It was late 2017. Bitcoin was all over the news. Everyone was talking about it. Everyone was trying to get in on the frenzy.

I myself had already bought a little bit of bitcoin, however I bought it months earlier. At the time I got in, Bitcoin was already trading for around $3,500 per coin. I reluctantly bought in thinking that it was just another “tulip bubble” and that it was going to pop at any time soon. You can guess how surprised I was when over the next seven months Bitcoin began it’s massive ascent. By the time November and December of 2017 rolled around, suddenly all of my family and friends knew what Bitcoin was. Just months earlier (back when I first got in) most didn’t have a clue what it was nor had they ever heard about it. But then it started appearing on the mainstream media and everyone began talking about it. Even my Dad, who is over 80 years old and was never interested in investing throughout his life, asked me back in December 2017 if I could show him how to buy some cryptocurrency.

Back in 2017, I had already sensed the Bubble

I often kick myself for not getting involved with bitcoin back when it was still trading at around $400 (or even earlier when it had been trading for even less). Unfortunately, I was going through an ugly divorce case back in 2015 and the trauma that it caused stopped me from focusing on anything related to investments (even though bitcoin had already popped up on my radar back then). Little did I know that the divorce would cost me more than I could ever imagine (including all the assets and money she took from me, it also costed me a lot of missed investment income that I would have made from getting in on Bitcoin earlier).

So I was already feeling down and late to the game by the time I jumped on the bandwagon back in the summer of 2017. I had not done much research into cryptocurrency prior but believed in the general concept enough to put a tiny amount of money into it.

It wasn’t until I began studying the historical cycles of bitcoin that I really began to understand what to expect from it. I had a pretty successful history of trading stocks and options prior to getting involved in cryptocurrency. I’ve always had an investor mindset and consider myself fairly knowledgeable when it comes to both fundamental and technical trading strategies. I’ve also always lived by the motto of buying cheap and selling when it’s expensive. Bitcoin on the other hand was still so new. It had only been around for less than 10 years (Bitcoin was founded in 2009) so it was hard to interpret what was considered cheap and what was considered expensive. It wasn’t until I actually sat down and really began studying it that I finally figured it out.

Like many assets, Bitcoin has historically moved in cycles. I’ve written on Quora before about the main economic cycles. There are 4 primary stages:

1. Growth (Expansion)
2. Stagnation (Peak)
3. Recession (Drop)
4. Recovery (Floor)

As you can see, in a normal “functioning” free market for virtually any asset, bear markets (or long term market “crashes” as most people call them) is a normal part of the cycle. It has always been this way throughout history.

Most newer investors, however, tend to falsely believe that just because a price is rising fast and an asset is trending, that it will rise forever. “To the moon” they say. However, the trained and experienced investor knows that once the majority of people begin talking like that (especially during times when your typical mom and pop investors start jumping on the bandwagon in drones), then it’s probably close to the time when you should be getting out.

There were all kinds of warning signs that cryptocurrency was in a bubble back in late 2017. Not only did my 82 year old father (who has never cared about investing in his life) ask me to buy him some cryptocurrency he heard about on the news, but on a separate occasion, my half sister also told me that she was thinking about cashing out her 401k in order to buy bitcoin. Many of my other friends were also talking in similar ways. When I heard these types of things being said by the majority of the public, the word “bubble” took on a new meaning for me as it related to the cryptocurrency boom. The question I had for myself at this point was “how long could this bubble go on?”. It was no longer “if”, but “when” the bubble would pop.

I began studying the historical bitcoin crashes and saw that bitcoin previously had three major crashes (one in 2011, one in 2013, and one in 2014). What I noticed was that just before each crash, the price of bitcoin would run up by at least 5 times to 10 times the previous high and that the whole bull cycle would usually last about a year or two (with the final 2 months or so producing the fastest gains).

By the time December 2017 rolled around, the price of bitcoin was going up by hundreds of dollars a day. Each day I woke up, the price of bitcoin was at new all time highs. The pace at which these gains were being made turned me into a real bear during that time. Unfortunately however I caught the flu and was sick during the time that the price actually started it’s reversal. At that point I lost my chance to take the profits I had made and have been a “hodler” ever since.

