Here's why you should never fret investing in Bitcoin regardless of the price dips and the major reason to buy Bitcoin now.
If you’re investing in bitcoin or have thought about it, I’m about to make your life infinitely less stressful. In this video, I’ll show you how much bitcoin is worth, why it could fall further and the reason to buy Bitcoin now anyway. We’re talking bitcoin investing today on Let’s Talk Money!
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How Bitcoin is Making Millionaires for Years
Nation, bitcoin is making millionaires! A $10,000 investment in bitcoin five years ago would be worth over $600,000 and that same amount in Ethereum would have made $1.8 million. Even for more recent investors, the price of bitcoin has tripled over the last year and Ethereum is up 10-times your money!
Now I haven’t always been a bitcoin believer. I just couldn’t wrap my head around how to value something like this and I’m not going to recommend something that I can’t value. In fact, I did a series of videos in 2018 on bitcoin stock alternatives and why I wasn’t investing in crypto.
Later in 2018 I bought and sold bitcoin a couple of times, still not for a long-term investment but just to profit from the ups-and-downs. At the start of this year though, I finally found a way to value the cryptocurrencies, a way to find the long-term investment upside. I invested a little but that thirty-thousand and higher price tag had me worried. What if it crashes again? So I became a slave to watching the price, stressing out over when to buy in and if bitcoin was going to crash!
Why Buying Bitcoin Now is a Great Investing Move
But now, I’ve found a loophole that has me all-in on cryptocurrencies. Buying in right now. In fact, this is as close to a win-win scenario as you get with investing!
In this video, I’ll give you a complete bitcoin price analysis along with the catalysts that could send it higher. I’ll share how I’m investing in bitcoin for an extra return and how low the price could go near-term. Then I’ll reveal that secret loophole that actually makes it better if you lose money in the short-term!
I’ll show you that bitcoin price analysis next but first, I want to get your input on this. If you’re not investing in bitcoin or cryptocurrencies yet, what do you think would have to happen for you to invest? What would change your mind on crypto? Would it be a higher price, or lower? Maybe an investment guru like Warren Buffett coming out in favor of bitcoin? So scroll down and let me know in the comments, what are your reasons for or against investing in bitcoin?
For that bitcoin price analysis, I’m going to use two different methods with some research from ARK Invest as well as my own. And first, let’s look at the Bitcoin price chart and I’ve circled some of the biggest events that play into the Ark Invest price analysis we’ll look at later. This shows last year’s low around $4,000 and closing just below twenty-thousand at year end. And it’s these institutional allocations that mean the most for Bitcoin price, investments like Square allocating a percent of its assets or Microstrategy buying $500 million Bitcoin from corporate cash.
It’s that industry and billion-dollar validation of Bitcoin that is taking it to new highs, making it a legitimate investment and cash reserve.
In fact, ARK estimates that if companies in the S&P 500 allocated just 1% of their cash reserves to Bitcoin, something we’ve already seen from Square, Salesforce.com and Tesla, that alone would add another $40,000 to the price of Bitcoin. And a 10% allocation would take it $400,000 higher!
And that’s just corporate investment. Ark estimates that institutional investment from pension funds, sovereign wealth and private investors could add between $100,000 to half a million more to the price. Here we see just a 1% allocation from high net worth individuals, pension funds and other institutional investors adds $100,000 to the price.
So with the two estimates, just a 1% allocation in Bitcoin from corporations and institutional investors, the price goes to $190,000 and that’s on the lowest allocation estimate.
Now that’s probably a three to five-year estimate because I think it takes a few years for institutional investors and companies to really get comfortable with putting clients and cash reserves into Bitcoin but that alone is more than four-times your money, a 427% return and even if it takes five years…that’s a 39% annual return.
But that’s just one way to value Bitcoin and those of you in the Nation have seen me use Metcalfe’s Law in the past to find the price. Metcalfe’s is a mathematical theory that says the value of any network is related to the square of the number of connected users.
And the theory has been an amazing tool to value Bitcoin or really any platform that depends on a user network. This formula has been eerily accurate at predicting the value of social media stocks like Facebook, Twitter and Pinterest. Any company that has a network of users at the center of its business model, you can use this formula to value the investment.
