Bitcoin, Even in Difficult Times Is Finding Its Way

It is interesting to watch how the world is quietly adopting Bitcoin as a means of payment even in such stressful times.

Bitcoin mining is growing in these days and when the world is threatened with financial collapse, people are quietly turning to Bitcoin to store wealth and transfer wealth worldwide.

In times of crises gold and diamonds were one of the best ways to store and transfer large amounts of wealth due to their virtual indestructibility. Gold simply cannot be destroyed, dissolved or taken apart. Even if it is dissolved, gold can be quickly compiled together. Diamonds are another case in point since they are stones, very difficult to break.

Bitcoin, since it is approved by every user taking part in the transaction, is also virtually indestructible or eternal since the bits of information are contained in each and every computer of the user who took part in creating, validating and transferring the respective Bitcoin via the blockchain hashing algorithm.

The only way to "destroy" Bitcoin is to annihilate each and every computer which took part in the Bitcoin transaction. Which means literally hundreds of millions of computers. And even then every user could have downloaded the information on an USB or external hard drive.

Bitcoin is (almost) indestructible, like people.

I forecast Bitcoin's price could reach 250 000 USD in 7 to 10 years. 

Why? Because Bitcoin and other cryptocurrencies are the greatest financial innovation ever, arguably.

Or at least cryptocurrencies are the cutting edge of economics, finance, financial technology or fin-tech for short.

Where Is the Bottom For Bitcoin?

Bitcoin is currently trading at around 38 883 USD from a peak of 64 400 USD several months ago.

I forecast Bitcoin's price could fall to 20 000 USD before recovering. In fact, in the next 5 years I believe Bitcoin's price could surpass 120 000 USD.

The current global insecurity will only speed up the adoption of a new, unique and effort saving store of wealth like Bitcoin. Due to its hashing algorithm and scripted nature Bitcoin is virtually untraceable. 

What is more, Bitcoin can be transferred all over the globe without much effort.

In addition, Bitcoin's underlying blockchain algorithm has the disruptive potential to revolutionise almost every industry known to man by safely storing via distributed nature virtually any piece of information.

Finance has needed a new asset class for decades. Finance has historically been one of the most innovative industries so the latest around 30 years hiatus without any new major financial product breakthrough was unusual. Fortunately, Bitcoin was invented and slowly, but surely even institutional investors like asset managers and hedge funds started investing in Bitcoin and other cryptocurrencies. 

Even Warren Buffett who is known as a renown sceptic of Bitcoin recently invested a large sum in Nubank, which is basically a crypto bank.

Crypto is here to stay because it saves people time, money and effort in a big way. Cryptocurrencies make preserving wealth, raising funds, storing and transferring information much more quicker, reliable, easier and safe.

Actually, in the next 10-12 years, in my opinion, Bitcoin's price could surpass 250 000 USD.

In addition, Bitcoin's underlying blockchain technology stands to transform many industries by providing a safe ways to store, transfer and verify information

Our world is being digitised and digital money like Bitcoin and other cryptocurrencies is just another step toward creating a more efficient and prosperous everyday life. Leading global central banks are talking about regulating the cryptocurrencies market. Actually, I am of the opinion that central banks should only regulate any stable coins, a kind of cryptocurrencies themselves would issue. As far as the larger cryptocurrencies market, regulatory bodies should police it so that there is general rule of law.

Bitcoin and cryptocurrencies are simply the most exciting development in the finance industry in the last 30 years.

Warren Buffett And the Allegedly, Possibly, the Largest Ever Insider Trading Case

According to various news sources Warren Buffett's Berkshire Hathaway bought a 1 billion USD stake in the gaming company Activision Blizzard months before the announcement that Microsoft Corp. is acquiring Activision for 68.7 billion USD.

I am a huge fan of Warren Buffett. He is my guru in terms of stocks investing. The above case with Activision Blizzard has the potential to literally destroy all of Warren Buffett's vast legacy in terms of investing. At 1 billion USD this could well make for the largest insider trading case in the history of the world. I must give Warren Buffett the benefit of the doubt that he knew nothing of the pending Microsoft Activision Blizzard merger announcement.