In January 2018, I posted a Tweet predicting that the price of Bitcoin would hit around $4,000-$5,000 within the following 6 months (See below). People at the time thought that I was crazy for stating that the price would go so low. Today the price of Bitcoin is right around the low of $4,000 which I called. In fact it has even dipped past that.

Unfortunately, I never did find a safe way to short bitcoin so I missed out on those profits too.

My Prediction now: We’re due for another 5x to 10x+ Bull Run

As you can see, I spent most of 2017 very bearish about cryptocurrency. It wasn’t if but when the crash would come I thought to myself. Well that bubble popped in Dec 2017 and has been in a deep bear market ever since just as I expected.

However the difference is that today, I am bullish once again.

As I stated above, this is not Bitcoin’s first rodeo. There have been three deep bear markets in the past all of which were followed by massive rallies that would go on to surpass previous highs by at least 500% to 1000% or more. See the pics below (charts by Coindesk.com):

As you can see by the most recent last chart, this crash is most likely a repeat of the last three. If history serves correctly, what do you think it will most likely do next?

If history repeats itself, the next stop for Bitcoin would be at least $100k to $200k. Yes, that’s per coin.

You may be laughing at that figure. But remember people also laughed at me when I predicted Bitcoin $4k within a matter of months back when it was around it’s all time highs.

Every single one of those previous three Bear markets which I listed above was followed by run-ups of at least 500% to 1,000% within the next few years afterwards. So one must ask why it would be any different this time?

What is the Intrinsic Value of Bitcoin and other Cryptocurrency?

One of the biggest arguments that Bitcoin and other Cryptocurrency bears make is that it has no real intrinsic value. They claim that it is just numbers on a computer screen.

Although that may be slightly true, I would challenge them in the sense that history shows us that the value of something is created by supply and demand rather than actual intrinsic value.

In reality, fiat currency (Such as the US Dollar, British Pound, Chinese Renminbi, etc) have no real intrinsic value either. It is simply just pieces of paper that can be printed at will by the issuing country’s government and/or Central bank. In fact, nowadays, much of it is not even on paper anymore but rather just numbers on a computer screen. Sound familiar?

Why the money that we already use has no real intrinsic value either

Most people don’t realize this but when a consumer goes to their bank to take out a loan (such as to buy a house, pay bills, buy a car, or whatever) the bank is not actually loaning you money it has. Banks are only required to keep around 10% in reserves. This means that when you borrow from a bank, up to 90% of what they are loaning you is not actually in their possession. So where does it come from you may ask. The answer is simple, they create it for you. Think of money as a sort of IOU from the government. When you take out a loan, the bank pulls up your account on a computer and inserts a bunch of numbers into your bank account in order to equal the amount of money that you are borrowing. It’s like they’re waving a digital magic wand and poof…money appears in your bank account. Over the course of time, you, like the good and trustworthy borrower that you are, pay back that loan in full along with interest. So now, the numbers that the bank made appear in your bank account instantly disappears out of existence. The interest that you paid however becomes the bank’s profit. So everybody wins. You got the money that you needed and the bank made money from loaning you money that it never had to begin with.

If you are thinking that this doesn’t sound very fair, I would agree. If you take this argument as far back as it can go, the answer becomes clear: The money that we are already using (such as US Dollars) has no intrinsic value either. The government and the central banks own it…not you. This also means that they can manipulate it in whatever way benefits them the most too.

How Governments and the elites manipulate the money we already use

One of my favorite movies is called “In Time” and it features Justin Timberlake. If you haven’t seen the movie, I suggest that you watch it at least once.

Without spoiling what it’s about I will tell you some things that pertain to our conversation. The movie is a Sci-Fi which takes place in the future in which the new currency is time itself. Today people use their country’s currency (such as Dollars) in order to buy things. In the movie however, time was able to be earned and spent. Therefore, people no longer paid for things in dollars and other fiat currency but paid for it with time itself. This allowed the rich to live practically forever while the poor could lose their life (by running out of time) within a day (if their bills were to high or they lost their job or something).

