Bitcoin Is Here To Stay, But Short Term Caution Is Warranted

No doubt the recent hysteria has been fueled by chatter over the Thanksgiving dinner table in America.The news that 100,000 new Coinbase accounts were created over the weekend drove further buying in the greatest bull run of all time. Coinbase now has more accounts than Charles Schwab further excited the bulls that the rally will continue. Bitcoin Monthly ChartThe truly amazing part for me about Bitcoin’s run is that it has been entirely driven without institutional buying. Big hedge funds, pensions, endowments and mutual funds have remained on the sidelines due to hacking concerns and worries that billions of dollars worth of Bitcoin can vanish. According to an article on Fortune:According to new research from Chainalysis, a digital forensics firm that studies the bitcoin blockchain, 3.79 million bitcoins are already gone for good based on a high estimate—and 2.78 million based on a low one. Those numbers imply 17% to 23% of existing bitcoins, which are today worth around $8,500 each, are lost.Stories like this have kept the big players out. This means that Bitcoin’s rise has been fueled strictly by retail investors. The little guy has become the hard core believer in Bitcoin after years of being screwed over by Wall Street, Washington, the Fed, and governments worldwide.So what does all of this mean?Well, for everyone like Jamie Dimon that has come out and said that Bitcoin is a bubble, billions of dollars have been left on the table. The fact is that institutions and banks have seen their cash cows weaken. The businesses of traditional lending, securities trading, market making are not as profitable as it used to be. Does anyone really think Jamie Dimon is not thinking how to take Coinbase’s business? Or Goldman Sachs is going to let Bittrex become the dominant exchange for all things crypto?Why is Bitcoin the answer?For the first time in history, there is truly one asset that investors worldwide want to own. Chinese investors never wanted to own US cannabis stocks. European investors never wanted to buy gold on the Comex. Bitcoin is the one asset that the entire planet is now searching for on Google/Yandex/Baidu/Bing.What’s next in the short term?I have no idea where this current move will stop. $10,000? $11,000? $12,000? Bitcoin is moving so fast that you can’t speculate, but here’s what will happen.When the selloff comes, it will be violent. Bitcoin investors should not kid themselves that Bitcoin futures on the CME will push up the price further. There are a lot of smart guys like Jamie Dimon that are dying to short Bitcoin. They missed the run and have to get some satisfaction that they were partially right.Once prices drop, the banks will figure out how to structure institutional products on Bitcoin. I expect a Bitcoin ETF to get approval sometime in the first quarter of next year. The folks at iShares want their piece of the pie as well. This is why Fundstrat’s Tom Lee, one of Wall Street’s top analysts sees $55,000 by 2022 as bitcoin’s the new gold. That’s why Bitcoin investors should always be ready to BTFD - “buy the f'n dip”!!Image courtesy of Jason Benjamin via Flickr