Warren Buffett has held an impeccable image of a honourable investor, a man of integrity. He never entered into any scandals, he avoided doing hostile takeovers and managed Berkshire Hathaway's portfolio of companies in a genius, brilliant way to create 700 billion USD of wealth - Berkshire Hathaway's market capitalisation as of today, the 24th of February 2022.

His only fault, as far as I am concerned, is that Warren Buffett's companies are cutting jobs easily when the economy turns or the investment is not so good as evidenced by Berkshire closing a shoe factory and Precision Castparts, one of Berkshire Hathaway's largest companies, decision to cut a third of its workforce, more than 10 thousand workers, after the coronavirus pandemic erupted.

So Warren Buffett's impeccable image has already been hurt immensely by the information that there is even possible insider trading done by his conglomerate Berkshire. As Buffett himself has said "it takes a lifetime to build a reputation and 15 minutes to destroy it."

Whatever happens, Warren Buffett's investing track record will ensure Buffett's legend will live on.

Investments, Stocks That Could Benefit From the Federal Reserve Raising Rates

Higher interest rate environment would benefit commercial banks, especially regional banks both in the US and globally.

That is because higher interest rates help banks expand their interest rate margins which are the main profit engine for commercial banks.

Banking groups with large investment banking businesses will see the fixed income trading part benefit, while equities trading will get hurt. IPO underwriting should also decline. Mergers and Acquisitions total fees would also decline by around 25 %, I estimate.

Gold, if the USD stops appreciating towards other major currencies, could also rise. This would benefit the stocks of gold and silver mining companies.

Cryptocurrencies As a Financing Vehicle

In 2015 and 2016 many nascent technology startups financed themselves by issuing unique cryptocurrencies tied to their projects.

These financing projects were very successful, but for various reasons the level of financing via issuing cryptocurrencies slowed down a bit in recent years.

Many prominent venture capitalists like Marc Andreessen and Ben Horowitz and many others have embraced buying cryptocurrencies.

Cryptocurrencies could actually partially displace venture capital funds and investment banks in providing financing for technology startups. I say only partially because cryoptocurrencies are used in either for pre seed, very early stage or seed capital which either venture capital funds, VC, do not provide or provide only to a limited extent. Since venture capital funds' assets under management grew substantially in recent years seed capital is only a small portion, somewhere at 10 % of overall startup financing volumes provided by VC or private equity funds.

Issuing cryptocurrencies is a huge business opportunity for startups, because they can so tap into the growth of capital potential that an Initial Public Offering and the public stock market provides without actually being in the late stage of development for the Securities and Exchange Commission to approve an IPO.

What is more, since cryptocurrencies are very volatile, more volatile than technology stocks even, the prices of cryptocurrencies issued by startups could rise a lot thus providing plentiful and much needed financing for very young technology companies trying to develop innovative products and build break through technologies. 

Roku Valuation After the Recent Large Stock Price Fall

Roku Inc is valued at circa 14.5 billion USD currently, after today's 25 % up till now drop of its stock price following disappointing revenue guidance by Roku.

In my opinion, Roku is worth 100 billion USD. Streaming is slowly augmenting television. And Roku has found an ingenious way of riding the streaming boom via its streaming facilitating gadgets. What is more, Roku's advertisement business is growing strongly which is a way for Roku to provide content as well.

Not long ago Netflix, the pioneer in TV streaming, was valued at more than 300 billion USD.

Roku's revenue is forecast to grow at around 30 % year on year in 2022 which is an excellent growth rate.

And Roku is profitable as well.

The indiscriminate selling of technology stocks by panicky investors going on at the moment is already providing pockets of huge value opportunity.

Roku is just one example where there is large probability of great future value to be realised. Roku has great technological edge in streaming, that is viewing TV via the internet, an already established name in the briskly growing and currently also huge in terms of revenue market for streaming services.

Essentially, TV viewing over the internet services are a cloud service for television and Roku is a innovative player in this new, transformative field of computing.

Roku's price and market value could objectively fall a lot more from current levels. In the long run Roku's place in the streaming industry and the nature of the streaming TV industry should insure Roku's long-term success.

In short, Roku's unique position in the streaming market makes me believe Roku's intrinsic value is 100 billion USD.

Virgin Galactic Valuation

Virgin Galactic, SPCE ticker, jumps more than 30 % today and reaches circa 2.77 billion USD valuation currently.