Justin Timberlake’s character on the other hand was lower class but had become rich by a stroke of luck. Being the vigilante that he was, he risked his life in order to try to donate that new found time to people that needed it the most.

Although some people may find the concept of time as a currency far-fetched, I disagree in the sense that people will trade whatever is valuable for them depending on what the situation calls for. If the fiat currency system which we have today suddenly failed, people would be forced to go back to the days of bartering. If that happened, possessions which you owned would become the new currency. You would no longer trade dollars for things that you needed…you would trade things you had for other things that you needed more. That is the truth about currency. The currency that we have today is only valuable as long as people believe in it. The moment people lose faith in it, the currency can fail (and that’s the point you will probably wish you had bitcoin [more on this later]).

Inflation is the tool the government and elites use to keep the rich richer and the poor poorer. It’s also how they enrich themselves.

Going back to the movie “In Time”, one of the most interesting aspects of the movie is how the elites responded to the redistribution of funds to the poor. Justin Timberlake’s character essentially got wealth (in the form of many decades of time) and distributed that wealth among the poor in his society. As one would expect, much of these impoverished people that were barely surviving from day to day were overjoyed by the prospect that they now had enough to get by for awhile, however those hopes were quickly dashed once the elites stepped in.

So how did they respond? They simply raised the price of everything. If people suddenly had more to spend, all the rich had to do to get it back was raise the price of everything accordingly.

In today’s world, we know this as inflation. Most people believe that inflation is just a normal part of life. Most people aren’t concerned with the fact that it costs 10 times as much to buy a house now as it did in the 1970s. Most people don’t think much about the fact that a college education today costs around 15 times more than it did in the 1930s or that the price of a gallon of milk is now multiples of what it used to be. Most people just consider that to be normal. In fact, this phenomenon has a name. It’s called inflation.

Most people think that inflation is a natural phenomenon but let me tell you that it’s not. Rather it’s perpetrated by the government and the social elites. Another thing that most poor and working class people don’t realize is that inflation is actually hurting them rather than helping them. Most people would argue that even though prices have gone up, wages have also gone up with it. Although this is true, wages have not increased at even close to the same pace that the prices of goods and services have. As I stated, even though the price of a house has gone up by at least 10 times what it was in 1970, wages have only gone up by about 5 times what it was during the same time period. If you’re in your early 30s like me, this means that it was indeed easier for our parents to afford a house back when they were our age than it is for us now. Just to illustrate this even further, if an average income family in the 1970s saved their entire paycheck from work in order to buy a house, it would take them approximately 2.5 years in order to afford to buy it cash. Today however, if the average income family saved their entire paycheck in order to buy a house, it would take them nearly twice as long (almost 5 years) before they would be able to buy the average house cash. (In all fairness though, I do want to point out that even though a house is more expensive now than in the 1970s, the interest rates are also much lower than they were during that same time period. In fact, this is probably the only reason why the average consumer can still afford to buy a house at all. This in itself however is just another form of government and central bank manipulation. Also, how long can this really go on since interest rates are approaching zero.)

Anyway, if we switch perspectives and look at what inflation has done for the rich, we see a very different story. If you bought a home, stocks, and/or any other inflationary assets in the 1970s and held those assets until now, how well off would you be today? By most standards, you’d probably be considered wealthy if you did it properly.

On the other hand, most working class and lower class families that may not have been able to afford investing in houses and stocks back in the 1970s or before that time would probably be even worse off today. These people were instead the renters and the borrowers…and who did they rent from and borrow from? You guessed it — The rich. Fast-forward to today and we can see now why the wealth gap has expanded so much over the years.

What’s in it for them?

Inflation is the best friend to the government and the wealthy and the worst enemy of the poor and working class. I’ve shared some of the reasons why above. Below are the 3 main points.

a) The rich can afford to buy assets while the poor usually cannot.

b) Inflation keeps those assets increasing in value (which keeps the wealth of the rich growing).

c) This same Inflation keeps the expenses of the poor and working class growing (which keeps the wealth of the poor and working class declining).

d) The more inflation rises, the more the rich will get richer and the poor will get poorer (IE: rising inequality)

The government is also a big beneficiary of inflation. All citizens pay taxes. If we look at the tax system, we can see that the more expensive something is and the more money someone makes at their job, the higher the amount of taxes the government is able to collect. Therefore, it is in the government’s best interest to keep inflation running smoothly. This is why the government has always stepped in to try to boost inflation through policies and stimulus during times of economic slowdowns. In fact, if you listen to mainstream media and popular commentary, most people call an inflationary economy a good economy and a deflationary (recessionary) one a bad one. For many poor and middle class people though (especially those on fixed incomes), a deflationary economy is a godsend to them since it’s the only time that they can actually afford things. I know. My parents fall into this category.

