The California Gold Rush started off quite innocently. In January of 1848, James W. Marshall struck gold while in Coloma, California. This exciting news brought thousands out West in hopes that they too could strike it rich. While many 49ers did not make money, gold worth billions of today’s US dollars was mined by those who were able to get in at the right time.
I believe we are now entering a twenty-first century gold rush with bitcoin as modern day gold. While computers have replaced pick axes, there are some similarities between the two "gold rushes." Like the gold in California, there is a limited supply of bitcoin. There will never be more than 21 million bitcoin, with over 89% already issued. Supply and demand always drives human behavior. Scarcity is power as we always crave what is in demand or that which we cannot have. The Fed has continually increased the supply of US dollars in circulation through all its’ stimulus. Once people begin to fully understand that there is a limited supply of bitcoin, and that there will never be more in circulation, the demand and price will begin to increase drastically.
With all the FED stimulus that has taken place over the past few years, inflation has become a major concern. In the 1970s, the price of gold rose drastically as investors looked for a place to store their money against the shrinking value of the dollar. In our twenty-first century world, I believe bitcoin will continue to rally like gold did in the 1970s. Bitcoin is easier to own and has also seen such large price increases over the last few years that more and more people are going to be drawn toward the fantastic returns. I believe we are entering a perfect storm for bitcoin. On the one hand we have a FED monetary policy of increasing the monetary supply, combined with the new technology of blockchain. This combination is leading to bullish conditions for those who own bitcoin.
So how did it work out for most speculators of the 1840s, the sold called "forty-niners?" Not so good. See, many were late to the party. They didn't know a thing about mining gold. By the time they made it out West, they were too late. Don't let this be you. Learn to read a chart and use technical analysis so you can profit from trends and manage your position correctly.
Bitcoin has been my best performing position this year, and I've blogged about it multiple times over the last few months. While I believe Bitcoin is headed for much higher prices in the long-term, it is prone to sharp pullbacks. It takes skill to handle various market conditions.
Risk right. Sit tight.
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