Now Metcalfe’s formula for this is the number of users squared and we have estimates for Bitcoin unique addresses or users in the range of seven to nine hundred thousand for 2021. So you would take the square of each of those estimates to build a lower and an upper limit for the value of Bitcoin. That means between a market cap of $490 billion to $810 billion or a fair value between $27,000 to $42,000 per Bitcoin.
But think of this estimate, that $33,000 Bitcoin valuation, more of as a floor for the price. You see, that’s the current value of the network of users.
But, and this is something I realized recently while thinking about it and why I started investing long-term, that current value…that’s not how you find the fair value of investments, is it? The fair value of a stock is the present value of its future cash flows, or how much those cash flows will be worth over the next three or five or twenty years.
So if we’re just looking at the value of Bitcoin based on its current network of users, we’re ignoring the potential future value as more individuals, more institutionals and more corporations put their money in the cryptocurrency.
If we’re looking further out on that Bitcoin valuation, which is the way we should be valuing it as an investment, we have to estimate how many unique users it can put on over the next three to five years. Bitcoin has added about 300,000 users in the last year and four-hundred over the last two. So making a few estimates here, we can come to a price prediction over the next three years. On a conservative estimate of just 100,000 new users a year, or 1.1 million total users, we get to a $1.2 trillion market cap or just under $63,000 per Bitcoin. On the current rate of growth, we get to 1.35 million users for $94,000 per Bitcoin and on a little faster growth, the price of Bitcoin more than doubles to $117,000 over the next three years.
So if we’re using these two ways to value Bitcoin together, the institutional investments method used by Ark Invest and this network valuation with Metcalfe’s law, we get a value somewhere between $94,000 to $190,000 over the next few years and potentially higher depending on how quickly investors allocate funds to the crypto.
So you’ve got those major catalysts in institutional investors along with corporate cash investments, growing inflation and a weakening dollar. Bitcoin isn’t a perfect inflation hedge but it is an asset with a limited supply so it should hold up against a weaker dollar.
How I Invest in Cryptocurrency for Huge Returns
Now I want to quickly show you how I’m investing in crypto for an extra return before we see how low bitcoin could fall and that secret investing loophole that means you’ll make money whether bitcoin rises or falls!
I use two apps to invest in cryptocurrency, Coinbase and BlockFi and will show you how to get started on each. Coinbase just issued shares and is a $62 billion company with top-level security so you know it’s absolutely safe. BlockFi is one of the few platforms headquartered in the U.S. and regulated by U.S. authorities and its investors are a who’s who of fintech institutions.
Buying cryptocurrency on Coinbase is surprisingly easy and it’s a great site for learning about crypto with these tutorials. They’ve even got a program where you’ll earn free crypto while you learn about some of the tokens.
How to Get Started Investing in Crypto the Right Way
Creating an account is actually easier than opening a stock investing account. You put in your name and email here, pick a password and set up your security verification with your phone number.
And that’s a big part of keeping your account safe here is this two-step verification. With this, whenever you go to buy or sell cryptocurrency, you’ll get a text message to your phone to confirm your identity to keep your account safe from hackers.
That’s all there is to setting up your account, no social security number, no other disclosures you would need with an investment account. Then to fund your account and start buying crypto, you just go to your settings and Payment methods.
Here you can link your bank account, make a wire transfer or use your debit card but I highly recommend you use this first option. With your linked bank account, you won’t have the same amount restrictions as with the other methods and the fee is much lower. Using your credit or debit card, the fee comes out to 4% which is way higher than funding from your bank account which is about 1.5 percent.
Coinbase uses Plaid to link to your account which helps make it safer with their encryption and cheaper. You can find your bank here in the drop-down or just enter it in search and I’ve got to tell you, I about fell off my chair when I saw the app recognized my tiny little community bank in Iowa!
Next You put in how much crypto you want to buy and which one, so I’ll do $2,500 in bitcoin as an example here and check the order preview. Coinbase is super-thorough in making sure you see exactly what you’re doing from how much crypto you’re buying and double-checking. I’m also going to buy $2,500 in Ethereum here and you’ll see your account update immediately with those totals.
Now while I buy most of my crypto on Coinbase, I don’t hold it there. I use BlockFi to hold my bitcoin because there I earn interest on the tokens, up to 8.6% while I wait for the price to head higher!
How to Set Crypto Investments for Extra Profits
And here’s how to earn that extra return on your crypto investments. You set up an account which takes all of half a minute then click deposit. You select the cryptocurrency you want to deposit, and this next part is HUGELY important.
