Daily Ramble
My mind was left reeling today when I heard the news that the US just legitimized banks using Bitcoin or other public blockchains to move dollars. Ok, that may not make a lick of sense to anyone not up to their tentacles in the crypto industry, but it’s a big stinking deal.
Why? Because the nature of money itself is transforming. Instead of walking down to the ATM and putting dollars or euros into your pocket, you’ll be doing the same thing digitally very, very soon. But how is that different than the banking system today? Because you can’t digitally withdraw your dollars and store them for yourself. Today, you login into a bank account and transfer your funds to another person’s bank account. Tomorrow, you’ll own and maintain the dollars in a wallet on your smartphone outside of the bank with the freedom to send and receive whenever you’d like across blockchains like Bitcoin. The dollars are digitally YOURS, not in the custody of the bank. Do you want to send some dollars to a Nigerian prince at 4 AM on Christmas Eve? No problem — the blockchain never sleeps.
This is particularly poignant right now as Ana’s job in Costa Rica has been trying for the last three weeks to pay for her flight from a Canadian bank account to our European account. No success. In the world of tomorrow, the transfer would be completed within an hour and cost a few pennies instead of the: $25 wire fee + 2% currency conversion fee + the foreign currency spread. Hurry up and get here Mr. Tomorrow….
Favorite Thing on the Interwebs Today
Nuf said.
Bitcoin Price Prediction
Yesterday: $29.5k - $33k
Today: $32.8k - $37k
Tomorrow: $32k - $40k
Yesterday’s prediction of sideways with a side of sideways was pretty much accurate, but my range was too limited — we did break up as high as $34.6k before the close. At the moment, the price is threatening to push another leg higher as the price of Bitcoin has pumped as high as $36k today and is not consolidating around $34.5k. As long as we don’t see the price fall below $33k today, the odds are that we’re going to continue our push for another all-time high before too long. The demand from Bitcoin investors, even after a 20% pullback on Monday seems insatiable. If the break up doesn’t happen today, odds are it will push tomorrow with an outside chance we see price drift as low as $32k before pushing.
Bitcoin Ed Bite
Collateral. That’s the word that everyone is going to understand by the end of this Bitcoin cycle. Collateral is what backs up a loan. By holding collateral, a loan provider has the assurance that the loan will be paid back. Why? Because whoever took out the loan, wants their collateral back.
What does that have to do with Bitcoin? It’s the perfect collateral and that has tremendous value. Before explaining, let’s think about a mortgage. When a lender provides money for a mortgage, the home is used as collateral. If the borrower fails to pay the mortgage, eventually, the lender takes possession of a home. Seems all well and good on paper, but how exactly does one take possession of a home, and how does one sell it to pay back the defaulted mortgage? Not trivial.
Bitcoin, on the other hand, is fully digital and liquid. If I take a loan out against my Bitcoin, I send the loan provider my Bitcoin, they provide me cash, and as long as I make good on my payments, I get my Bitcoin back at the end. If I don’t, the lender can liquidate the Bitcoin on the market instantly paying off the loan. Since the lender has possession of the Bitcoin, and it’s a liquid market to buy and sell, all the issues that come with a defaulted mortgage are thrown out the window. Even credit checks become unnecessary because the lender has possession of the bitcoin the entire time.
The result: lower interest rates, no credit checks needed, and instant credit. All the problems with traditional lending, thrown out the window. Bitcoin is going to make things go boom.
Thanks for reading,
Kent
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I think we need to get you an updated profile pic. Just sayin'.... ❤ Mom