Doug Casey: How I learned to love bitcoin

[Bill Bonner's Diary]( Editor’s Note: Legendary speculator, and Bill’s longtime friend, Doug Casey pens today’s weekend Diary. Below, Doug reveals how he came to recognize the potential of bitcoin, and makes a bold prediction for the future of the cryptocurrency. Doug Casey: How I Learned to Love Bitcoin By Doug Casey, Founder, Casey Research In this article, I’d like to explain how I learned to love Bitcoin. Why it’s a wonderful thing. Its potential as a speculation. How the government is going to co-opt it. And how this is all likely to end. I was first introduced to Bitcoin several years ago in Cafayate, Argentina. A young Belgian guy came to visit, I bought him lunch, and we discussed Bitcoin. He was a very early enthusiast. He gave me a physical Bitcoin as a souvenir. They’re now collectibles, but the digital codes are inscribed on them. I still have that Bitcoin. It was worth $13 at the time. I wish I had listened to his argument more carefully, because I could have made millions. Over 300-1 over just a few years… that’s rare indeed. I was inclined towards it philosophically, but outsmarted myself on an investment level. Because Bitcoin was pitched to me as an alternative currency, and I failed to see all of its advantages in that role. My original objection was that Bitcoin isn’t backed by anything. It’s really a private fiat currency. It’s very much like the Zambian Kwacha, the Argentine peso, the US dollar, or any of the other 150-plus currencies in today’s world. It’s a floating abstraction. Unlike state currencies, though, its acceptance isn’t enforced by laws. But, on the other hand, its quantity is limited. But would that be enough to get large amounts of people to use it as a currency? Recommended Link [World-renowned crypto expert: "I'm revealing my cryptocurrency investment secret"]( For the next few days, the crypto expert who's been called "The Oracle" of cryptos on the internet and is followed by over 100,000 people across the globe is revealing his proprietary investment strategy. It's already helped an "average Joe" named Paul turn $500 into just under $140,000… [Click here to see what it could do for you]( -- I missed something when I said, back then, that it had no value. It’s a fiat currency, yes, but it has much more practical value than any other. A currency has to be a good medium of exchange, and a store of value. Even a few years ago, both of those things were wild speculations when it came to Bitcoin. I tried to analyze the situation rationally, using Aristotle’s five characteristics of a good money. Aristotle defined the five characteristics of good money in the 4th century BC. And his analysis is as accurate now as it was then. It must be durable, divisible, convenient, consistent, and have use value in and of itself. Based on that, Aristotle believed gold and silver were best suited for use as money. Let’s analyze how Bitcoin does by these five criteria. - Durable. Bitcoin and other cryptocurrencies are definitely durable—unless we have a major electromagnetic pulse (EMP) or a significant solar flare that wipes out all the computers. Bitcoins are not as durable as the metals, but they’re adequate, barring a collapse of civilization. - Divisible. Bitcoin is infinitely divisible. Better than the physical metals, actually—although the metals can be accounted in tiny fractions too. - Convenient. Yes—as long as you have a smartphone, Bitcoin is very convenient. But your smartphone, or something like it, may not always be with you. And your counterparty also has to have one. And it’s not very convenient if someone doesn’t know or trust Bitcoin. Right now, that’s still probably 98% of humanity. - Consistent. Absolutely. Every Bitcoin is exactly like another one. It’s at least as good as .999 fine gold that way. The problem I had with Bitcoin was the fifth point: Does it have use value in itself, so you can’t get stuck holding the bag? If you have a million US paper dollars, and nobody accepts them, they have no use in and of themselves—except as wall decorations or kindling. They’re just unsecured liabilities of a bankrupt government. In essence like a million Zimbabwe dollars, although there’s obviously a continuum. Fiat currencies can be easily destroyed by their issuers. The things are burning matches. They have half-lives, like radioactive elements. Sure, there were advantages to Bitcoin being a privately issued fiat currency. But I didn’t see its real use value; that’s where I went wrong. Bitcoin is certainly a fiat currency like the dollar or the Kwacha. But it’s also an excellent transfer device. You can move wealth from one country to another, or to another person, quickly and privately. I’d say secretly, but you’re not supposed to say “secret” anymore, you can only say “private.” Part of the politically correct corruption of language, I might add. Recommended Link [Teeka's new cryptocurrency prediction could make you a fortune by January]( For the next few days only, crypto expert Teeka Tiwari is revealing his next big cryptocurrency prediction for 2018. Last year's prediction was spot on… Those who followed his best ideas had the chance to turn a small stake into nearly $200,000. [Click here to be among the first to hear his latest]( -- And you can do so outside of the banking system, which is increasingly important. If you use Bitcoin, you don’t need a bank to store your money. Cryptocurrencies, like Bitcoins, are just the first, and most obvious, application of blockchain technology. Hopefully, among other things, blockchain and Bitcoin are going to destroy the SWIFT system, the vehicle for wiring money from one bank to another. SWIFT is expensive (at least $50-100 per transaction), slow (generally a day or two, sometimes a week or more), and insecure (who trusts either big banks or the US Government?). And SWIFT requires that all dollars clear through New York; non-Americans don’t care for that. SWIFT is used by thousands of banks around the world to send payment instructions worth trillions of dollars each day. Incidentally, it’s not that I’m against SWIFT itself. It’s just that it’s become a creature of the banks—who abuse it and are actually responsible for its problems. So, this is one big use value of Bitcoin. It allows you to transfer something that is accepted as money outside of the banking system, and outside of government fiat currencies. Bitcoin is well on the way to being