Posted on 12/03/2020 11:13:01 AM PST by Red Badger
Didi Taihuttu and Family
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Didi Taihuttu, his wife, and three kids bet all they have on bitcoin.
In 2017, CNBC spoke to the Dutch family of five when they were in the process of liquidating their assets — from a profitable business and 2,500-square-foot house, to their shoes — and trading it all in for the popular cryptocurrency and a life on the road.
Nearly four years and 40 countries later, Taihuttu and his family still don’t have bank accounts, a house, or all that much by way of personal possessions. All of the family’s savings remain tied up in highly volatile cryptocurrencies.
“We stepped into bitcoin, because we wanted to change our lives,” said the 42-year-old father of three.
When the price of bitcoin collapsed in 2018, Taihuttu added more to his investment portfolio. He says he was always a firm believer that the cryptocurrency was poised for a major rebound. “I think in this bull cycle, we are going to see a minimal peak of $100,000. I won’t be surprised if it hits $200,000 by 2022.”
The price of bitcoin reached an all-time high on Monday, as it closed in on $20,000. And some analysts say the cryptocurrency still has a lot of room to run higher.
Mike Novogratz, CEO of investment firm Galaxy Digital, thinks this comeback rally is only just getting started. He sees bitcoin rising to $60,000 by next year.
And Tom Fitzpatrick, global head of CitiFXTechnicals, said the charts signaled that bitcoin could reach $318,000 by December 2021, in a report meant for Citibank’s institutional clients and obtained by CNBC. Why this isn’t another bubble
Taihuttu bought the bulk of his bitcoin holdings when it was was trading at around $900 in early 2017, just months before it reached nearly $20,000 a coin.
Even as bitcoin peaked, the family stayed invested in the cryptocurrency. Once the bubble burst, and the price tumbled down to about $3,000 in early 2018, Taihuttu and his family weren’t deterred. “When bitcoin dipped, we started to buy more.”
When I asked Taihuttu on our Skype call whether he was worried that we could be in the midst of another bitcoin bubble, he doubled down on his investment. “I don’t see demand going down,” he added. “I think we’re headed for a supply crisis.” Didi Taihuttu
Part of what’s different about bitcoin’s rally in 2020 versus 2017 is that institutional investors are now adopting bitcoin, lending it newfound legitimacy and helping to erase the reputational risk of investing in the cryptocurrency.
“The 2017 rally was largely driven by retail investors, whereas this year we’re seeing a massive influx from corporate entities and institutional money managers,” said Mati Greenspan, portfolio manager and founder of Quantum Economics.
Old-school, billionaire hedge fund managers Stanley Druckenmiller and Paul Tudor Jones now own bitcoin and big fintech players like Square and PayPal are also adding crypto products.
This kind of mainstream adoption is hugely important, because cryptocurrencies like bitcoin aren’t backed by an asset, nor do they have the full faith and backing of the government. They’re valuable because people believe they’re valuable. So it goes a long way when bitcoin gets buy-in from some of the biggest names on Wall Street. Bitcoin’s supply crisis
The surge in interest from mainstream financial players hasn’t just reformed bitcoin’s image, it’s also fomented a supply shortage.
“The basic reason for the two rallies are the same,” Greenspan said. “It’s a matter of digital scarcity. There is a strictly limited supply of bitcoin available in the market, so when everyone is buying and nobody is selling, it can cause tremendous upward pressure on the price. What’s different this time are the players involved.”
The 2017 rally was driven by retail speculation, and in 2020, it’s the billionaires and corporations that are buying bitcoin en masse.
“When PayPal starts to sell bitcoin to its 350 million users, they also need to buy the bitcoin somewhere,” said Taihuttu. “There will be a huge supply crisis, because there won’t be enough new bitcoins mined everyday to fulfill the need by huge companies.”
And that interest from institutional investors doesn’t appear to be slowing down. Six out of 10 investors surveyed by Fidelity in June believe digital assets have a place in investment portfolios. Are retail investors missing out?
Mike Bucella, general partner at BlockTower Capital, told CNBC in a recent interview on “Power Lunch” that retail investors are actually the ones missing out on the bitcoin rally this year.
“If you dig a layer deeper in the derivatives market, you notice that most of that derivatives flow has transitioned from the crypto native exchanges of 2017 to institutional products, like the CME,” said Bucella. “I think this really firmly indicates that retail actually missed out on this rally this year. It’s been primarily and firmly an institutional bid.”
But not all retail investors are missing out.
Taihuttu put a couple hundred thousand dollars into cryptocurrency in 2017, while the price of bitcoin was still trading lower, and he has mostly stayed all in on his investment.
Despite 2020′s massive returns and all the recent bullish calls around bitcoin price targets, the fact remains, a speculative asset like bitcoin is prone to seismic price moves in a very short space of time.
