Tesla, BMW, and a Historic Week for Crypto

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Posted by The Savvy Retiree on February 15, 2021 in Investing

I have a story today about BMW trying to save consumers more than $7 billion a year. It’s also a story about Tesla and a $1.5 billion investment. And it’s a story about me spending $893 at a Czech computer store.

Ultimately, this is a story about cryptocurrency. But stick with me for a moment because there’s a lot going on here that could mean lots of money in your pocket.

I regularly write to you about crypto this or that, particularly about the role bitcoin will play in our lives going forward. But crypto isn’t just the narrow little world of digital money. It’s an entirely new way of conducting business, insuring authenticity, protecting consumers, assuring safety, providing lending services, etc. etc. etc.

In that is an opportunity that isn’t once-in-a-generation or once-in-a-lifetime. It might well be once-in-a-species. At the very least, it could be once in whatever the financial version of a geological epoch is.

Let’s start with BMW…

The German automaker has linked up with a blockchain company called VeChain, which trades in the crypto-sphere under the symbol VET. Through this partnership, the pair are creating a new app called “VerifyCar.” It will be a “decentralized application built on the VeChain Blockchain” and it will effectively capture all sorts of car-centric data, such as miles driven, repairs, vehicle service records, and whatnot. Because it’s on the blockchain, the data is immutable; no one can monkey with it…which is where the $7 billion enters our story.

Used-car fraud is a big deal. BMW’s grand pooh-bah of information technology reported that in 2019, every third used-car sold in Germany alone had a manipulated odometer. That average impact of that added about €3,000 ($3,600) to the car sales prices, or about €6 billion annually (the $7 billion figure).

Through the VeChain hookup, that goes away. A would-be buyer would be able to request a VerifyCar readout. And since mileage can’t be manipulated lower, a seller can’t screw the buyer out of thousands of dollars.

Then there’s Tesla’s announcement this past week that it has invested $1.5 billion in bitcoin, and will begin accepting bitcoin as payment for its cars (which, frankly, is a waste of bitcoin, since the crypto will go higher while the Tesla depreciates). That news sent bitcoin $5,000 higher (a 13% move) over a span of about 30 minutes.

Tesla is just the latest company to move into bitcoin as a store of value. It underscores the growing legitimacy of cryptocurrency, and it’s increasingly making the crypto naysayers look like 19th century Luddites who refuse to accept the sea change, even as the sea is washing over them.

Separately, the U.S. Comptroller of the Currency has recently announced that federally regulated banks can conduct payments using stablecoins (a type of crypto tied to assets like the dollar, the euro, the pound, etc.). Meanwhile, credit card giant Visa announced a few days ago that it’s now working on systems that will allow customers of traditional banks to buy and hold crypto assets. That, along with PayPal’s recent move to allow consumers to buy and hold crypto, is going to usher in mass adoption of crypto assets among Main Street investors and savers.

And when mass adoption happens, the price of the major cryptocurrencies such as bitcoin, Ethereum, and a few others are going to surge. Demand does that to an asset.

Which brings me to that $893 I spent this past week at a Czech electronics store…

I’ve decided I want to build an Ethereum mining rig—the Frankenstein-like collection of random computer parts whose sole, unified purpose is to crunch complex calculations that unlock fragments of an Ethereum coin.

Back in California, before I moved to Prague, I built five mining rigs. It was partly for the fun of doing it with my son, partly for the greed of mining a digital asset that had real financial value. Before moving to Central Europe, however, I sold off all my gear. With Ethereum prices now at record highs above $1,700, I am again excited to build a rig for the enjoyment of tinkering (boys and their toys) and for the prospect of earning passive income 24 hours a day.

I won’t bore you here with the numbingly technical innards, but the rig I’m building has the capacity to earn about $180 a month with Ethereum at $1,700, and I can expand the rig to earn as much as $1,100 a month. (I plan on filming the construction of this rig, and once it’s up and running I’ll send you a video to show you what’s involved, if for no other reason than curiosity’s sake or something to chat about at your next cocktail party.)

I realize $180 isn’t much, but the sum isn’t really the point of the rig. The point is that I expect Ethereum will cross $20,000 and I want to gather as much of it as I can now without having to spend $1,700 per coin, when, for half that price, I can build a rig that (quite profitably) mines a bit more than 1/10th of an Ethereum every month.

Crazy as $20,000 sounds, it’s not really that crazy when you consider Ethereum’s role in the crypto-sphere. But that’s a more technical story for another day.

In the meantime, I’m certainly not recommending you rush out and follow my lead and build a mining rig. I can tell you from experience that they can certainly be ornery little buggers from a technical perspective, even though you only need exactly seven computer parts to build a working rig.

But I am saying, watch this space. And watch what’s going on in the crypto markets. Huge—huge!—opportunities are coursing through crypto as the financial world morphs. And I don’t want you to miss out.

By Jeff D. Opdyke