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Crypto Q & A

From Stansberry Research Newsletter: Question from David L.

Bitcoin may be the Final Frontier... but the IRS is the one entity that always gets its take. Ditto with regulators. Don't you think regulators could make things difficult for crypto?

Great question David... this was actually the most popular one by far!

Look, the government could try to say Bitcoin's illegal – but the technology literally makes it unstoppable.

It'd work out just as well as prohibition or when they tried to make going over 55mph illegal in the 1980s. People would just find a way around it (like speakeasys), or do it anyway (like speeding).

And even if they were to say owning Bitcoin is illegal... which I highly, highly doubt... that would undeniably hurt the value in the near-term, but I believe innovation would simply move offshore.

We've seen examples of this as China has changed its stance on crypto several times over the years. The system will reach a tipping point where governments that ban it will just need to let it back in. Just like what happened with gold in America.

As far as taxes are concerned, they may seem tricky at first just like any new asset, but there are several crypto tax software providers and more and more are coming out every day. That's what I do personally. These programs pull in most of my transactions automatically, and have made it incredibly easy for me to file my taxes every year.

Question from Charles R.

We need an easier way to buy crypto. Is there a way or will there be one soon?

My gut tells me most people think buying Bitcoin is much harder than it actually is.

You learned how to use the internet, right?

[There are many crypto exchanges for you to chose from]

There's also Bitcoin ATMs now, and all sorts of new services popping up to make things easier for you...

Services like Crypto.com's app or the "Cash App" by Square can put Bitcoin on your phone in minutes.

PayPal, Visa, Mastercard and all the big names are releasing crypto features, too.

Buying some smaller cryptos can require a bit more time, but that challenge filters out most investors and means the ones of us who are willing to do the work capture all the alpha.


Question from Greg W.

Are investors able today to purchase Bitcoin in their IRA/ROTH accounts?

Yes! Same with most 401k and brokerage accounts. IRS Notice 2014-21, which declared Bitcoin property for tax purposes is what mandates IRAs to let you hold it in your account. As Bitcoin continues to grow in popularity, I expect this process to only get easier and easier.

Question from Michelle P.

So if crypto/Bitcoin is based on internet/technology, etc., isn't it open to problems if that base gets shutdown or is hacked?

This was another popular one.

Bitcoin runs on computers in more than 100 countries. To shut it down, every country in the world would need to work together to root out everyone that was contributing computing power to the network. Good luck.

My point is: Bitcoin has already evolved into the largest and most secure computing network in history.

Hacking it would require collusion among the operators of that network or spinning up your own network that's 51% as powerful as Bitcoin's. The costs to even attempt that doesn't make it worth it...

Stepping back, though, to hack Bitcoin would basically mean destroying it because people would lose faith in the network. It would be like stealing the Mona Lisa but knowing as soon as you got it outside, it would turn to dust in your hands. If you steal millions of dollars-worth of Bitcoin, all the buyers will exit and your heist would have been meaningless.

Question from Anthony G.

What do you suggest as asset allocation today to cryptos?

You don't need a lot. It's the best asymmetric bet in investing right now. Amazon (AMZN) and Facebook (FB) simply won't see their stock rise 1,000% with such enormous market caps.

But we believe there's a sea of 10x opportunities within crypto. I have TEN open 1,000%+ winners in Crypto Capital right now. (It was 4 when I first started working on my Beyond Bitcoin presentation.)

More generally, we recommend starting with 1% of your invest-able assets in crypto... as you grow more comfortable, you can bump that up to 5% or more depending on your tolerance for risk.

Question from Russell B.

Because this is a foreign concept for me, will I need to spend a lot of time learning how to make these buys?

I won't pretend getting started in Bitcoin requires ZERO homework. You should never invest in something you don' t understand.

To take things one step further... I would actually argue that crypto is easier to navigate than the traditional monetary system. If you want to pay someone in England today, for example, you're going to pay as much as $50 in fees and it could take four days or more. You would be limited to dealing with your bank on weekdays during banking hours.

With Bitcoin and crypto, you could do the exact same transaction in minutes... for about a $0.97 fee... 365 days a year... 24 hours a day... WITHOUT touching the banking system.

We can send an e-mail anywhere in the world instantly. Why shouldn't we be able to do the same thing with our money?

Question from Choong K.

Where can one use Bitcoin to buy an asset now?

More places than you'd think. I'll just mention a few that comes to mind:

AT&T... Burger King... KFC... Overstock... Subway... Virgin Galactic... At a Miami Dolphins or Dallas Mavericks game (once we can finally go back to sports arenas)... Norwegian Airline... Etsy... Domino's Pizza... Expedia.com... and the Red Cross.

The list goes on and on...

If you wanted to, you could also connect your Bitcoin to a debit card and spend it ANYWHERE the same way you would with cash.

Question from Priscilla H.

Is there an ETF for crypto?

Yes! There is a great stock opportunity for people who want crypto exposure... it trades just like any normal ETF fund, but it's not quite the same.

Question from Dan K.

Here is what I think is a good question that scares the heck out of a lot of folks who have modest understanding of Bitcoin, and a partial reason as to why it is so volatile... WHALES. These guys with 1,000 or more Bitcoin seem to be able to manipulate (too strong a term), but cause sharp drops in the price and scaring folks away. What is your thought on this one? Thank you!

Dan... it's pretty awesome you already know what a "whale" is. For anyone who doesn't, in the crypto world, a "whale" is someone that has a huge stake in a particular crypto asset...

The cool part about Bitcoin and other cryptos is they're very transparent. You can look at exactly what the whales are doing... and for the most part, what we see is a clear pattern of accumulation. The whales tend to buy Bitcoin when the prices are low and sell when the prices are high. We try to do exactly the same. Sure, it might appear there's some market manipulation going on, but the overall trend is crystal clear. Bitcoin grows its user base and use cases every day.

Question from Daniel J.

Maybe this is a dumb question, but if there are only 21 million Bitcoins, what is to keep the big banks or governments from buying up all of them and sitting on them or running the cost up beyond a normal person's ability to purchase them?

That might happen if you wanted to buy an entire Bitcoin, but you don't have to do that. You can buy a fraction of a Bitcoin as small as 0.00000001. If that amount of Bitcoin ever becomes too costly for basic transactions, you'll likely be able to buy even smaller denominations.

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