In 2018, the massive sell-off in cryptocurrencies, including bitcoin, was swift, brutal and worse than the bursting of the dot-com bubble in 2000.
2020 may look different than 2017′s rally, but as an asset, bitcoin behaves in a cyclical manner. Each successive high is higher, and the lows are not quite as low, but bitcoin is certainly not immune to another major correction.
Though for Taihuttu, the bitcoin play isn’t all about making a profit. He’s already given half of his money away to charity, and his family of five has spent the last four years traveling the world, in order to spread the gospel of decentralized digital currencies.
A federal reserve note is just a piece of paper. Nothing more.
“...To your point though, it definitely seems like greed...”
To me it seems like stupidity, and worse, endangering his family. Even if he “wins”, how will that affect his children?
The US dollar is backed by nothing, except people's confidence in the US government. Despite the debt, the deficits, the insane government policies and leaders.
Bitcoin is also backed just by confidence - in cryptocurrencies. But you can't print an endless supply.
Value is always determined by what a disinterested 3rd party is willing to pay for the asset.
At this moment, there are a lot of people willing to pay $18-19,000 per bitcoin.
Is it just faith?
I say no.
Bitcoin is backed by demand for bitcoin, among millions of people. It has advantages they value and are willing to pay government currency for.
I know 2 guys that bought Bitcoin when it was $0.30. 1 sold his before it got too crazy high and is kicking himself. 1 kept it, sold half and started a business, and has half left. He bought a $600k house with cash not long ago. Dang.
We have no idea how much of their money they really invested in Bitcoin, nor do we know how much they dipped into and converted their bitcoin repository. When the price crashed they bought more. That tells me they had money from somewhere to be able to do so.
Again, Mt. Gox is paradigmatic of what I'm trying to tell you , and you know exactly what I'm trying to tell you.
That the whole of the exchange -- the entire Dutch Tulip -- will be collapsed by a "Mt. Gox" cubed; and I'm not talking about whether or not BC is this or that, or even irrational exuberance.
I'm stating flatly that when China decides to issue its own YuanYuan, they will first intentionally destroy the existing market, like they've done with every other market entry since they crawled out of the mud. I mean, it's tattooed on their foreheads.
Frankly all the PLA really has to do is outlaw BC and the top 10, but Confucianism will prevail in subterfuge...
Bitcoin is Amway in a different form.
Agree totally.
Governments around the world are issuing debt / creating money at an astounding pace.
People are looking for stores of value.
I’m not holding bitcoin but I understand what people are seeking. The stock market bubble is part of this same phenomenon.
I caught the tail end of a Dave Ramsey caller today. 25 year old took some massive risk and turned a small amount into $650,000. I think he was asking about buying a house.
Ramsey used the lottery ticket example and said something like you risked and won, big. Don’t expect it to happen again the same way. He recommended that he pay off his only debt, a truck and in a year or so buy a modest house for cash. Invest the rest and turn it into a few million in the market. Good advice I think
shockingly Amway allowed my dad to retire at 38 and he has never had to work a job since ... my mom and dad busted their butts every night after he worked a full time day job for maybe 5 years until he retired...he is now 81- has had a very good life.
I know there are crappy people in every business including Amway- I know because I saw it personally and so did my parents but my dad who was so shy he would throw up before leaving the house showed the plan every night and sold products because he wanted to provide for his family...he did that.
If people are determined they will make it work no matter what tool they are handed to accomplish it.
The guy was fortunate, but most people don’t end up that well.
Paying cash for things and owning them is the best bet.
Then, if/when TSHTF, you have what you own.
For the most part that’s been our plan. The only debt we’ve ever had was the mortgage and occasionally a modest car payment. We run them till they’re dead.
Was it tough to go without stuff? Absolutely but guess what, our kids are all grown and on their own. They are well adjusted and all are debt free except for a small amount two owe us for education.
My son is the only one with any debt, and that’s a mortgage and a few other things.
But he HATES being in debt and is working to pay it down as quickly as possible. He has learned that debt is not worth it. He hates it hanging over his head.
Actually, all they have to do is turn off the power to the bitcoin “miners”.
One of mine had a lot of school debt. He was going for aerospace engineering so we didn’t balk at it.
He had a job in his field at NASA his junior and senior year which earned enough to pay for school and expenses. He managed to pay off $30,000 in a year. He and three other guys rent a house (the Case de NASA) and all live frugally. He had to buy a car but besides a few new guns, that’s his only big purchase.
Glad he’s armed.
I consider that an essential purchase these days.
The local police will come to their house if they ever need anything.
That’s good, but as of now, I have yet to see a police holster and since you can’t carry one in your pocket for emergencies, better that he’s got his guns.
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