Because cryptocurrencies don’t have your name on them, it’s just an account address, you have to be very careful with how you move your crypto around. You need to make sure you’re depositing the right currency and using the right wallet address.
So we’re going to copy this wallet address for bitcoin on BlockFi and I recommend copying it onto a notepad so you can double-check it. Then you go back to Coinbase and click this Send or Receive button.
And what you can do, you can try a small amount at first to make sure you have the right address before you move more of your crypto to your BlockFi account. So I’ll just move $66 here to test and put in that bitcoin wallet address I copied. Again, this is where you want to double-check that number.
I can name the transaction and review it to make sure everything looks good, and again, Coinbase is super thorough in making sure you know what’s going on…and that’s it, you’ll see your Coinbase account balance change immediately and it will take about half an hour to see the BlockFi transaction go through. Now I’ve got that bitcoin stored on BlockFi where it’s earning interest up to 8.6% annualized every day it’s in the wallet.
Now while I’m putting most of my investment in bitcoin and Ethereum right now, the prices could fall from here. China is cracking down on miners can crypto buying, it says because of the energy usage but it’s really because the government wants to control the flow of money and crypto is making it easier for people to move their money outside the country.
Tesla recently stopped accepting bitcoin for payment, supposedly because of the amount of fossil fuels burned for the electricity in bitcoin mining although research shows crypto mining uses from 39% to as high as 74% of electricity needed from renewable sources already, way above the 25% average for renewable electricity generation.
Then there’s just the trend to higher interest rates and tighter monetary policy that could hit ‘hot’ investments like bitcoin and the tech stocks that have been under pressure this year.
The price of bitcoin is down 45% from its recent peak and could fall further but Nation, if the 81% crash in bitcoin after that 2017 peak didn’t kill the investment case for cryptocurrency then nothing will.
Is bitcoin volatile? Yes. Will it have you biting your fingernails and turn your hair gray. Probably Yes. But this is a legitimate asset that will go to those higher prices over time.
The Secret Reason to Buy Bitcoin Now
And it turns out, there’s a secret loop-hole strategy that means you might actually be better off if the price does crash in the short-term.
This is a strategy uncovered by CNBC first so I’ve got to give their reporters credit for finding it. Basically it comes from the difference in how the investment is defined and how the IRS taxes your crypto profits.
The IRS defines cryptocurrency as property, which means if you sell your bitcoin for less than you paid for it, so if the price crashes, then you can take that loss against gains you made on other investments to lower your taxes.
So let’s say you bought one bitcoin at $36,000 and it does keep falling to $20,000 by the end of the year. Now the stock market has been on fire the last few years and let’s say you’re sitting on shares of General Electric, up 114% over the last year, so let’s say you’re up $20,000 on your stock.
If you sold those shares, you’d be on the hook for $3,000 in taxes on the profit. That’s the long-term rate of 15% times that $20,000 profit on the stock. Three grand of YOUR money gone to taxes!
But if you sell your bitcoin and report that $16,000 loss, you lower your overall gain by that amount. Between the two investments, you’ve only made $4,000 and now only owe $600 in taxes on the profit…saving over two thousand dollars!
And the beauty of this is, you can turn around and buy that bitcoin back to make money on the rebound.
This doesn’t work with regular stocks because the SEC defines stocks as securities investments and says you can’t buy them within 30 days of selling if you take that tax write-off. It’s what’s called the Wash Sale rule and prevents investors from using the trick.
But because the government and the SEC is dragging its ass to define cryptocurrencies, you can use it with bitcoin or other crypto. The SEC doesn’t define bitcoin as a security…in fact, it doesn’t know how it wants to define it yet. That means there’s no Wash Sale rule. You can sell your crypto at a loss, use that loss to lower your taxes on other investments, and immediately buy your bitcoin back before it rises again.
Eventually the SEC is going to get around to defining bitcoin as a security or applying that rule so this is something you’ll probably only get to take advantage of right now but it’s a huge advantage. This means, you can buy into bitcoin. If the price increases to those targets, you’re sitting on double or triple your money. If the price falls over the short-term, you sell to book that loss and lower your taxes, buy it back and wait for the rebound. It’s a great way to lower your risk in bitcoin and still get that upside!