Will Bitcoin be the currency of the future?

Most bitcoin bulls claim that bitcoin is not only the first decentralized currency (meaning a currency which is controlled by the people rather than a central bank or government) but they also claim that it will be what people use in the future in order to buy goods and services. Most of them truly believe that it will one day replace fiat money in every day transactions.

Although I agree with the first point (about it being a decentralized currency), I personally do not subscribe to the other idea at all. I do not feel that it will ever take the place of fiat as the main currency of trade.

Why I believe that Cryptocurrency like Bitcoin will be a safehaven asset rather than an everyday currency

The main problem that I have with something like Bitcoin becoming an actual day-to-day currency is that it is deflationary rather than inflationary in nature.

Bitcoin has a limited supply. When Satoshi Nakamoto created Bitcoin, he programmed a hard limit of 21,000,000 Bitcoin into the code. This means that once 21 Million bitcoins are mined, no more can be mined. Because of this hard limit, Bitcoin (and any other limit capped cryptocurrency like it) are deflationary in nature.

This means that in order for the value to increase after all coins have been mined, then smaller amounts will have to be worth more. Today, Cryptocurrency can be purchased in fractional amounts. For instance, people can buy 0.10BTC or 0.05BTC or even 0.0000005BTC, etc. They do not need to purchase one whole BTC. As the price of bitcoin increases, then people would get less and less bitcoin for the same amount of money as before. This is called a deflationary asset. It is the opposite of what most people today are used to. Most people are used to spending more money to buy goods and services now than they did say 30 years ago. Deflationary assets like Bitcoin however would be the opposite. It takes less bitcoin to buy a house today as it did say 5 years ago.

So if we were to envision a future in which everybody paid in Bitcoin, we can see the problem. Could you imagine trying to keep track of your expenses in that type of deflationary environment? Imagine going to the grocery store where a can of tomatoes costs 0.000000000012678BTC or a light bulb costs 0.00000005678912BTC. It just wouldn’t be very economical and would require a ton of math. For that reason, I can’t picture it as an actual currency. I could be wrong but that’s my opinion.

Digital “Gold” and “Silver”

There is another deflationary asset much like Bitcoin. Precious metals such as gold and silver are very similar in nature. They both have a limited supply. It is the fact that this supply is limited that gives them their intrinsic value.

Inflation really increased after the 1970s. Nixon had just taken America off the gold standard so that they could “print” money at will…and print they did. Once that happened the value of the dollar decreased in value as larger supplies of dollars have been introduced over the years. As the dollar lost value due to inflation, the prices of goods and services rose. However, the price of gold, silver, and other precious metals rose with it. For this reason, investors always viewed gold as a good hedge for inflation. In their eyes, it is a good way to preserve their wealth while the feds go on a “printing” spree. During recessionary times, the prices of assets such as houses and stocks as well as other goods and services tend to fall. For this reason, it is not a good idea for the rich to hold on to these assets until it’s cheap again and the bull market cycle starts fresh. Instead they keep their money in cash or bonds. If they feel that even holding on to cash is dangerous, they put their money into “safehaven” assets such as gold and silver.

I believe that Cryptocurrency will join the ranks of “safehaven” assets such as these. Cryptocurrency is still fairly new and has not reached the point in which it’s considered absolutely safe yet, however once the large brokerages begin trading cryptocurrency like bitcoin and other products such as ETFs are introduced, this will all change. Once people can store and trade bitcoin through their brokerage accounts like they do stocks, I believe that cryptocurrency will take on it’s new form as a “safehaven” asset for most investors.

What is the true value of a Bitcoin? Other Crypto?