I think Virgin Galactic could  be worth 1 trillion USD one day. There was an article on Bloomberg.com some time ago the title of which read: "If you want to be a trillionaire, try space mining".

Space has unimaginable riches in the form of gold, silver, diamonds, platinum, palladium, cooper, iron ore and many other commodities which could be mined both on planets and on asteroids.

The main reason some experts are forecasting Elon Musk will be the first USD trillionaire is his equity stake in SpaceX.

Virgin Galactic is grossly undervalued even after today's jump. Virgin Galactic technological lead in building rockets and space explorations ensures Virgin Galactic will remain at the forefront of space exploration for years to come. Virgin Galactic's technology edge is totally underpriced by public markets, as far as I am concerned.

If management executes Virgin Galactic's strategy correctly Virgin Galactic could turn into one of the world's most valuable corporations with trillions of USD market capitalization.

Cryptocurrencies and Technology Stocks Relationship

The Nasdaq Composite is down 14.6 % from its recent all time high.

Cryptocurrencies' prices, a rough measure of which is Bitcoin's price, have been falling also.

Many analysts and investors have in the past expressed different views whether Bitcoin and other cryptocurrencies prices will fall in tandem with technology stocks when the long expected technology stocks crash comes.

While there may be still not a technology stocks crash, the current circa 15 % fall puts a strain on many unprofitable technology and biotechnology stocks. These companies have been losing money and heavily utilizing investors' money to keep their respective companies functioning as a going concern.

Cryptocurrencies were viewed by many as a substitute for gold or some sort of safe heaven. Up till now Bitcoin and other cryptocurrencies are acting like a risky asset.

Cryptocurrencies carry inherent higher leverage than technology stocks, since cryptocurrencies are not part of the capital structure of the respective companies that issued them, so they are not entitled to dividends or bankruptcy proceeds in case of firm default. This inherent volatility of cryptocurrencies insures the high risk and high reward of Bitcoin and the cryptocurrencies asset class in general.

As far as I am concerned, I find the high risk high reward investing profile of cryptocurrencies reasonable. This is similar to the technology stocks investment characteristics. Actually, I think cryptocurrencies could end up as a reasonable vehicle to store value in the future due mainly to the disruptive potential of the blockchain technology underlying Bitcoin.

Bitcoin and Blockchain's Future Value Enhancement Possibilities

Bitcoin is still a major disruptor not only for the global Technology and Financial industry, but also for our modern way of life.

The Blockchain's algorithm built in efficiencies will soon change more deeply everything we basically now. Because Bitcoin's blockchain algorithm is a very efficient way to proof, validate and store information.

And information, since the dawn of humanity has been the most precious commodity. Up till now, people count on expert opinion to fom their own view of the world. In short, whatever Babe Ruth thinks about baseball or what Lionel Messi or Alex Ferguson say of football is correct. That is, people believe in the infallibility of renowned experts, great practitioners in their field.

While blockchain believes in the wisdom of crowds.

Actually, history has proved both the expert and the crowd wisdom approach to be wrong. The very fact humanity has endured world wars, famine, pandemics or dictatorships proves that both democracy, dictatorship or some mixture of the two has been shown to be wrong at several stages of history.

Bitcoin's blockchain algorithm offers an interesting solution to the problem. The blockchain algorithm just speeds up the processing of information, its storage and analyses. And since many people get to decide what is right, the probability of error tends to zero.

Unlike the wisdom of crowds, via Blockchain everybody in fact has veto rights, which bars the appearance of ruthless dictators, nuclear war catastrophes, world pandemics or famine.

Actually, there is a field called Bayesian econometrics that does something similar. It constantly adapts to new information.

But Blockchain's built in veto power is a significant technological breakthrough. 

So if Bitcoin remains attached to and works through the blockchain technology, Bitcoin's value could approach the value of space exploration, in the next 30 years, at least.

As far as I am concerned, Bitcoin is worth 170 000 USD even at present.

Snap, Snapchat Application Owner, Valuation

Snap Inc, the firm producing the Snapchat application, is currently valued at approximately 65 billion USD.

In my opinion, the intrinsic value of Snap is 270 billion USD. And this is independent of the stock market environment. The US stock market, the Nasdaq Composite Index and technology stocks in general have endured a significant correction in their market capitalisations.

