Bitcoin’s growth has just begun

January 10, 2018 02:44 PM

Bitcoin began in 2017 with a value below $1,000, by early December it surpassed $17,500. Ronnie Moas put out a buy recommendation in July when bitcoin was priced at $2,570, he recently raised his 2018 projection from $20,000 to $28,000. Here’s why. 

Mid-year, we projected bitcoin to hit $20,000 in 2018, but the growth in acceptance of digital currencies has pushed us to amend that to $28,000. This outlook is not an attempt to compete with people on the internet for who has the highest price target on bitcoin. When it was trading at $2,570 on July 3 my long-term target was $50,000. Bitcoin is now trading at $15,140. On a split-adjusted basis, if you held on to bitcoin cash, bitcoin gold and (10 times) bitcoin diamond, the spin-off coins, you are now sitting on more than $17,000 and a gain of more than 500%.

If you invested in July, you can sell 15% of your current holdings to cover your initial investment; the remaining 85% is now house money you are playing with. If bitcoin ever goes to zero you can’t tell me that you lost money. 

The end game here is bitcoin becoming the number one most valuable currency in the world, which would put the valuation at $6 trillion to $7 trillion dollars; 25 times where we are today.

Coincidentally, that is where both gold and the Chinese currency are valued today. In my view, gold should not be valued at 25 times what bitcoin is trading at ($255 billion). While the amount of unmined gold in the ground is unknown, we do know how much bitcoin there is, and how much is left to be mined. We are a couple of years away from a situation where hundreds of millions of people around the world are trying to get their hands on a few million bitcoin.

The supply is capped, something that cannot be said for U.S. dollars. That is why the U.S. dollar has dropped by 75% in the last 50 years and that is why bitcoin has jumped 500% in the last five months. We are in the early stages of this long game with only 1% penetration worldwide. That should grow to 2%-2.5% in 2018, 3.0%-4.0% by 2019 and is going to top 5% by 2020.  And that will be what drives bitcoin towards a multi-billion dollar valuation and a coin price between $300,000 and $400,000 by 2022. Bitcoin is already one of the top 20 currencies in the world out of more than 190 currencies. My target for next year is $28,000. 

Evaluation of bitcoin must be done on a real-time basis as it continues to get more attention, obstacles in bitcoin’s path drop like dominoes.

Most of you know what Facebook did to myspace.com, what the compact disc did to the vinyl and cassettes, what Uber has done to taxis and  what Amazon did to Barnes & Noble; there are many examples in history where someone got knocked off the top of the mountain, and there is no guarantee that bitcoin will remain at the top of the mountain. That is why you want to be diversified across at least one-dozen of the alternative currencies. There are more than 1,000 cryptocurrencies, and several have similar growth metrics to bitcoin. 

There currently is $200 trillion in the world tied up in stocks, cash, bonds, and gold. All four are overvalued. If 2% of that $200 trillion ends up in crypto, that’s $4 trillion going to a sector that today is valued at $400 billion. That $400 billion is up from $88 billion in July.

 Bitcoin’s share of that $4 trillion — assuming it maintains its 63% market share — would be $150,000. A bullish scenario would see us there within 12 to 18 months, while a more conservative scenario would have us getting there in 3-5 years. Bitcoin has already jumped by more than 2,000% in the last 12 months. 

Though this may sound extreme, this forecast tends to trend on the more conservative end of the bitcoin prognosis spectrum. It is based on thorough research of dozens of the most highly regarded financial news websites and current headlines that jump off the page.  Just consider a sampling of bitcoin-related headlines over a 48-hours period in early December (see “Bitcoin is all the rage,” below). 

We are not dealing with tulips here; if you are looking for a bubble, look at the 10-year price chart of the S&P 500 or a 30-year chart of the bond market.

There is no bubble here. Bitcoin remains 80% to 90% undervalued based on the current quote. It’s understandable if some people are uncomfortable chasing it here, but you can’t look at where it came up from, you have to look at where it is today, and try to figure out where it is going from here.

There are some doomsday scenarios out there that would cause bitcoin to collapse, but if we are getting a 10 to 1 or 20 to 1 payout from the current quote, it is worth taking that risk. You are risking a few months of your salary, and if the bitcoin bulls are right on this, you end up shaving five to 10 years off of your retirement age. That is a shot worth taking. In life, you miss every shot you do not take.

Everyone must decide what level of risk they are willing to accept. Do not ever take a bet that you can’t afford to lose.

There are some legitimate concerns regarding bitcoin. It is a currency, and historically currencies go to zero. As mentioned earlier, even the U.S. dollar has lost 75% of its value since 1967. There could be regulatory problems, tax-regulations, an exchange hack and/or competing currencies that rain on the bitcoin parade. There are some doomsday scenarios here, but with a market cap now topping $250 billion, it looks like the market is sending a very clear signal that whatever obstacles remain in its way, will be knocked down. 

 

About the Author

Ronnie Moas is the founder and director of research at Standpoint Research. TipRanks recently ranked Ronnie #1 in a ranking of 3,500 analysts evaluating more than 400 of his recommendations since 2008. Ronnie Ideas are generated by a 155-variable computer model after heavy fundamental and subjective overlays are applied. Ronnie is also the founder of philanthropyandphilosophy.com. Research free trial at StandpointResearch.com @RonnieMoas