One bitcoin is worth nearly $400 today. Think that sounds like a lot for a currency you can't physically touch and that has been around for only a few years? Well, it could go much, much higher, according to one observer.
To be able to make an assessment whether to invest in bitcoin or not, you need to understand where it comes from and what might make it valuable. This, however, is not an easy task for someone who is not well versed in cryptography and monetary policy. To get a better understanding, we sat down with a prolific writer within the bitcoin space, Datavetaren, to learn more about his viewpoints on bitcoin, blockchain and what the future might hold.
Datavetaren, as he is best known as through his blog and active twitter account is probably best described by some of his own tweets.
Datavetaren, as he is best known as through his blog and active twitter account is probably best described by some of his own tweets.
TheStreet: Why are you interested in bitcoin and blockchain technology?
Datavetaren: When I first heard about bitcoin in 2011, I thought that this cannot possibly work. It should not be possible to get it secure enough and make it "unhackable." Then I heard about it again in early 2012 and thought "Why is it still here?" At this point I got curious and actually read the technical white paper written by Satoshi and looked at the bitcoin core source code. Now I was completely knocked to the ground; this was an invention comparable to the Internet, electricity or the steam engine of its time. I started asking myself questions such as "Where does money comes from?" and "Why is bitcoin different?" To reuse Steve Jobs' expression: Bitcoin is reinventing money.
TheStreet: What is your view on the regulatory landscape of these technologies?
Datavetaren: Bitcoin as technology cannot be regulated (it is designed that way.) What remains is the interaction between bitcoin and the current economy. That can be regulated and already is when it comes to bitcoin exchanges. My opinion is that that bitcoin should be treated as a foreign currency like ECJ [European Court of Justice] recently declared. Merchants, in a free market economy, should be allowed to accept the currency, like any other foreign currency. It is wrong to try to regulate bitcoin as something special. The standard rules we have for foreign currencies should apply to bitcoin as well. Nothing less, nothing more.
TheStreet: What are your thoughts on bitcoin as an investment for private investors?
Datavetaren: If you are patient enough, the leverage of bitcoin is huge. We are talking about $1,000,000 (possibly more) per coin in the long run (current price is around $400 at the time of writing.) It will replace gold (which is a trillion dollar market) as a safe haven. Gold gained this status because it cannot be forged and it is scarce, durable, and fungible. Bitcoin has all those properties as well, and, in addition, it comes with an international payment/settlement network. There's no need for "bitcoin certificates" as you can directly verify your ownership by checking the bitcoin blockchain. It is extremely important though that purchased coins on an exchange are cashed out. If you do not have special equipment for this, then, at least, use bitaddress.org to create your own paper notes.
TheStreet: What are your thoughts on bitcoin as an investment for institutional investors?
Datavetaren: Institutional investors are heavily regulated on what kind of assets they are allowed to invest in. Bitcoin is currently too mysterious for institutional investors to pay attention to. Currently, some institutions are investing in bitcoin derivatives such as ETNs (exchange traded notes) but it is somewhat odd that it is based on trusting a third-party which goes against the bitcoin spirit. However, as more central banks are applying negative interest rates on the private banks' deposit accounts, it may become an escape route. Recently, a Swiss pension fund manager tried to withdraw the fund in cash to avoid the negative interest rate. Although denied, and possibly illegally so, it would be much easier in future to store the wealth electronically in the bitcoin blockchain ledger instead of piling up a stash of paper notes in a vault.
Datavetaren: When I first heard about bitcoin in 2011, I thought that this cannot possibly work. It should not be possible to get it secure enough and make it "unhackable." Then I heard about it again in early 2012 and thought "Why is it still here?" At this point I got curious and actually read the technical white paper written by Satoshi and looked at the bitcoin core source code. Now I was completely knocked to the ground; this was an invention comparable to the Internet, electricity or the steam engine of its time. I started asking myself questions such as "Where does money comes from?" and "Why is bitcoin different?" To reuse Steve Jobs' expression: Bitcoin is reinventing money.
TheStreet: What is your view on the regulatory landscape of these technologies?
Datavetaren: Bitcoin as technology cannot be regulated (it is designed that way.) What remains is the interaction between bitcoin and the current economy. That can be regulated and already is when it comes to bitcoin exchanges. My opinion is that that bitcoin should be treated as a foreign currency like ECJ [European Court of Justice] recently declared. Merchants, in a free market economy, should be allowed to accept the currency, like any other foreign currency. It is wrong to try to regulate bitcoin as something special. The standard rules we have for foreign currencies should apply to bitcoin as well. Nothing less, nothing more.
TheStreet: What are your thoughts on bitcoin as an investment for private investors?
Datavetaren: If you are patient enough, the leverage of bitcoin is huge. We are talking about $1,000,000 (possibly more) per coin in the long run (current price is around $400 at the time of writing.) It will replace gold (which is a trillion dollar market) as a safe haven. Gold gained this status because it cannot be forged and it is scarce, durable, and fungible. Bitcoin has all those properties as well, and, in addition, it comes with an international payment/settlement network. There's no need for "bitcoin certificates" as you can directly verify your ownership by checking the bitcoin blockchain. It is extremely important though that purchased coins on an exchange are cashed out. If you do not have special equipment for this, then, at least, use bitaddress.org to create your own paper notes.
TheStreet: What are your thoughts on bitcoin as an investment for institutional investors?
Datavetaren: Institutional investors are heavily regulated on what kind of assets they are allowed to invest in. Bitcoin is currently too mysterious for institutional investors to pay attention to. Currently, some institutions are investing in bitcoin derivatives such as ETNs (exchange traded notes) but it is somewhat odd that it is based on trusting a third-party which goes against the bitcoin spirit. However, as more central banks are applying negative interest rates on the private banks' deposit accounts, it may become an escape route. Recently, a Swiss pension fund manager tried to withdraw the fund in cash to avoid the negative interest rate. Although denied, and possibly illegally so, it would be much easier in future to store the wealth electronically in the bitcoin blockchain ledger instead of piling up a stash of paper notes in a vault.
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