accepted as money. I think it will succeed. What is money? Money is a medium of exchange and a store of value. Almost anything can be used as money. Some things are just much better than others. Salt, seashells, and cows have all historically been used as money. After all, the word pecuniary comes from the Latin pecus, which means cow. And salary comes from the Latin sal, which is salt. Wampum were seashells. Cigarettes are money in prisons and war zones. Even giant Yap island discs have been used as money. Bitcoin is becoming more and more accepted as a medium of exchange, while most government fiat currencies approach their intrinsic values—essentially zero. Bitcoin is a bit more problematic as a store of value. Once again, let’s get back to the basics. You’ve got two kinds of currencies: commodity currencies and fiat currencies. The commodity currencies are actual physical commodities. You know they have use value. Fiat currencies, on the other hand, are just made up. They’re totally arbitrary and political. It’s like that old joke about sardines. You’ve got eating sardines and trading sardines. Commodity currencies are eating sardines. Fiat currencies are trading sardines. Of course, there’s no guarantee that Bitcoin is going to be accepted a year or two from now. It’s a high tech innovation, and maybe a Version 2.0 will collapse the value of the current version. So in a few years, we may find that Bitcoin fails the store of value test. But it’s accepted at the moment. And it’s been growing in value at a crazy rate—unlike fiat currencies, which have all been falling against real goods and services at about 5-10% a year. Incidentally, I don’t put much faith in the accuracy of government inflation figures. Bitcoin has been a great speculation so far. But as a store of value? Bitcoin is a technological innovation. There likely will be Bitcoin 2.0 and 3.0, not to mention other, even more advanced cryptos. What will the current Bitcoin then be worth? There’s a reason the expression “High tech, big wreck” is true. Just because so far it’s been a great speculation, doesn’t mean it’s a good store of value. Technology, a solar flare, or even government action could wipe it out. The bottom line? Bitcoin passes the medium of exchange test for the moment and store of value test for the moment. So you can definitely say it’s money—for the moment. But so does the Argentine peso, for the moment. I have little confidence, however, Bitcoin will be here, say, five years from now. Buying cryptos is not like socking away gold coins. Recommended Link [Details on the "next Bitcoin"]( This crypto is in the same position Bitcoin was a few years ago, right before it soared. It's just starting to get some buzz… especially in cryptocurrency circles… but it hasn't hit the mainstream news yet. Once it reaches a wider audience, the gains it's delivered so far could seem like a drop in the bucket. [Details here]( -- The $64 question is: Where are we in the market cycle for cryptos? Clearly, we’re no longer early in the game. It’s like getting into the Internet stocks back in 1998—they weren’t cheap, but the bubble got much, much bigger. And the Internet—contrary to what people like Paul Krugman thought—was not itself a bubble. Up till now, the only way to play this has been the coins, the tokens, like Bitcoin. There are perhaps a thousand of them out there now, and most of them are garbage. Because I think the bubble will get much bigger, I’m getting involved in these cryptocurrencies on several levels. Including public mining companies, which is not germane to this article. I’m trying to make the trend my friend. But cautiously, because there’s a lot of speculation going on. I am concerned about the market, which is very bubbly. But I think it’s going much higher, for several reasons. One, as we discussed, is that some of the cryptos have great utility, and only about 25 million out of the 7 billion people in the world currently own them. I promise you that five years from now that number will be more like three billion. They’re going to get much bigger in the developed world, but even bigger in the Third World. Regards, Doug Casey Founder, Casey Research Editor’s Note: On Thursday, cryptocurrency investing expert Teeka Tiwari held a cryptocurrency training webinar. More than 250,000 people RSVP’d to hear the important news that Teeka had to share: A new law in Congress could send the value of cryptocurrencies like bitcoin soaring by January of 2018. Even if you’ve never invested in cryptocurrencies, this is news every investor should hear. Teeka agreed to replay his training webinar for readers who missed it. See it for yourself [right here](. [Bonner and Partners]( © Bonner & Partners 55 NE 5th Avenue, Suite 100, Delray Beach, FL 33483 [www.bonnerandpartners.com]( This e-mail was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Customer Service Bonner & Partners welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact us, call Toll Free: (800) 681-1765, International: (443) 353-4462, Mon-Fri: 9am-7pm or email us [here](mailto:feedback@bonnerandpartners.com). Having trouble getting your e-mails? Add us to your address book. Get Instructions [here](… © 2017 Bonner & Partners, 55 NE 5th Avenue Suite 100, Delray Beach, FL 33483, USA. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from the publisher. Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not designed to meet your personal situation – we are not financial advisors nor do we give personalized advice. The opinions expressed herein are those of the publisher and are subject to change without notice. It may become outdated and there is no obligation to update any such information. Recommendations in Bonner & Partners publications should be made only after consulting with your advisor and only after reviewing the prospectus or financial statements of the company in question. You shouldn't make any decision based solely on what you read here. Bonner & Partners writers and publications do not take compensation in any form for covering those securities or commodities. Bonner & Partners expressly forbids its writers from owning or having an interest in any security that they recommend to their readers. Furthermore, all other employees and agents of Bonner & Partners and its affiliate companies must wait 24 hours before following an initial recommendation published on the Internet, or 72 hours after a printed publication is mailed.