6/25/17: ANDY HOFFMAN - BITCOIN VS. ETHEREUM, AND EVERYTHING ELSE

In April 2000, just after the dotcom peak, I sold the last stock I'll ever own. That is, aside from Precious Metal miners - which comprised all of my portfolio from 2002-2008; half of it from 2008-2011 - when I sold miners, to "move up the totem pole of safety" to physical Precious Metals; and ZERO from 2011 on (just before I joined Miles Franklin, one of the nation's oldest, largest bullion dealers - when I not only went 100% physical, but became the most vocally anti-mining stock prognosticator in the Precious Metals space. After having learned how catastrophically dangerous mining stocks are, for a variety of reasons I'm not going to rehash here, I realized that the sky-high risk of owning mining stocks wasn't wroth the potential reward - for one, because most miners have proven, over time, to decidedly NOT be "leveraged proxies" of gold and silver prices (with the exception of a handful of VERY small time windows); and more importantly, because when the gold Cartel is inevitably overwhelmed - just as the "London Gold Pool" was in 1968 - gold and silver prices' rise will dwarf that of nearly all bull markets in history, WITHOUT the myriad, monstrous risks of mining shares.

Now that I'm older - 46, married, and a father, versus 29 and single when the dotcom bubble burst - I'm decidedly wiser; and equally decidedly, more conservative. This is why, until Bitcoin arrived, I have not owned ANY assets other than physical gold and silver, my home, and a tiny bit of cash - NOT at an insolvent, "bail-in-able" bank, but the Charles Schwab brokerage.

Quite obviously, Bitcoin's volatility is amongst the highest of any asset class. However, for such a nascent technology - with so many moving parts; and opinions regarding its future - from a "spectacular failure," to "the future of money" and "digital gold" - that should be expected. No less, because its float is so low, with just 16 million coins in existence - of which, less than half are likely available-for-sale. However, "volatility" is not a bad thing when you are a hoddler, and the primary trend is UP. Not to mention, when it's VERY up - as in, the price has more than sextupled in the past 18 months. Frankly, I find it comical when Bitcoin detractors claim it can't be money because it's volatile - given that, as it continues to prove its worth over time, the price will of course be less volatile - and oh yeah, significantly higher. From my perspective, Bitcoin has acquired true monetary value faster than any asset in global history - including gold, which took decades, if not centuries, to become universally valued and accepted. Moreover, if its scaling issues are resolved reasonably, it could easily be viewed as money by EVERYONE, in the VERY near-term.

In the 18 years I've been investing my own money, the best gains I've ever had were in mining stocks circa 2004-07, just before the sector peaked - likely, permanently so. However, even those gains pale in comparison to the pace Bitcoin has surged - clearly, being "revalued" in the past six months, like no asset class I can remember; other than dotcom stocks in 1998-99 - most of which, were scams or pipe dreams from day one. I knew that then, in real-time - just as know today, that the vast majority of "altcoins" are today. This is why, unless something dramatically negative occurs in the space, I will likely be a "Bitcoin Maximalist" in perpetuity - as reflected by my current crypto portfolio weights, of roughly 99.5% Bitcoin, 0.5% Litecoin, and 0.0% everything else.

Yet again, my mining logic has resurfaced - as in my mind, if Bitcoin succeeds, it will likely create the biggest bull market in financial history; on a par with, or perhaps beyond, that of even Precious Metals; which is saying a lot, as I believe that in today's dollars, non-manipulated gold should be at least $20,000/oz, and silver $1,000/oz). In other words, just as there is absolutely no reason to take on the massive risks of owning mining shares in lieu of physical gold and silver, there is no reason to own altcoins - given that the massive risks they entail, more than offset the potential of greater percentage near-term gains. Which frankly, may not even be the case - as when Bitcoin inevitably scales, it will be difficult for even the top "market darling" momentum ICOs from outperforming it.

