$1B blockchain fund, $700k Bitcoin forecast, crypto mining

If you’ve been reading this Monday column for the past couple of weeks, you know that I spend much of my time scouring the globe to find companies that are leading the digital money revolution.

Not just the companies, but the countries. And that brings me to my first stop this week: China.

China Backs $1B Blockchain Fund: A new Chinese blockchain fund has raised $1.6 billion to invest in innovative blockchain startups.

Some 30% of that cash came from the city of Hangzhou, which couldn’t have invested without the permission of the Chinese government. So, this could be the beginning of a tidal wave of Chinese investment.

The big threat to the United States: Unless Washington wakes up soon and creates a favorable environment for the most talented blockchain developers in the world, China, which is aggressively pursuing its “Made in China” plan, could become the dominant force in this space.

Future historians may look back on this era and wonder why the very same country that virtually owned Internet 1.0 was so quick to forfeit that leadership in the early days of Internet 2.0.

Blockchain Can Help You Boost Your Crypto Investing Exposure: We generally recommend limiting your cryptocurrency investments to about 5% of your portfolio. But don’t make the mistake of thinking that cryptocurrencies are the same as blockchain opportunities. They are related but VERY different.

In other words, there are plenty of ways to position for profits in the crypto-revolution, and they’re not restricted to risky startups.

Some companies are becoming so intertwined with cryptocurrencies that they could become publicly traded alternatives to cryptocurrencies themselves. Not only do many crypto-stocks have just as much potential as cryptocurrencies, but you can put crypto-stocks into your retirement accounts, such as IRAs.

Stand by. I’ll have much more to say about this very soon.

$700,000 Bitcoin?! We’ve already talked about how George Soros’ hedge fund is now betting on cryptocurrencies and how Fundstrat Global co-founder Tom Lee predicted that Bitcoin would hit $125,000 in 2022.

An even bolder prediction has come from another legendary investor, this time at the Ira Sohn conference in New York. That’s one of the most prestigious investment conferences in the world, where typically only the most successful money managers are invited to speak.

This year, John Pfeffer, founder of Pfeffer Capital and a highly successful hedge fund manager, predicted that Bitcoin is the first viable candidate to replace gold as a store of value.

He said Bitcoin is better than gold “on every front” and predicted that it will rise to no less than $90,000 and potentially as high as $700,000 in the “next couple years.”

Once soothsayers begin to spit out numbers that high, we begin to wonder where they pull them from. But here are our observations …

First, the mere fact that these wildly bullish forecasts are now grabbing the headlines denotes a major shift in market sentiment.

Heck, just a few weeks ago, practically all we heard was talk about “Bitcoin dying.” That was a good time to buy. Now? Not so much.

Second, the honest reality is that no one knows how high cryptocurrency values will go. If anyone says he does, shake his hand, say goodbye and show him to the door.

Yes, our team does a good job pinpointing the timing of major bottoms. But anticipating the magnitude of the subsequent move is trickier.

Third, among the top cryptos on our lists, Bitcoin is among the least likely to enjoy the kind of dramatic surge these forecasters are talking about.

What’s more probable is that such surges happen among cryptocurrencies with more advanced technology. In fact, that’s the basic message of this month’s surge in EOS.

Cryptocurrency Mining 101: I am frequently asked to explain what this is. So here it goes, in a nutshell:

Cryptocurrency mining is the process by which people (or businesses) with high-powered computers compete against one another to solve highly complex mathematical equations — the result of the encryption that makes cryptocurrencies so secure.

The first to solve those equations — and verify a crypto coin transaction is valid — gets paid in that same coin.

Bitcoin, for example, pays a reward of 12.5 tokens. So with Bitcoin currently trading in the $8,000 range, that translates into more than a $100,000 payment for the “miner” who wins the prize.

Right now, we give Bitcoin a “C+” rating, mainly due to outdated technology and networks that are often clogged. (Get our latest Weiss Cryptocurrency Ratings in your email inbox every week. Start here.)

Plus, here’s another, longer-term issue: Bitcoin mining (based on Proof-of-Work) consumes tremendous amounts of electricity and is getting prohibitively expensive. As a result, expect a major shift to alternative technologies that are far more efficient and economical.

Best wishes,

Tony Sagami

About the Technology Analyst

Even in the worst years for stocks, Tony was twice named “Portfolio Manager of the Year” by Thomson Financial. He was one of the first to introduce computer software for trading stocks. And in the early 2000s, he wrote “The Supernet,” providing a vision of the future internet that was far ahead of its time.

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