Retiring Soon: Is Bitcoin for Me?

I was recently asked by a bitcoin novice who is retiring in 3-5 years if he should invest in Bitcoin and I had to pause. In the long-term I am bitcoin bullish. The features it offers are unlike any other asset (with the obvious exception of other cryptocurrencies). I am also so bullish that I don't feel the need to pour all of my assets into it because I believe even a small investment will grow in a parabolic manner. However, not planning on a short-term retirement window I had not given this much thought.

My response to my friend (and this is no way investment advice for you) was that I view it as a 70% bullish move in the short term time frame. I based this on the bitcoin use cases which I perceive. The first, most obvious, use case is that of an asset little different than the precious metals ETFs. Westerners want to hold BTC in their portfolio on the chance it will continue its meteoric rise. This is a risky proposition. The hockey stick rise we currently see in the bitcoin price maintains the look of a bubble similar to the bubble of late 2013. Speculators have entered the market looking for an opportunity to see quick gains then exit the market just as quickly. Although I believe the massive increases in the Japanese markets of late is less speculative, we cannot discount the speculators role in creating a bubble. This is the major contributing factor in my hesitation from calling bitcoin a solid buy option to my friend.

As I have indicated however, bitcoin is more than a static asset to be invested in. The second use case I mentioned was that of a currency. It is used at a growing pace in places such as Venezuela and Japan as a currency. Even I allocate a small portion of my monthly income to a Coinbase account simply to use a Shift Visa card which allows me to keep some of my fiat in bitcoin on an ongoing basis. Why do people do this, because the fiat currencies of the world are constantly being devalued through inflation by the central banks. In this use case, bitcoin is a buy in both the short and long-term. This, of course, will reverse if the central bank turn to sound money. Sorry, that was a little joke.

The third use case I mentioned to my friend was that over cross-border transaction facilitator. I told him that seemed to be an easy enough calculation. Let's assume the $9 billion market cap of Western Union will be cut in half in the coming five years. $4.5 billion into the $28 billion dollar bitcoin market cap minus a small percent which will go to the Ripple cryptocurrency reflects a not trivial increase in the short term bitcoin price and market share.

Finally, what if bitcoin is only good for black market, nefarious activities? Obviously given the ransomware situations this is a major use case. If this becomes the major use case for bitcoin long-term, opportunity still exists. We can anecdotally recognize most questionable transactions occur using paper currencies. As the public becomes more aware of the ways to utilize cryptocurrency, criminals will use it more. Dash may offer more anonymity however most criminals are savvy and want the less volatile bitcoin. They are business people at their core.

This was the case I laid out for my friend. I am currently assisting him in investing a 2-4% stake of his holdings into bitcoin which was his decision but I endorsed. Feel free to comment on how you view bitcoin in the short-term below.