The way I see it, there are just TWO legitimate crypto-currencies; and by legitimate, I mean that I have no doubt they will both exist for years - and likely decades - to come. Everything else is highly speculative, with VERY strong odds of going to zero; i.e., the "dotcoms" of our time, only worse - as at least the dotcoms were somewhat vetted by Wall Street, the SEC, and stock exchanges like the NASDAQ; as opposed to today's "ICOs" - NONE of which are vetted by anyone, or subject to any regulatory scrutiny. To the point that, atop all their other terrifying risks, the SEC - and countless other regulators - could at any time arrest the leaders of CENTRALIZED ICOs, and force them to shut their businesses down.

The two legitimate cryptos, of course, or Bitcoin and Litecoin; both of which are decentralized, use proof of work, and did NOT hold initial coin offerings. Both have long histories of immutability and issuance limits; both have use cases - as a store of value, and secondarily for day-to-day transactions; both can be bought and sold on multiple exchanges - for both other cryptos and cash; and thus, can be "trusted." Yes, Bitcoin still must fight through its SegWit/block increase issues, in order to become truly immutable and trusted. However, I have no doubt the "economic majority" will win this battle, by hook or crook - per my June 16th Steemit post, "My view of the Bitcoin scaling saga."

https://steemit.com/andyhoffman/@andyhoffman/6-16-17-andy-hoffman-my-view-of-the-bitcoin-scaling-saga

As for the others, let's just put it this way. For ten years, I worked as a Wall Street oilfield service, drilling, and equipment analyst, with not a whit of geology or engineering knowledge. After that, five years in the mining industry - also, with not an iota of practical knowledge of how mining works; and now, I'm "analyzing" crypto-currency, despite having zero technical background. And yet, I've done just fine in all cases, based on my intense desire to learn; strong analytical skills; and most important of all, my ability to seek out, and learn from, the industries' brightest minds.

Based on my "study" of crypto-currency over the past 18 months - to the point that whilst knowing nothing of how it "works," I'm more crypto-savvy than 99.9% of the world's population - it couldn't be clearer that the vast majority of ICOs will fail; possibly, much sooner than most can imagine. But perhaps not, as bubbles often last much longer than anyone can expect.

And frankly, the one that scares me most is Ethereum, as it has all the hallmarks of danger - from its cult of personality, to huge Wall Street and Main Street investment capital, to wild expectations that it will dominate the blockchain for decades to come. The way I see it, Ethereum is a wildly unstable "product" - having been the victim of everything from hacks to (centralized management led) hard forks to flash crashes and network freezes. Clearly, its scaling issues are AT LEAST as large as Bitcoin's, and far more complex -to the point that future hard forks are not just possible, but guaranteed. Not to mention, its valuation has risen so fast relative to its expectations, it has the potential to experience a pretty nasty plunge at any time - like the one we're seeing this weekend, which may or may not reverse any time soon.

Some people say Ethereum's success is good for Bitcoin, but I beg to differ. Being famous - or should I say, infamous - for having criminals like JP Morgan as investors, and hosting ICOs of completely worthless tokens - is not a recipe for success. And thus, when they spectacularly fail - it will decidedly not be good for cryptos' overall reputation. That said, when the smoke clears, Bitcoin and Litecoin's use cases will be unchanged - as opposed to 90-plus percent of "everything else"; most of which, will be permanently damaged. As for Ethereum, perhaps there's something to the hype - and thus, that it will one day become an undisputed crypto leader - worth more, LOL, than Bitcoin. Which, if that's the case, good for them, and anyone choosing to invest in its tokens. As for me, I'll simply say "sold to you," and continue to hold the "gold standard" of crypto currency, Bitcoin - along with a tiny (pardon the pun) "dash" of the silver standard, Litecoin.

Good luck to all. And remember, while Bitcoin's future is still far from written, it has built a monumental lead in the cryptocurrency space -which will be unbelievable difficult to be exceeded. Conversely, the odds of any "anything else" crypto becoming a major success are infinitesimal - so buyer beware, as the one thing I'm certain of, it's going to be wild, bumpy ride; potentially, for many years to come.