Here’s Why Bitcoin Deserves a Place in Your Portfolio

Posted on February 8, 2017 | by [email protected]

Bitcoin deserves a place in your portfolio irrespective of what ‘smart’ conservative money managers would have you believe. Bitcoin is a disruptive technology because its creates a new market in how financial transactions are handled. Bitcoin also has the potential to disturb the traditional monetary system and eventually displace money (fiat currency) as we currently know it.

Of course, it wouldn’t be wise to sell all your assets to buy Bitcoin or to put all of your investment in Bitcoin; yet, you’ll be doing yourself a major disservice if you refuse to join the bandwagon of early adopters who are investing in the potential of Bitcoin. This article provides insight into some of the reasons why you should endeavor include Bitcoin in your portfolio in order to reap the benefits of diversification.

1. Bitcoin is not a passing fad

Many products and services often come into limelight with a tag for being “disruptive”, only for them to fizzle out of existence after a couple of years. Bitcoin is not a passing fad and it is here to stay. To start with, Bitcoin (built on Blockchain technology) imbibes the very essence of the most disruptive 21st century technologies. Bitcoin has a mobile-first approach, it is open source, it facilitates peer-to-peer transactions, focused on privacy, and encrypted with cryptography. No other financial/monetary product is fortified with all the technologies that give Bitcoin its unprecedented level of usefulness and security.

2. Bitcoin has direct application across hundreds of markets and industries

Many people erroneously assume that Bitcoin is only useful for sending and receiving payments when you don’t want to go through banks. The assumption is reinforced by the fact that Bitcoin was the choice payment system for questionable transactions on places such as Silk Road. Nonetheless, Bitcoin could compete with fiat currencies for direct applications in a wide variety of markets. Bitcoin has direct applications in the $1 trillion e-commerce market, the $515B annual remittance market, and in the $2 trillion annual e-payment market among others.

3. Tech and finance heavyweights already support Bitcoin

Bitcoin is still in infancy and it’s adoption is still a long way off from gaining traction in the mass market. Nonetheless, Bitcoin is already getting rave reviews of heavyweights in the technology industry. Paul Buchheit who founded Gmail has opined that “Bitcoin may be the TCP/IP of money.” Bill Gates, founder of Microsoft says Bitcoin is “a technological tour de force.” Richard Brown, an executive at IBM notes that “Bitcoin is a very sophisticated, globally distributed asset ledger.”

Heavyweights in the finance sector have also lent their voice to support Bitcoin. For instance, top-tier venture capitalists such as Peter Thiel, Marc Andreessen, and Fred Wilson have invested in the technology.

4. Bitcoin’s adoption is on an uptrend globally

Bitcoin might still be in infancy but its adoption shows a predominantly upward trend globally. The U.S. government is already toeing the path of acceptance and regulation for Bitcoin in the U.S. Bitcoin has earned the title of digital gold in Germany. The adoption of the cryptocurrency has grown rapidly in China and India in response to some of the monetary policies of the government. Available data shows that in Q1 2016, there were more than 13 million Bitcoin wallets to account for a 60% year-over-year increase. More so, the hashrate on the Bitcoin network was 1,028 pth/s to mark a 300% year-over-year increase.

Bitcoin is Becoming Digital Gold in Germany

Posted on January 19, 2017 | by [email protected]

Bitcoin investors are becoming apprehensive about the supposed ‘crackdown’ on Bitcoin in China. The apprehensions are justified if you consider the fact that China currently accounts for about 80 of volume transactions globally. However, while the whole world remains fixated on increasing regulation for Bitcoin use in China, other countries are rising up to the occasion to provide an enabling environment for Bitcoin to thrive.

Today, my attention is on Germany as Bitcoin starts to build up momentum for mainstream adoption in the country. A popular TV channel in Germany, Das Erste, has aired a full feature broadcast television show on the growing adoption of Bitcoin in the country. The video commentary runs in German but it features a mix of German and English speakers, you can also translate the summary and comments in-browser with Chrome

Meet Germany’s digital gold

Das Erste says Bitcoin can be regarded as digital gold in Germany and the name is apt. To start with, the digital currency has doubled its value relative to the Euro in the last one year – in contrast, gold has not been able to record such massive gains in the same period.

The video starts by showing the level of Bitcoin adoption in Germany with people using the cryptocurrency to pay for everyday items. You can see some people using Bitcoin to buy coffee, making withdrawals from the ATM, and sending money to others through the cryptocurrency.

The video goes on to include a feature report on Martijn Wismijer, one of the pioneer Bitcoin adopters known for having a Bitcoin wallet chip implant in his hand. In Martin’s words,” I’ve had a chip implant since 2014. You can hardly see it, but here is the antenna, next to the chip. If I want to buy, I just keep my hand at the checkout or the machine over there.”

Bitcoin Wallet chip implants are the futuristic forebears of how well Bitcooin can ingrain itself into the global economy. In fact, Martin goes on to show how the use of Bitcoin use transcends digital transactions by using his Bitcoin wallet chip implat to order a Red Bull from a vending machine.

The adoption of Bitcoin is taking off in Europe

Germans are starting to recognize the possibilities that Bitcoin might offer as an alternative global currency. The fact that you don’t need the services of a bank to conduct Bitcoin transactions with people locally or in other parts of the world is one of the factors driving the adoption of Bitcoin in the country. The low transaction costs and the relative privacy are also driving up interest in the use of Bitcoin.

