unrealized promises, and code that could turn out to be worthless.

Bitcoin could be the MySpace of cryptocurrencies. It could disappear tomorrow and most people probably wouldn’t care or even notice. Since Bitcoin has failed as a currency, we’re left with a store of value, unrealized promises, and code that could turn out to be worthless. Volatility: Can you stomach the massive ups and downs? What’s troubling for people used to safer investments is this volatility seems to be driving a lot of the demand for Bitcoin. I have to admit, the potential to benefit from price swings is what got me interested in cryptos in the first place. I wasn’t attracted to Bitcoin because of its utility as a digital currency. I was drawn to it by the opportunity to make some money. And if others feel that way (of course they do) it’s a reason to be concerned.

Can you stomach the massive ups and downs? What’s troubling for people used to safer investments is this volatility seems to be driving a lot of the demand for Bitcoin. I have to admit, the potential to benefit from price swings is what got me interested in cryptos in the first place. I wasn’t attracted to Bitcoin because of its utility as a digital currency. I was drawn to it by the opportunity to make some money. And if others feel that way (of course they do) it’s a reason to be concerned. Bitcoin is used for illegal activity: That doesn’t make it inherently bad, or immoral. It’s just a tool. And it’s being used by bad people. But on the other hand it’s also being used by people in corrupt or unstable countries like Venezuela as a way to get out of a terrible situation. Venezuelans are buying bitcoin because their government has destroyed the price of the peso. They’ve completely crushed its value so that’s it’s basically worthless. People are starving. And some are turning to mining and trading cryptocurrencies to survive. I think that’s pretty cool.

That doesn’t make it inherently bad, or immoral. It’s just a tool. And it’s being used by bad people. But on the other hand it’s also being used by people in corrupt or unstable countries like Venezuela as a way to get out of a terrible situation. Venezuelans are buying bitcoin because their government has destroyed the price of the peso. They’ve completely crushed its value so that’s it’s basically worthless. People are starving. And some are turning to mining and trading cryptocurrencies to survive. I think that’s pretty cool. The big investment banks have stepped into the cryptocurrency world: This has probably helped drive prices up. And some say it could be too late for the average investor to profit.

This has probably helped drive prices up. And some say it could be too late for the average investor to profit. China has made it illegal to trade Bitcoin in the country: But since the ban, prices have soared beyond where they were before the ban. Why? Likely because Bitcoin is borderless. No one country can completely regulate it. So this doens’t seem to be a life-threatening issue.

What to Make of All This Information … ???

I can’t predict the future. Neither can you. All we can do is make educated guesses. So below are the tentative conclusions I’ve reached.

1. Governments are unlikely to succeed in regulating Bitcoin

Global consensus is hard. It’s not that hard to get 2 people or groups to agree on something. But gaining consensus among hundreds of groups is a whole other ball game …

There’s something called the Byzantine Generals Problem, which refers to a dizzying thought experiment involving a group of generals trying to agree on a course of action with the help of untrustworthy messengers. You can’t solve the problem without complete trust between each general and his messenger.

Bitcoin, thanks to blockchain technology, gets around the consensus problem with clever cryptographic techniques. But, in life and politics, consensus is never that easy.

Think about climate change policy. Barring a new revolutionary technology, it’s going to take a global agreement to reduce emissions appreciably (and fast). Everyone, including China, has to be onboard. But to date we’ve had only minor commitments and an agreement that basically kicks the ball down the road …

In short, it’s very hard to ban or regulate carbon emissions, because they’re decentralized.

Bitcoin is also decentralized. In order to ban it, every country would have to be onboard. Enforcement would no doubt be very expensive.

Do voters have the stomach for funding an all-out ban on cryptocurrencies? Not likely — Bitcoin just doesn’t get the blood boiling.

So I don’t think government intervention is a serious threat.

2. Markets don’t have to be rational to thrive

We like to think we do things for good reasons. But the truth is a lot murkier.

Humans are weird.

And the average person is terrible with money. We buy all sorts of ridiculous things … like selfie sticks.

Markets are irrational.

Most of the time, when we buy something, we make emotional decisions then use logic to look back and justify these decisions.

Ever bought a house?

You may have had a list of requirements but in the end probably ended up with the one that felt the best. And you probably paid a little more than you planned to. Oh well, no big deal. It’s OK to buy things that make you happy.

So what’s the point I’m trying to make?

Bitcoin (and cryptocurrencies more broadly) could very well continue to rise in price because people want it to.

There’s a clear demand coupled with a constrained supply guaranteed by mathematics, not politics––though, granted, nothing is set in stone and that limit could one day disappear. Who knows.

There’s no denying that people want to buy Bitcoin. It doesn’t really matter whether their reasons are rational.

Of course, it could be a bubble. But it’s not an ironclad certainty.

