The Paradise Papers have got a lot of very rich people very nervous. The massive leak of offshore banking data exposes the realities of a world where anonymity means squat when your entire database can be squirted digitally around the world thanks to one disgruntled employee or misplaced USB stick.
What the 0.1%ers need is a secure anonymous technology which is both fungible and reasonably liquid. Hmmmmmmm….
The road to $1M / BTC
I’m calling it here, I think once BTC becomes the tax shelter option of the 21st century, it’s market value will hit astronomical levels. Corporate oligarchs, the super-rich and tyrannical despots are all waking up to the potential of a fully protected anonymous asset.
Hell, if they really want, they can put their digital wallet on a portable hard drive and hold the BTC in their hands. Some grizzled old despot holding a western digital drive and being told the magic black box holds his fortune. He puts it in his safe. His grandson rolls his eyes and plots a heist… sorry, I got carried away by the story.
Seriously, with the billions floating around in the legitimate world, the potential demand could make the current grey and black market look like a firecracker next to a nuke.
Running up against the demand, is the practical limit to the BTC available. With BTC’s divisibilty making it easier to slice up the currency, There’s no reason why single BTC prices won’t continue to head up in the long term as it becomes a larger and larger medium of exchange for large sums of wealth.
Who cares you say, I bought BTC at $100. Now I snort crushed adderall off the rail of my mega-yacht. Sure, but every banker with half a brain is saying the current run is a bubble, so I hope you can make those payments when the party ends.
My colleagues are posting a lot of great analysis on miners, futures, and the current state of the market. It’s a great series if you want to understand the current crazed market.
Personally, I agree with the old greybeards at the central banks. BTC is a bubble, but after this bursts, the long slow climb will end even higher thanks to the potential for BTC as tax shelter.
The crazy trading around BTC is the early-adopter craze. This one tends to be the folks who see the potential and early institutional investors. It’s all leverage and hype. So if you want to invest purely on the basis of BTC value going up, in the short term it could be pretty dicey.
If on the other hand, you wait for all the smart leveraged folks to pull their profits and clap themselves on the back, I’d take the opportunity to grab some BTC asap. It may sting that you missed $100, $500, $1,000, and $5,000 – but there’s time before it will hit $50,000, and I think it will.
I’m thinking about holding BTC itself as longer term investment strategy. Just as an outside bet, I’d try to grab 1 BTC to hang onto myself just in case. Here’s why:
Warning: Time to breakout the tin-foil hats
Here’s how I see it playing out. BTC will stabilize as an investment and become a super-currency for the rich. Why do I think this will make 10k look like peanuts for a single BTC? Because when the block chain becomes enormous, we will fundamentally reach the end of the mining phase of the currency. Now there are effectively finite BTC in the world.
(I’m not going to get into the issue of forks, alternates etc. Even if another crypto currency becomes the default, it will still run into the same issues eventually – barring quantum computing)
When we’re talking about the folks who move money around at the scale of the Paradise Papers, $10k doesn’t even cover a night in their 3rd favourite hotel. The use of BTC will not be tied to it’s market value.
When the gold rush is over, the value of BTC will drop and then start climbing again, eventually reaching whatever value the super-rich find convenient.
Crazy Sci-fi Ranting Over
The buzz around the Paradise Papers and the new interest in BTC as a result finally solves an issue I had around BTC as a financial instrument, What was it’s market? People buy USD because the US has a huge GDP and it backs its currency, and you can go to America and buy Big Macs with it. No one buys my homemade chocolate coins because they melt and aren’t backed by anything other than love.
BTC was a great idea and a useful technology, but it was on the margins. Now it has a raison d’être – helping the extremely wealthy legitimately avoid taxes.
You’ll know this seismic shift is gathering steam when governments in former tax havens begin marketing BTC services as an extension of their brand in mass market publications.