Currency Comment - Bitcoin moves to Main Street

· It's SONA time again soon, so I’m going to do us all a favour and skip right past that. I saw there may be reruns of “Knight rider” on SABC3 on Thursday (it’s a real thing, I saw it when I was channel hopping whilst convalescing in December) – so maybe tune into that.

·        In any case I have an early draft of the President’s speech. Here are some highlights.

o   Pandemic – blah blah blah, effective vaccines, more blah, social distancing, yadayada, lower the curve, etc etc

o   Economic impact blah blah, creating jobs, yadayada, etc etc

o   Corruption – we are good at that in South Africa!!

o   Eskom, end load shedding blah blah, monitoring the situation, etc etc

o   Fiscal constraints, realign spending programs, the finance minister will spell it out in the budget, blah blah

o   Add your own topic here, blah blah, …..

·        So there you have it.

·        Of far more interest is Teslas Bitcoin announcement yesterday. If you haven’t seen it, they have added 1.5 billion dollars’ worth of Bitcoin to their balance sheet.

·        Even more interesting is that they are working to accept payment for some goods and services, in a limited capacity, in Bitcoin. That did cause the Bitcoin price to rally to new highs of around 47 000usd.

·        However, in my opinion,  the implications are far more important than the short term price movements.

·        Historically, there have been small transactions in Bitcoin. A cup of coffee here, a few pizzas there (BTW, those 2 pizzas are now worth close to a half a billion USD.)

·         But this is really the first time that a multinational organisation, that does a lot more than just sell cars, has touted bringing the cyber currency into its transactions.

·        It’s a significant milestone in the evolution of Bitcoin, because it means that Bitcoin could well be on the cusp of moving from Cyberstreet to  Mainstreet.

·        For years, bitcoins doubters have opined that the only thing that bitcoin is good for, is dark web weapons and drug transactions.

·        To be fair, I’m sure there were/are some less than savoury characters using crypto for nefarious purposes. But let’s also be clear, fiat currency is also used for those kinds of transactions. Anyone that has ever watched a Hollywood movie/series about drug lords will well remember the cut scene, where rooms are filled with stacks of USD bills, and the baddies are always looking for new and innovative ways to “clean’ the vast stacks of cash piled up in the garage/kids playroom/bathroom/toilet/wife’s closet, etc.

·        Anyway, before I digress too much…..it’s interesting that Tesla has been an early (yes, it’s still early) mover. Because as we know, they also produce renewable energy, the main ingredient in creating Bitcoin. So now we have a Mainstreet player that not only allows transactions in Bitcoin but also provides the major ingredient to create the currency and its underlying technology (blockchain).

·        I’m not going to rehash the mechanics of blockchain/bitcoin here, there are certainly better resources than myself out there. But I will say this – It’s well worth educating oneself, even if it is a rudimentary knowledge about the mechanics.

·        Today it may be Tesla that allows you to buy something from them for Bitcoin. Tomorrow it could be your house that changes hands, without any intervention from Government or lawyers. And it may take about half an hour as opposed to 3,4,5 months. #justimagining

·        This kind of evolution and main street adoption is another very important step on the road to a potential alternative to fiat currency.

·        To be sure, it will be a long road. To be sure, there will be moments when it seems to all come crashing down. To be sure, Bitcoin is by no means a one-way bet. Its price movement will remain very volatile. But this is beyond what Bitcoins price is doing, this is now about the power and potential of blockchain.

·        Remember,  it’s not that long ago that Jamie Dimon threatened to fire anyone at JP Morgan involved in bitcoin. Now JP analysts regularly cover crypto assets.