I’m Not Giving Up on Bitcoin… Neither Should You

It looked like the 2008 crisis all over again…

In March, three U.S. banks collapsed in the span of a week. Then, one of Switzerland’s great banks, Credit Suisse, abruptly failed, too.

Stock prices plummeted around the world, as government leaders and financial regulators gathered in emergency meetings to determine where the next banking domino might fall. But amid all this turmoil, one much-maligned asset was skyrocketing… rising more than 45% in just two weeks, outpacing every major stock or commodity.

It wasn’t gold, as many people might expect during a financial crisis (gold rose a bit less than 10%).

That asset was bitcoin.

On its face, this might seem surprising. Why would investment capital pour into a risky asset like crypto during a financial crisis?

Look beneath the surface and it makes perfect sense. The reason money poured into bitcoin is the same reason I’ve remained unwaveringly bullish on the world’s leading cryptocurrency, even after its price collapsed last year.

And it’s why I still advise that everyone own some exposure to bitcoin in their investment portfolio today.

That reason: Bitcoin is the antidote to our debt-addled world.

The Case for Bitcoin

Bitcoin was launched in 2009 at the tail end of the global financial crisis. It was designed as a new type of money… a digital currency controlled by no one.

Fiat currencies like the dollar and euro are administered by governments and central banks, which alter interest rates or use the printing press to manipulate their value.

Bitcoin is “decentralized,” meaning the system that governs the currency (known as a blockchain) is spread out across a vast, global network of computers. As such, no president, central bank, or hedge fund can manipulate the token’s price to goose the economy or pay for a government’s excessive spending.

Similarly, bitcoin’s supply cannot be altered. Only 21 million bitcoins will ever exist, and just under 19 million have been created so far. (The last one arrives somewhere near 2041.)

These characteristics make bitcoin a new, modern way to diversify wealth outside fiat currencies like the dollar.

Gold has played this role for generations. Now it has bitcoin for company, which explains why bitcoin is often referred to as “digital gold”… and why investors started snapping up this cryptocurrency as the banking crisis emerged.

Canaries in the Coalmine

The collapse of banks in the U.S. and Europe is an early warning sign about the fragility of our global financial system.

These failed banks held a large portion of their assets in U.S. Treasury debt—just as they are supposed to do, since Treasury bonds are apparently the safest investment in the world.

Despite this, problems emerged when the Federal Reserve started raising interest rates at a historically fast pace.

In little over a year, the Fed has pushed rates from 0.25% to around 5% in an effort to tame inflation. That’s a 1,900% increase… the largest jump in percentage terms over such a short span in the history of America.

This created a problem for banks.

Last year, 10-year Treasury notes paid less than 2% in interest to their owners. Now they pay north of 4%. So, bond investors have been selling old bonds to buy new ones, meaning the market value of the old bonds has plummeted.

Because of that, banks had to sell their supposedly safe investments at a loss to meet cash withdrawal demands from their customers. In March, this led to two of the three biggest banking failures in U.S. history—Silicon Valley Bank and Signature Bank—and media reports suggest nearly 200 other banks could be at risk of this type of collapse.

On the government side of the equation, higher and higher interest rates are pushing up Uncle Sam’s costs for servicing his monumental mountain of debt.

The U.S. today holds history’s largest collection of public debt, totaling more than $31.5 trillion. Plus, it has another $182 trillion in unfunded liabilities… money that must be paid in the future toward programs like Social Security and Medicare.

That represents a gargantuan risk to the American financial system.

A key problem—and one that bolsters the case for bitcoin over the medium to long term—is that the government has only three ways of managing this extreme debt. It can:

1. Allow high inflation to erode the value of the debt, making it easier to repay in tomorrow’s devalued dollars.

2. Radically devalue the dollar in order to repay the debt with cheaper dollars.

3. Turn on the printing presses and manifest trillions of dollars out of thin air electronically to repay the debt, leading to even greater inflation and potentially hyperinflation.

