The hottest investment in 2014: Bitcoin

The virtual currency is here to stay and can make you money. Here are 3 reasons it's gaining fast.

By Traders Reserve Dec 16, 2013 1:08PM

Credit: Lusky/Getty Images
Caption: Big pile of the world’s new currency Bitcoin.By Jamie Dlugosch


The hottest investment in 2014 will be the virtual currency Bitcoin.

 

Take it to the bank. In fact, I wouldn't be surprised if Bitcoin doubles in value or more next year.

 

Sure there are those who say it's nonsense, that Bitcoin is a raging bubble not unlike the "tulip craze" of the 1630s. Blah, blah, blah.

 

It is not. In fact, it is far from it. Bitcoin is not only here to stay, it is something that if you get in now can make you rich. It is simply the most exciting financial story to come along since the dot-com boom.

 

I know what you are thinking. The dot-com boom ended in disaster. Indeed, it did. The dot-com boom was indeed a bubble.  But before that bubble popped there were many that profited handsomely and did so over a long period of time before the implosion. 

 

Exactly the same thing is going to happen with Bitcoin. Yes, the story will end, perhaps even badly, but before that occurs you have what I consider to be one of the best investment opportunities of 2014.

 

Bitcoin is not even close to being the same as the Dutch tulip craze. Here are the reasons:

 

Bitcoin is gaining credibility, and fast  

The number of financial commentators and investment managers commenting on Bitcoin has grown substantially over the last few months. That mere fact is giving credibility to the virtual currency.

 

For the concept to take hold and sustain the market needs that credibility. If you aren't convinced of that credibility, perhaps you might take a gander at the Bitcoin smartphone apps now available. Bitcoin is seemingly everywhere. The sheer number of headlines on major financial site results in more and more people buying into the story. It is spreading like wildfire and likely to spread even more in 2014.

  

Now, regulators are picking up on the interest in Bitcoin, watching closely to make sure there are no shenanigans going on in this new virtual currency. Put it all together and the credibility for Bitcoin use is growing by the minute. That growth is sure to result in more buyers and investors jumping on board.

 

Demand is insatiable

To truly understand the power of Bitcoin, one must understand the psychology of the buyer or investor of this new virtual currency.

 

The promise of a currency not tied to a central bank has enormous power in certain parts of the community -- think Tea Party here. The lack of trust in centralized governments has a huge following and Bitcoin suits these folks just fine. These are the same folks that drove gold prices to soaring heights. My bet here is that those former gold buyers are slowly but surely giving Bitcoin a try. Why not? The appeal is quite similar and like gold, Bitcoin has no real utility.

 

I can imagine many people disgusted with the Federal Reserve might enjoy taking it to the man by propping up Bitcoin. It won't take many investors to push Bitcoin higher. I can think of plenty of sources for that demand making it almost insatiable as the Bitcoin phenomenon takes flight.

 

Supply is limited

Basic economics suggests that insatiable demand results in higher and higher prices, but what if we add into the mix limited supply? The prices are going to go through the roof.


That is the situation with Bitcoin. The beauty of this new virtual currency is that supply is limited. There will be no printing of funny money. What’s available is available. At the moment there are some 12 million Bitcoins in circulation.

  

How is a Bitcoin created? Without getting too technical, there are complex formulas that "miners" can use to unleash new Bitcoins on the market. The maximum number of Bitcoins that can be harvested is 21 million. The race then is on for miners and hoarders alike to accumulate Bitcoins. That puts even more pressure on the price as new buyers will be forced to bid up the price in order to acquire what can only be viewed as a rare virtual currency.

 

More from Traders Reserve


Tags: GOLD
27Comments
Dec 16, 2013 7:14PM
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Outstanding article from someone who obviously understands the main concepts of bitcoin: that is is a decentralized, EXTENSIBLE payment gateway that also happens to have a unit of measure with an associated value. 
Dec 17, 2013 1:23AM
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Bitcoin is a decentralized distributed payment network. It is a protocol for transferring wealth just like how HTTP & TCP enable the Internet.

E.g. Electronic payments can be converted to/from Bitcoin instantaneously on both sides of a transaction (E.g. see ) - eliminating the high fees from Western Union and Wire Transfers.
Dec 17, 2013 3:33AM
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Keep in mind this isn't just speculation, there is also a vast market of trade and transactions that has been established and going on for a few years now. Anyone in the world can also be a merchant, for free, easily. They can download a wallet, invoice, trade, provide for families in different countries. All easily and securely. And they don't have to be approved by a bank or agency to store wealth. Encryption is also extremely safe, it is what banks use. It isn't hard to set up either.