Although I am bullish about certain Cryptocurrencies such as Bitcoin, Litecoin, Dash, etc, I am not a believer in the majority of the altcoins out there today. According to coinmarketcap.com, as of today, there are over 2,000 different cryptocurrency coins out there. In fact, new ones come out practically every day and coins seem to be hard-forking all the time leading to the creation of a new coin on a chain.

I believe that most of these altcoins will fail and that they will fail hard. I’m willing to make a bet that ten years from now if cryptocurrency is still in existence, almost all of the value of cryptocurrency will be held in probably just 10 to 30 coins. The top 10 will hold most of the popularity and value while others will fall to the wayside. Most of the altcoins we see today will probably be gone.

This wouldn’t be the first time something like this has happened. During the dot com boom in the 2000s, IPOs of different internet companies were popping up left and right. Many of these companies weren’t even real companies or weren’t making a profit yet their stock was surging 3,000%, 5,000%, or even 10,000% in just a few short years. We all know what happened next. When the dot com bubble burst, many of these companies just disappeared and their stocks were delisted. Only the strongest ones like Apple and Microsoft emerged from the rubble and went on to make obscene gains since then.

I believe that cryptocurrency will see a similar story. These altcoins and forked coins will fail and disappear. However the strong will survive and probably go on to make obscene profits in the future.

Conclusion

As you can see, I am a big believer in the long term prospect of some (not all) of the cryptocurrency that we see in existence today. Also, contrary to popular opinion from among the bears, my argument is that Cryptocurrency like Bitcoin DOES have intrinsic value and that it’s intrinsic value is derived from the fact that it has a limited supply much like gold and silver. For this reason, I believe that it will become a “safehaven asset” once it is picked up by the major brokerage firms as a viable trading instrument and cryptocurrency can actually be stored in more trustworthy holding companies which these brokerages are a part of. In fact, I am willing to go a step further and opine that cryptocurrency with hard supply limits such as Bitcoin, Litecoin, Dash, and others are actually more valuable than gold in terms of extrinsic value. The reason is because some of these coins actually have lower supply limits than gold. Take for example Bitcoin with it’s hard limit of 21 Million. Compare that to the roughly 6 billion ounces of Gold that is currently estimated to exist above ground in the world today, and we can clearly see that there is a lot more gold in the world than there ever will be bitcoin. In fact, there is roughly 285 times more gold currently in the world than what the total supply cap of bitcoin is set at. One can look at this and conclude that the fair value of a bitcoin would be worth at least 285 times more than what an ounce of gold is worth. Currently that would put the fair value of one bitcoin well over $3,000,000 and that number should only increase overtime. Also remember that there are more millionaires that exist in the world today than there are bitcoin. If fiat currency ever fails, they will need a place to stash their cash for safekeeping. It would be more feasible in my opinion to put money into something liquid like Bitcoin that can easily be bought and sold rather than something illiquid like physical gold and silver. We haven’t even talked about another potential benefit and the main benefit that bitcoin was created for which is privacy and protection from government overreach. Most people don’t realize that when governments get desperate they can easily confiscate the savings and assets of it’s citizens. It has happened many times in the past in many different countries. It has also happened here in the U.S. In 1933 for instance, Franklin Roosevelt confiscated gold from U.S. citizens in order to increase the money supply and combat the effects of the great depression. Another recent example was the bail-ins in Greece. We’ve also witnessed the effects of out of control inflation in countries like Germany after WW2 and more recently Venezuela and Zimbabwe. Now, with interest rates approaching zero around the world (and even already negative in some countries) as well as the out of control national debts of countries around the world including the U.S., do you really want to trust the government to take care of your money? For these reasons as well as the other reasons I mentioned above, count me as a long term hodler and lets hope for the best.

God Bless.

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Disclaimer: This article contains the opinions of the author and in no way constitutes as investment advice. Please trade responsibly and at your own risk. The author, Medium, nor any other person or entity shall be held responsible for any losses or problems that you may incur as a result of the opinions presented in this article.

Note that the author does hold Bitcoin, Bitcoin Cash, Litecoin, Dash, Ripple, and some other cryptocurrency either mentioned or not mentioned in this article.