Many analysts express doubts that many currently unprofitable technology companies will survive the current technology stocks rout mainly because the Federal Reserve is firmly intent on embarking on an aggressive Federal Funds Rate hiking cycle, so as to stave off the high inflation America and many other countries are enduring at the moment. What is more, the Federal Reserve could soon taper off its bond buying and even start selling its bond holdings.

Raising the interest rate levels and withdrawing liquidity from the capital markets by the Federal Reserve will make it much harder for technology and biotechnology startups to finance their businesses which are usually unprofitable, at least in the initial years. Partly because of the bettter risk/reward payoff of buying the higher yielding US Treasuries.

All these developments are currently decreasing the value of almost all technology stocks. Snap is no exception with Snap's stock price falling more than 50 % from its recent peak.

However, social networks are the modern way of communicating. Videos is the main new mega trend of consuming content, because you learn so much in a few minutes and the effort is not enormous.

Snap is riding both the social networking and the video wave. And I am convinced there is room for one or two more leading social networks, aside Facebook. In addition, Meta, the company owner of Facebook is having image problems and issues with regulators which are threatening to break up Facebook. All these problems are weakening Meta/Facebooks's competitive position. Yes Meta has huge cash resources, but it recently said it expects to suffer a 10 billion USD revenue hit this year, after Apple's privacy protection changes.

So Snap's comparatively low market capitalisation, its innovation edge in social media and videos, Meta's regulatory problems and the young user demographic of Snap explain my estimate that Snap is worth 270 billion USD.

Bitcoin, Other Cryptocurrencies and Technology Stocks Will Soon Become Undervalued

Bitcoin is currently trading at 44 400 USD. 

If Bitcoin's price and the Nasdaq Composite Index fall by 25 % or more from current levels they will be on the verge of becoming undervalued, as far as I am concerned.

If that happens, Bitcoin and most other  cryptocurrencies will become undervalued. 

High volatility stocks tend to overshoot both to the upside and to the downside. Meta(Facebook), Pinterest and Snap(Snapchat) have lost more than 30 % of their market capitalizations in the last three months. I think their business models are still sound. Yes, they were grossly overvalued, but now things are starting to change.

Bitcoin and other cryptocurrencies will simply revolutionize our world creating huge amount of riches, progress and well being in the process.

Yes, I do agree with Cathie Wood about innovation. Yes, "innovation is on sale", not now, but soon.

The Current Technology Stocks Crash Implications

The Nasdaq Composite Index comprised mainly from stocks of information technology companies is down circa 12 % from its most recent peak.

We are witnessing a technology stocks valuation reset. And even though many previously high flying technology stocks look cheap mainly in comparison with their previous valuation metrics multiples, the Nasdaq Composite and technology stocks' prices could fall even more.

I forecast the Nasdaq composite will keep falling until roughly the end of February 2021. The Nasdaq Composite Index fall could reach 30 % from its November 2021 peak.

If the crash remains limited to technology stocks confines, the Nasdaq Composite fall could stop there. If due to negative wealth effect the tech stocks fall spills into the broader market economy,  however, the the Nasdaq could end up correcting around 50 % from its November 2021 peak.

In fact, I believe that any stock, especially technology stocks, deserves a market capitalisation of above 20 billion USD only if they prove able to change the world, as is proverbial to say in Silicon Valley circles. Apple, Microsoft, Amazon, Alphabet(Google) and Meta(Facebook) ended up doing just that.

Yes, there are still many technology companies with market capitalisations above 20 billion USD, but now they are much less in numbers than just one month ago. Leading global central banks' money creation, investors' risk appetite/greed, low or zero central bank reference yields, low yield environment and obviously the technology and digitisation revolution we are observing currently lead to most technology stocks being overvalued. Some more, some less. 

The current technology stocks correction will be an interesting phenomenon to observe and it will lucidly show which tech stocks were most overvalued. And many technology stocks bargains will emerge. In my opinion, the main factors that will determine which technology stocks will realise future value after the current technology stocks rout is done are profitability and growth potential of mainly the sector of the technology industry the company is active in, but also the growth potential of the individual technology company determined by its technology, strategy, management, agility, speed, distance from its competitors and the quality of its workforce.