The Case for BITCOIN $100,000 – Part Two

In yesterday’s HX Daily we began to make our case for why we think we eventually could see Bitcoin trade at $100,000 or greater. We also think this could happen relatively soon.

One of our key insights is that we think we will see huge growth in the demand for bitcoin internationally.

We think this is already happening and there is a great real-world example – the country of Turkey.

We are sure you know Turkey and its incredible history. You might not know that that is one of the largest populations and economies in the world. It ranks roughly 18th largest on both of these measures.

It is technically considered an “upper-middle” income country with a “Purchasing Price Parity” GDP per capita of around $44,000. That is a measure that tries to adjust for the costs of everything in the country. To put this in perspective, the same measure for the United States is around $52,000. Turkey is NOT a poor country…

In recent years, though, Turkey has had to deal with massive inflation. Here is a chart…

While Turkey HAS seen these kinds of levels of inflation in the past, it had been more than two decades ago. Given the massive economic development in the country, these levels of inflation are certainly a surprise.

What has driven these high levels of inflation?

This is a subject we could write probably several books about but the answer is simple – bad government.

In the case of Turkey, the ruling President Recip Tayyip Erdogan decided to straight reject the policies that have traditionally been used to keep inflation down and injected massive amounts of money into the economy.

Again, we could write a ton more about the subject but he made a bet that the traditional economic orthodoxy wasn’t correct and that he could avoid the pain. He was WRONG.

This note, however, is not about Turkish economic policy but rather how the population of Turkey has been reacting to the situation.

Traditionally in periods of hyperinflation you would see folks work to move their assets out of the country, move into hard assets (real estate) and buy other “store of value” assets like gold and the US dollar. (That last one may be a questionable “store of value” going forward but historically this is what has happened.)

All of those things happened with this current bout of inflation. Something new also happened, though – they bought bitcoin. A lot of bitcoin…

Now it has not only been bitcoin, as they have bought other cryptocurrencies including ones that are connected to the US dollar called “tethered” coins. 

One of the big drivers of this movement towards cryptocurrencies by Turkish citizens has been the restrictions that the Turkish government has put on the trade in gold. Gold smuggling has become a big thing in Turkey and the government reported they have seized 350 kilograms just this year…

While there are ways the government can get involved in the regulation of cryptocurrency and bitcoin, it is going to be considerably more difficult.

This is what is driving the demand amongst Turkish citizens.

In a recent survey, 58% of Turkish investors said they view crypto as a long-term wealth building tool. Another 37% regard it as a hedge against the continued devaluation of their own currency. Almost three-quarters of these investors have focused on bitcoin.

Now there are a lot of elements to this equation. Without a doubt, the Turkish government will look to curtail the ability of their citizens to move all of their wealth into crypto and bitcoin. There are several things that they are able to do and some of them will have an impact.

Ultimately, though, this is what bitcoin was built for – situations exactly like this!

The last element to think about goes back to the math we put in our previous piece about bitcoin. The percentage of people on Earth who are currently involved. It is less than 0.5% of the world’s total population.

Turkey is just one country but look globally at aging populations, expansionary monetary policy and poor governments. Ask yourself – do we think we are going to see more situations like Turkey or less in the coming decades?

We think the answer to that question is pretty obvious…

This is also why we think that eventually the global demand for bitcoin – with the very limited supply – will result in much higher prices for bitcoin in the future!

Check out Enrique Abeyta’s conversation with Nick Andrews of the "Sports Card Madness" podcast.

Traditional investors may be blown away by his reports of 30x returns!

The pair share tales of woe about early failures with counterfeit cards, and the joys of teaching asset management to your kids!