Think about gold. Even though it’s been part of the global economy for thousands of years, there was time when gold was unknown to man. Once it was discovered, it changed the way people trade.

Today we don’t use gold as a currency — we dropped it pretty quickly when a better alternative (fiat currency) was proposed — but many still use it as a store of value.

So even though Bitcoin has already failed as a currency, it could still act as a store of value, like gold. And other cryptocurrencies could become actual currencies.

3. The decentralization of EVERYTHING

We’re in a digital age, and technology is changing the way we do almost everything. In general, it removes the need for central authority.

Cryptocurrencies are doing to money what the internet has done to information. They could replace money managers with mathematics.

And the technology to accomplish this has only recently been ‘discovered’. So we can’t just look at past bubbles to say Bitcoin is a bubble. It might be. But who knows? I think it’s too early to tell.

Bitcoin, for better or worse, has morphed into a wealth-generating network.

It’s become an income-producing asset (albeit a strange, non-traditional one). People are using it as a vehicle to achieve capital gains when the price goes up, generate income when new currencies ‘fork’ off the main Bitcoin chain (like Bitcoin Cash and Bitcoin Gold), and as a gateway to owning other cryptocurrencies.

It’s not a currency. It’s a network.

Because of this network effect and Bitcoin’s ‘crypto gateway’ status, I see it as an opportunity.

Buying Bitcoin is like taking ownership over this network.

In Conclusion … Should you buy bitcoin at today’s price?

I’m not going to answer that because I’m not a financial advisor.

I’ll echo Mark Cuban and others who’ve advised not to put more money into Bitcoin (or other cryptocurrencies) than you can afford to lose. Basically 10% of your money max. This is the same advice experts would give for any investment, really.

I do think the potential benefits outweigh the risks … and yes, there are big risks. But part of life is taking (calculated) risks. It’s human nature and it’s actually how we grow as individuals and a society.

But you need to mitigate risks. An easy way to do this is to rebalance your portfolio when the price reaches uncharted territory.

It’s true that the hype surrounding Bitcoin may have driven prices a little too high a little too quickly. As Lou Kerner pointed out, “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run” (this is Amara’s Law).

But that doesn’t mean there’s no serious long-term growth potential for Bitcoin.

The real value of bitcoin is not its intrinsic value. Nor is it its utility as a means of exchange.

It’s not a real currency.

No––the real value of bitcoin is its network value.

Look at the biggest companies today (Facebook, Alphabet, Amazon, Apple) and you’ll notice something similar. They all benefit from a network effect.

The more people who use Facebook, the more valuable its platform becomes to advertisers. Same with Google. The more people search, the more money the company generates.

A network is by definition decentralized.

Tesla and others in their industry are decentralizing electricity production and vehicle fueling. You can now generate your own electricity and fuel your car at home (with that same electricity).

Technology is decentralizing just about everything. Except, until recently, the management of money.

Blockchain technology represents the decentralization of banking. This is a space that’s ripe for ‘disruption’.

A decentralized economy needs a decentralized currency (or currencies).

As Miguel Cuneta pointed out, we could finally be witnessing the separation of money from the state.

Banks might be the next centralised institution to fall. And they’d have Bitcoin to thank for that.

How to Buy Bitcoin Safely & Easily

Coinbase is by far the easiest and most secure way to buy and store your first bitcoins.

As a first time buyer, you might be concerned about the security of your funds (especially in light of recent hacks). Well, you’ll be relieved to know that all cryptocurrency hacks were actually the result of poor security on the part of exchanges, NOT the Bitcoin blockchain itself. The blockchain has never been hacked.

To buy and sell bitcoin, you need to use an exchange. An exchange is simply a third-party that facilitates trading between cryptocurrency buyers and sellers. Unfortunately, while blockchain technology is very secure, many exchanges are not.

But one exchange (Coinbase) stands out. Their security is top-notch. What’s more, the company is fully compliant with government regulations, and even has insurance to protect users in the event of a hack.

So if you ever lost funds on Coinbase due to a hack, you would be reimbursed 100%.

No other exchange can make that promise. And that’s one reason why Coinbase is hands-down the best way to dip your toes in the cryptocurrency world.

Another reason is their generous referral program.

If you sign up using my link below and buy $100 (or more) worth of cryptocurrency, you and I both receive $10 in bitcoin automatically.

That’s a 10% bonus in free money just for transferring some fiat currency to cryptocurrency. And once you’ve signed up, you can refer your friends and get $10 for every friend who makes a deposit of at least $100. Pretty sweet, right?

Click here to buy your first bitcoins at Coinbase and get a $10 bonus for free.

By the way, the bonus also works if you buy $100 worth of other cryptocurrencies on Coinbase. Currently, you can also buy Ethereum, Bitcoin Cash, and Litecoin.