Not that it is ready for the mass markets, yet, but it will be, and it is a much better product than what we have all been buying into. At least in terms of utility, transparency, and technological adaption. Compared to paper currency that can be counterfeited, backed by whatever the federal reserve is, and rigged to the hilt... and doomed to another financial collapse sooner or later, and certain devaluation as it is printed endlessly.



Dec 18, 2013 4:07AM
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yeaah dudes, hot investment, hahhaaha. keep being smartass please
Dec 19, 2013 11:08AM
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Anything that sounds too good to be true....................probably puts a lot of money into someones pocket, ever here of the pyramid sales deal?
Dec 16, 2013 5:22PM
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Ok, I have to confess I have not been following this in the news. Can someone who has please explain what ths is and how "virtual currency" is supposed to work?
Dec 28, 2013 5:54PM
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All the makings of yet another fad,and the one who buys the most loses the most.

 

It it sounds to good to be true, it is not true., and if you haven't been sucked yet, don't get sucked in, that is how these things work.

 

Basic Ponzi scheme.

Dec 26, 2013 1:10PM
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But China just made BitCoin illegal and its value then dropped by several hundred dollars.  Of course it will climb back up --- until other nations follow China's lead and make it illegal too.  It's not really currency because people rarely use it directly in order to make purchases. Instead it is simply an investment 'stock.' Unlike other stocks, however, it is based upon nothing at all.
Jan 14, 2014 8:28PM
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I still don't understand bitcoin at all. The whole concept is foreign to me. How does one invest in it? How would you profit from it and how would you realize that profit in a real non digital way. I guess I'm old school because I need something that is physical, tangible and has a real trade value without being tied to an electric device. Virtual cash is really gone when you lose the internet. 
Dec 20, 2013 9:30PM
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Wonderful article! best read about bitcoins this year. thank you for actually knowing what you are talking about!
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someone explain how this recent run-up for Bitcoins and bandwagon being created by financial opinion writers is any different than hype pushed on the public by brokerage and investment firms? Then it was the financial press and investment firms marketing investments to the street and public that were backed up by financial instruments called collateralized debt obligations (CDOs) and/or credit default swaps (CDSs), etc. that were no more than B rated loans packaged as A rated bonds in the period leading up to the collapse of financial markets due to the financial gimmickry that brokers and firms made millions in fees on while everyone else took a beating when the instruments collapsed as a result of interest increases.
Jan 4, 2014 8:25PM
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Bitcoin and the alt-currencies inspired by Bitcoin. Alt-coin mining is actually fairly profitable. There are some excellent DIY mining rig build sites like http://www.coinminingrigs.com that show you how to get started.
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All alt currency is a good investment, better than a bank savings account, you can double your money, though it can be risky. Still, I would sooner put £500 in BTC than the bank.  
BTC 1E9kVv9UeiLCXd7yBsYWEf173MWd9ra2mb
Dec 17, 2013 3:59PM
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@: Bitcoin isn't really decentralized, 2 non decentralized pools (there is a decentralized pool but those aren't it) control over 51% of the hashrate which givens them together full control over the coin, other 2 anonymous individuals control 40%. CPU and GPU mining has been rendered obsolete by ASIC which vastly centralizes control over it.

If people all adopted P2Pool things would get a lot better in terms of centralization. But then the ASIC problem remains which so far only seems to be address by altcoins.
Dec 16, 2013 7:48PM
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You got some Bitcoins, Jamie.....??
Dec 17, 2013 11:21AM
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And who makes or controls Bitcoins...??

And where are they really at...?

Dec 16, 2013 8:01PM
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Does anyone else think it's absolutely CRAZY for Exxon-Mobil to be at an all-time high on the same day that Mexico announces an end to their 75-year old private oil monopoly? Literally, there isn't any doubt that Exxon-Mobil as an oligarchy is facing extinction, that oil manipulated prices are heading down and New World Order's vice-grip on the world is fading? If I were an heir to any of those oil and gas fortunes... I'd be building a rocket to get off Earth... there's no place to hide once you screw the world... even if your daddy did it.  
Dec 17, 2013 1:36AM
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It'll drop down to $10 in March of next year.... Guaranteed.
Dec 16, 2013 6:09PM
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This is crap, no actual value is created while mining the Bitcoin and it is valid only if hte giver and reciever percieve the value. Who ever is putting his computer in a loop and mining is making money for actually doing nothing. The world is going crazy... Digital currency does make sense however, there has to be a basis to it and it has to be attached to something. I am quite surprised that it has reached even this livel of Hype. And i may be wrong as well, but i am still not jumping on this bandwagaon.
Dec 16, 2013 8:00PM
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Explanation: You let people who could hack into your computer use it to run high speed transactions and they give you virtual money that exchanges in the virtual markets. You end up with somebody else operating your computer and virtually nothing else. This is a scam.
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