The adoption of Bitcoin is also taking off in Iceland as the video features Marco Streng, CEO of the firm Genesis Mining in Iceland. Streng provided some insights on Bitcoin mining in Iceland and he notes that his company’s mining activities is “over 10,000 graphics cards, which is more than the largest supercomputer in the world.”

Decentralized vs. Fiat Currency: Identifying Failure

Posted on September 21, 2016 | by [email protected]

Decentralized Currency

Critics have cited Bitcoin’s decentralized nature as problematic to long-term investment, but this criticism deserves deeper analysis. Notable dissenting voices include investor Warren Buffet and economist Paul Krugman. Critics are entitled to their opinion. In considering the potential demerits of Bitcoin, however, investors should be aware of the benefits associated with its decentralized character. The intent of this post is to explore the failures of historical fiat currencies. (For reference, fiat currency describes government issued and/or authorized money, lacking intrinsic value.) From fiat currency failures, the benefits of a decentralized system become clearer.

Currency Failures of the Past

Fiat currencies, similar to Bitcoin, are susceptible to shocks in value. Since they lack intrinsic value, immaterial forces can dramatically influence their worth. This post examines the failures of the German Papiermark, the Argentine Peso, and the Zimbabwean Dollar.

After Germany’s World War I defeat, the Treaty of Versailles mandated Germany provide war reparations to allied nations. When Germany neglected payments, France and Belgium occupied areas of German production, which forced the German government to print papiermarks for salaries. As the quantity of currency increased, the value of the currency decreased. This induced a spiral of hyperinflation.

Following the 1973 OPEC oil embargo, Argentine budget and trade deficits threatened to collapse the economy. In response to growing debt and civil unrest, the Argentine government printed money. The value of the peso drastically decreased, until the government established a new peso to stabilize the economy.

The situation in Zimbabwe echoed that of Argentina and Germany. Excessive government spending and economic problems led the government to overissue currency. The government printed Zimbabwean dollars in higher denominations as the value of the dollar plummeted.

Lessons Learned

Each of these cases shares a common denominator. Social, geographic, and political forces contributed to devaluation, and eventual collapse, of each of these currencies. Bitcoin is exempt from these sources of error. As an independent, decentralized currency, Bitcoin will not face pressure from foreign governments or internal unrest. Monetary supply is fixed, which means that supply will not respond to changes in the world. Effectively, Bitcoin removes the element of human error.

The argument of this article is imperfect for several reasons.

Historical currencies are tested under harsher conditions than Bitcoin through wider use and longer duration.
This piece overlooks the benefits of monetary policy, which have been used to stabilize economies.
Hyperinflation, which is the common source of failure among these currencies, could still occur to Bitcoin.

Despite these imperfections, the trend in other intrinsically valueless currencies points a finger at geo-political variables as the culprit for currency failure. Since Bitcoin avoids geo-political variables, it may be less prone to failure.

Bank of Tokyo and IBM come together for a Blockchain Venture

Posted on September 16, 2016 | by [email protected]

The exact measure of success for any technology is its ability to impact and transform traditional set-ups. This is exactly what makes Bitcoin and its underlying technology so valuable and hence they are being termed as disruptive. Blockchain technology has transformative potential and major financial institutions are trying to adopt the same so ease their process. This grand scale adoption has in turn made the adoption of currency viable and has driven up the value recently. Let’s look into a recent blockchain adoption story where IBM partnered with Bank of Tokyo for managing contracts on blockchain:

Bank of Tokyo, IBM and Blockchain:

Bank of Tokyo-Mitsubishi UFJ (BTMU) plans to begin managing its contracts on a blockchain-based platform. This platform relies on technology provided by the still in-development Hyperledger project and the design services of IBM. The two companies confirmed that the platform will manage service level agreements between BTMU and other third parties. IBM’s vice president of blockchain Ramesh Gopinath told that the first phase of building the platform is complete. This allows a detailed tracking of workflows within the Japanese bank. The second phase is now underway to connect workflows between companies.

Gopinath explained how the integration will work as follows:

“You capture the entire workflow all the way to a master agreement and special workflows for employees. If you capture the metrics that are relevant, hopefully in the new model there will be fewer disputes”

According to a release, IBM and BTMU will first trial the service by transacting with each other over the platform. BTMU intends to ultimately migrate to the new contract management platform by the end of fiscal year 2017.

Germany Energy Giant now accepts Bitcoin for payment:

German Energy giant backs bitcoin payments

Customers of one of Germany’s largest energy providers ‘Enercity’ can now pay their electricity bills with bitcoin, the company announced. One of the ten largest energy companies in Germany, ‘Enercity’ has a turnover of around 2.3 billion EUR. It provides energy and services for residential customers in the Hanover region, as well as for business customers throughout Germany. Enercity has cited increasing popularity of Bitcoin and its ability to “act independently of central institutions” as the reason for the decision. It said that Digital payment methods such as Bitcoin are becoming increasingly popular. Enercity therefore now allows bills to be paid with Bitcoin.

Thus with these advancements in implementing Blockchain and accepting Bitcoin payments, the prices sure are to be affected to a certain extent.