Dear Mom and Dad, it’s time we talked about Bitcoin.
We know you aren’t going to like hearing this, but as Bob Dylan once said, “The times, they are a-changing.” We are writing because we want to fill you in on a major change happening around the globe. The change strikes at the heart of global finance and could introduce unwanted volatility into your retirement plans.
This change is coming in the form of Bitcoin, the world’s first “non-sovereign” globally-traded currency.
Bitcoin’s dramatic growth should be viewed as a yardstick by which to measure the dysfunction of the current global financial system. As governments around the world have abandoned old fiscal disciplines and have allowed their money-printing policies to run amok, investors have flocked to Bitcoin.
Among our many blessings in the United States, we enjoy a stable currency that is happily accepted around the world. This makes us uniquely blind to seeing the revolution ushered in by Bitcoin. Already, hundreds of millions of people around the world have started experimenting with digital currency powered by “blockchain technology.”
Simply put, blockchain technology is a method for combining computer networks and statistical mathematics to create ultra-secure “trustless” public ledgers. The process empowers digital currencies like Bitcoin by solving a multi-century old problem that has plagued paper currencies since their invention in China in 1262 A.D., specifically the “double-spend and double-print problem”. This means that users of a crypto-currency no longer need to rely upon a “trusted third party” to ensure the validity and immutability of transactions.
We believe that this could potentially be very disruptive to the current global financial landscape, considering our current banking system at its core is just a large grouping of potentially obsolete “trusted third parties”. These banks, such as JP Morgan, the Bank of England, Bank of America and others have the role of verifying that funds are where people say they are and that the people moving the funds are authorized to do so. With cryptocurrencies, these verification processes, fees and delays become unnecessary. Transactions are faster, cheaper and irreversible.
In less than a decade, cryptocurrencies have evolved from a fringe fintech “white-paper” to something even the Federal Reserve is labeling as a “new asset class”.
Cryptocurrencies are catching on in different places for different reasons. While technologically-advanced Japan was the first major country to officially recognize Bitcoin as legal tender, it was the cash-starved government of Venezuela that gained global headlines with the announcement that it would accept Bitcoin and Litecoin (another cryptocurrency) for tax payments.
It’s not just emerging economies flocking to Bitcoin. Germany’s second largest stock exchange, along with Japan’s largest bank, Mitsubishi Bank and Swiss banking giant Julius Baer have announced plans to offer cryptocurrency exchange and custody services.
Over the past three years, governments around the world have slowly come to see the benefits (and perils) of decentralized money. Money that can move around the world with the same ease as data has far reaching implications. Many technologists see cryptocurrencies as the completion piece the internet was waiting for to unlock its true potential.
Before the advent of cryptocurrency, you could video-chat with someone in a remote corner of the world, but you couldn’t send that same person a dollar, or even a penny – at least not efficiently. Before Bitcoin, the only option for sending money to far flung locales like Bhutan or Bahrain was the international Fed-Wire system, a process which takes several days and incurs around $50 dollars. This is certainly problematic for a $1 transaction and doubly problematic if either party happens to be a part of the world’s 1.8 billion people without access to Western banking. Cryptocurrencies, led by Bitcoin, are changing that.
Closer to home, it seems Wall Street is waking up to the opportunity, which is a reason we are bringing this to your attention now. It seems we may have finally reached a tipping point on cryptocurrency investing. During 2018 industry leaders Goldman Sachs, Nasdaq, Fidelity, Bank of America, JP Morgan, Morgan Stanley and the NYSE either formed strategic alliances with established cryptocurrency firms or committed substantial resources of their own to the continued assimilation of digital assets into traditional wealth management. Other industry leading companies like Facebook, Starbucks, Square, AT&T, Overstock.com, Mastercard, Money Gram, Nike, Coinstar, Tesla, Uber, Samsung have joined the movement, all either launching digital currencies or positioning their firms to take advantage of the sector’s growth.
Where Bitcoin and other digital assets go from here is the big unknown. In this new paradigm, some companies will adapt and thrive while others will face obsolescence. We believe that we are still in the early innings of the cryptocurrency and blockchain technology revolution and that more upside remains – especially for nimble investors that can build positions ahead of the anticipated deluge of institutional money that is expected to be allocated to the space in the coming years.
So Mom and Dad, don’t dismiss this digital currency and blockchain revolution. Take some time, do your research and ask questions. Because like Dylan said, “…keep your eyes wide, the chance won’t come again…”
Peace, Love and Respect,
Your Kids Working at www.SarsonFunds.com
Please visit www.sarsonfunds.com to learn more about how we invest in transparency so that our clients can invest in the future.