The most likely option is #1. Though whatever path Uncle Sam ultimately chooses, the end result is that the dollars in your bank account today will continue to erode.

How much less might your dollars be worth? My bet: Inflation will average around 6% per year for the rest of this decade.

That means every $100 in your bank account today will be worth just under $67 by 2030. In that inflationary crisis, the dollar won’t be the safe-haven asset it typically is… because the dollar will be at the center of the storm.

So, investors will turn to other assets to preserve their wealth. Assets that cannot be devalued or manipulated by government… that are not affected by banking collapses… and that offer some measure of security and wealth protection.

Bitcoin will be a big winner in this world. Which means bitcoin’s price will move far higher as the remainder of the decade unfolds.

The Future Price of Bitcoin

I understand if the idea that bitcoin “offers security” seems laughable after the crypto turmoil of the past 12 to 18 months. And yes, without question, bitcoin endured a horrid 2022.

After reaching a record high near $69,000 per token in November 2021, the price collapsed all the way down to the $16,000 range by the end of last year.

That’s a huge amount of short-term volatility, to be sure, but it’s important to view these price movements in terms of bitcoin’s longer-term trajectory. And to understand this, we need to follow the rainbow (see the chart below).

The Bitcoin Rainbow Chart shows bitcoin’s price since it started trading. And it tells us two things…

First, bitcoin is trending toward a price north of $100,000 per token within the next two years.

Second, it indicates this is a good time to buy bitcoin… even after its recent rally higher.

The colors on the rainbow indicate whether you should buy, sell, or hold. If the price is at or near the top of the rainbow, toward the red and orange lines, that indicates bitcoin is nearing a short-term peak and it’s a good moment to “sell.”

If it’s at the bottom, toward the blue and green lines, that indicates a good “buy” price.

So, even after its big, post-bank-failure pop, bitcoin remains in the “accumulate” phase. Meaning that here, near the tail end of what has been a painful 18-month crypto bear market, a great deal of wealth potentially awaits those who buy bitcoin today.

Longer term, bitcoin is likely to move well into the six-figures, probably north of $250,000 by the end of the decade, because demand for the asset will continually increase during an inflationary crisis, and there’s a very limited supply of the coins for investors to buy.

Indeed, depending on the severity of the dollar crisis that arises, bitcoin could even see $1 million per coin… a price tag mentioned by a host of financial pros, including Cathie Wood, CEO of investment management firm Ark Invest and a widely respected investor looking to profit from long-tailed technology disruptions.

Without a doubt, “charting” is more “abstract art” than science, but I find it valuable. And this particular rainbow chart has been remarkably prescient in forecasting buy, sell, and hold opportunities with bitcoin.

Port in a Storm

The failure of one of Switzerland’s major banks, the failure of three U.S. banks, and the potential failure of nearly 200 more suggests America and the Western world are nearing another financial crisis.

That’s why I own bitcoin. And why I counsel all my friends to consider owning some bitcoin, too. To me, the granddaddy of crypto is lifestyle insurance, so I want permanent exposure to it in my portfolio. In a crisis that sees the dollar come under intense pressure, I’m betting demand for bitcoin as a “safe haven” asset will drive the price markedly higher, allowing me to sell some here and there to preserve my lifestyle.

To be clear, you don’t have to own a ton of it to protect your wealth in a crisis. In fact, I’d advise that bitcoin should comprise no more than 2% to 5% of your total investment portfolio… depending on your level of risk tolerance.

As I write this, bitcoin trades at about $27,700 per coin. At that price, a $5,000 investment grows to more than $45,000 if bitcoin races to $250,000… and at $1 million, your investment is worth more than $180,000. These gains can help ensure you don’t lose ground as inflation attacks your dollar wealth over the next decade.

This is why I never lost faith in bitcoin during the bear market.

We in the West—particularly in the U.S.—are barreling toward a financial storm. Bitcoin was specifically designed for this moment. And its reaction to the recent banking collapses tells me that this is the port I want to be in when the storm arrives.