What is All The Hype About Bitcoin?

Tom Lee, Fundstrat and FSInsight focus on the the broader outlook of all markets. I don’t get what’s going on!
What does this have to do with Bitcoin, digital currency, and the blockchain? Bitcoin’s price and properties as an asset has made a lot of people pay attention, including us. Blockchain technology is one of the most significant inventions in personal finance ever.  The recent acceleration and introduction of new market infrastructure like Coinbase, and other cryptocurrency exchanges have multiplied quickly. 

‘BTC’ is now an investable asset and can be purchased passively without the hassle of digital wallets. Scandals have come and scandals have gone but digital assets keep proliferating. Investing in Bitcoin is now easier than ever. Other blue-chip cryptocurrencies are starting to catch up as well if you don’t want to just invest in Bitcoin. Ethereum is a new exciting asset in the space. No one at this time necessarily predicted the continued supremacy of the dollar; after all America’s payment imbalances were caused largely by war expenses in Southeast Asia, a conflict which was ending without victory. 

Hopes were not too high for continued American financial dominance and very few people realized the significance of a technological protocol created by a group of American banks called the Society for Worldwide Interbank Financial Telecommunications (SWIFT) in 1973. No one could have known it at the time, SWIFT is one of the main reasons banks have been able to maintain profitability despite the aforementioned multi-generational decline in interest rates. 

If you are looking for something that conceptually helps you understand what Bitcoin is, this obscure protocol may offer a decent metaphor, but at the same time, Bitcoin was a monumental leap in human ingenuity that solved one of our most enduring economic problems; the persistent incentive to violate trust to maximize individual gains. Because of this perpetual problem, digital financial transactions have always needed a trusted third-party to act as an intermediary. Bitcoin was created in the heat of the GFC when trust of those third parties was at an all-time low. Investing in Bitcoin back then would have given you returns in the tens of thousands of percentage points. 

SWIFT and other inefficient payment oligopolies will maintain their dominance for a while but there is now a proven technological alternative that has the potential to eliminate problematic economic rents charged by the financial industry to individuals for the privilege of using the system. The cost of this in the United States is about $1,000 annually per capita. Will bitcoin replace credit cards and bank accounts? We don’t think that will necessarily be the case, but we do think the technology has the potential to create unprecedent efficiencies in the economy. We’ll give you an example of how we think about it. 

This simple protocol, literally a system of connecting unique identifiers to express information necessary for international financial transactions, is an antiquated technological solution that maintains dominance because it was effective and it was first. It replaced a system called Telex that was plagued with human error issues. SWIFT’s generation of unique codes overcame these issues and allowed individuals and businesses to accept payments on an unprecedented scale. This then led to a massive network effect. Investing in Bitcoin, like the banks investment in SWIFT will likely pay off very much. Unlike the benefits of SWIFT though, the benefits of investing in Bitcoin are now pretty much available to any investor in the world. We can help you get started!