Editor’s Note: Earlier this month, Palm Beach Letter editor Teeka Tiwari told you how cryptocurrencies like bitcoin are your best defense in the War on Cash. That essay was so popular that our own Chris Lowe caught up with Teeka to find out why Diary readers need to care about cryptocurrencies.
Chris Lowe (CL): Bitcoin has been going up steadily for the last three years. What is driving bitcoin higher?
Teeka Tiwari (TT): It’s that people are waking up to the idea that they can have control over the value of the currency they use. Right now, there’s a global currency war. Countries are debasing the buying power of their currencies to try to steal growth from one another.
On top of that, you have the War on Cash, which I know you’ve reported on extensively. It’s getting harder and harder to have private ownership of your money. Central banks do not respect private ownership of your cash. There is an increasing number of bans, like the one you saw in India last November. [Catch up here.]
Meanwhile, central banks are using tools such as negative interest rates to punish savers in the hope that they’ll rush out and spend their cash to avoid being penalized with a negative rate for saving it.
There’s a backlash to all that. People are saying, “Hey, this is my money. I want to be able to hold it anonymously. I want to be able to keep it a secret from the government. I want to be in complete control of my own capital.” Bitcoin gives you that control. Unlike any other asset or currency, bitcoin does that.
CL: We’ve written about cryptocurrencies a lot in Inner Circle. And the pushback we get in the mailbag is usually from folks who are worried that governments are not going to stand by and allow people to have that kind of control.[Inner Circle is a weekly service that provides subscribers with concise analysis, strategic thinking, and investment research from around the Bonner & Partners network. Learn more here.]
Recently, we’ve seen China and Venezuela crack down on cryptocurrency exchanges. And Hawaii has stopped Coinbase, one of the main cryptocurrency exchanges, from operating in the state.
What do you say to people who say, “Look, this isn’t going to last. Governments are going to get wise to this. They’re going to crack down on bitcoin and other cryptocurrencies. And they’re going to lose a lot of value as a result”?
TT: Look, it’s still early days for cryptocurrencies. Bitcoin, the first cryptocurrency, went live in 2009. We’ll certainly have those fears coming to the market. And we’ll certainly have big price swings when a government official says something and, all of a sudden, people freak out.
But let’s talk about China… This year, the Chinese government started imposing all these different controls on bitcoin exchanges. They said, “You can’t pull your funds out. You have to start paying commissions. You have to start paying all these taxes.”
And initially, we did see a gigantic drop in the price of bitcoin as a result. It went from about $1,100 down to about $700. But guess what happened? We saw this almost immediate rally back up to new highs.
What this is saying is that people have had enough of governments telling them what to do. The beauty of bitcoin is that, unless you shut down the entire internet, you can’t kill bitcoin or any other distributed cryptocurrency. They’re impossible to kill because, by definition, the underlying records of the transactions – what’s known as the “blockchain” – are copied all over the internet.
That makes it incredibly difficult to regulate. Governments can try, but they’ll always fail. And of course, that terrifies regulators. Their inability to control these networks scares the heck out of them.
CL: So what’s going to happen now?
TT: At some point, they’ll just say, “Look, we can’t stop people from owning bitcoin. We can’t stop people from owning other cryptocurrencies, either. Let’s put in a regulatory framework that we can work with.”
Britain, Switzerland, and Australia, for instance, are taking more of that type of approach when it comes to dealing with cryptocurrencies.
CL: You’ve been jetting around the world to report on the rise of cryptocurrencies. You were in London last week at the Blockchain Expo event. Now you’re in Austin, Texas, at SXSW Interactive, another big cryptocurrency event. What’s the buzz around bitcoin and cryptocurrencies at these events? What should Diary readers have on their radars?
TT: People are, of course, very receptive to bitcoin. They’re very excited about cryptocurrencies. I’ve been focusing on companies that are using blockchains – the distrusted online ledgers at the heart of all cryptocurrency networks – to solve massive problems.
You see, there’s this new type of cryptocurrency. Actually, it’s not really a currency at all… it’s a “crypto-token.” It uses the same underlying technology as bitcoin. But instead of functioning as a currency, it’s more like a proxy for equity in a company.
This is the next exciting step in the evolution of cryptocurrencies and blockchain technology. These crypto-tokens were the big buzz in Austin. And they were the big buzz in London, too. I’ve been recommending some of these crypto-tokens to my Palm Beach Confidential subscribers, and they’ve been doing incredibly well. I think we’re going to continue to see more and more of that.
CL: Can you give us some examples of the types of problems these new companies are helping to solve?
TT: For instance, tampering with bank records. We recently had the problem with Wells Fargo going back and changing mortgage records. Then we had something called “robo-signing.” Banks were basically forging affidavits and forcing people out of homes they had already paid for. This happened because there’s no easy way of creating a tamper-proof audit trail in these big banks.
But I visited somebody down here in Austin yesterday who has created a solution. Using blockchain technology, you can create an immutable chain of records that will immediately tell when something’s been tampered with. Within minutes of somebody tampering with a file, a compliance guy will get an alert saying, “Hey, someone’s just changed something when they shouldn’t have.”
Now, to give you an idea of how big this compliance market is, trade magazine Compliance Week estimates that about $1.3 trillion a year is spent on securing documents.
This is a huge, huge market. And it’s ripe for disruption… and ripe for the blockchain.
The really amazing thing is that this new company is stepping into this huge market by totally bypassing the stock market. It’s going out and solving this huge global problem. And it’s issuing crypto-tokens instead of stocks or bonds to fund itself.
CL: So instead of a business owner floating his company on the stock market, as we’re used to, he just issues crypto-tokens. How do our members participate? Where should people be reading more about this?
TT: CoinDesk.com is a great resource to read about different projects that are coming out.
CL: Where do these crypto-tokens trade?
These are non-traditional exchanges. They’re not like the New York Stock Exchange. These are the new stock markets, if you will, that are springing up to fill the void for this new form of share issuance that I call a crypto-token.
CL: Final question: What’s the simplest way for Diary readers to participate in the cryptocurrency boom?
TT: Buy bitcoin.
Today, more than 100,000 merchants accept bitcoin as payment, including Overstock.com, Cisco, Walmart, Starbucks, and Microsoft.
Think of bitcoin as the reserve currency of all cryptocurrencies. Just as the values of other fiat currencies are measured against the reserve currency of the dollar, the values of other cryptocurrencies are measured against bitcoin.
Also, you can’t just swap your dollars, euro, or yen directly to buy other cryptocurrencies. Often, you need to first swap your dollars for bitcoins… and then exchange your bitcoins for other cryptocurrencies.
Bitcoin’s “reserve” status means it deserves a home in your portfolio.
Editor’s Note: Early investors in bitcoin saw incredible gains in the span of a few months. In 2013 alone, bitcoin shot up 8,536%.
We mention this because Teeka just revealed a new cryptocurrency that he believes could be “the next bitcoin.”
Already, this cryptocurrency has shot up 1,000% in 2017 and been tested by 11 different banks as well as IBM and Microsoft. Teeka believes this new cryptocurrency could soon see bitcoin-like gains in the coming months.
To learn the name of this new currency, and to see how you can get in on the ground floor, click right here.