How many bitcoins does it take to buy a pizza?
Ric Edelman: It's Monday, May 22nd. Happy Bitcoin Pizza Day. This is an annual commemoration now and it's, what, 14th year? As we all celebrate the first commercial use of bitcoin. It occurred on May 22nd in 2010. The story goes back that far. Laszlo Hanyecze was an early bitcoin miner. And when you were engaged in bitcoin mining back then, about every ten minutes when you solved one of the cryptographic puzzles that verified data being placed onto the Bitcoin blockchain, you got a blockchain reward, a mining reward of how much? 50 bitcoins.
Now that sounds like an awful lot. Back then, bitcoins were worth, well, zero. I mean, nobody knew what a bitcoin was worth. The assumption was that they were worth nothing because there was nothing you could ever do with a bitcoin. Back in 2009 and 2010, the general attitude was that this was a really interesting computer project, but nobody really understood whether it would ever have any commercial use in the marketplace.
And so Laszlo decided to post a note on a digital forum where he and other bitcoiners were hanging around. And he said on this forum that he was willing to buy two large pizzas paying in bitcoin if anybody would deliver the pizzas to him. Well, a couple of days later, on May 22nd, somebody did. They delivered two large pizzas to him from Papa John's. Laszlo paid him 10,000 bitcoins. In other words, Laszlo felt that the 10,000 bitcoins were worth about $14, the price of the two pizzas. Well, that was a fair trade back in 2010, based on the assumed value of bitcoin. At that moment, 10,000 bitcoins equaled $14. Today, those 10,000 bitcoins are worth $270 million. That was a pretty good profit for the sale of those two pizzas.
So now you know why we love to celebrate Bitcoin Pizza Day. And it really makes you wonder, does Laszlo kick himself for giving away 10,000 bitcoins for $270 million? I'm not sure if he does or doesn't. I haven’t asked him. And what happened to the person who received those 10,000 bitcoins? Did they sell them? Have they held on to them? You have to wonder what all happened next.
By the way, bitcoin miners don't get 50 bitcoins anymore. The number of bitcoins that you receive from mining gets cut in half about every four years. So bitcoin miners saw a decline in the number of bitcoins that they receive for their work. It went from 50 to 25 bitcoins. Then four years later, it was cut again to 12.5. And then it was cut again to six and a quarter. That's where we stand right now. If you're a bitcoin miner, you receive for your efforts six and a quarter bitcoin. Now, if you do the math on that, six and a quarter bitcoin is worth somewhere around $200,000. Pretty good pay, isn't it? By the way, the six and a quarter bitcoin that you currently receive in 2023, for next year, it's going to be cut again from six and a half to three and an eighth.
Many people argue that this is one of the key reasons that the price of bitcoin keeps rising exponentially. If the number of bitcoins that miners get gets cut in half every four years, they demand a doubling in the value of each one so that their compensation remains the same. Historically, that has always worked. Since 2010, we see a dramatic increase in the price of bitcoin following each halving the theory if we extrapolate it further, argues that by summer of 25, shortly after the next halving, the price of bitcoin should be around $150,000.
That's a 5X increase from today's price. Will that prove true the way it always has in the past? Well, you know what they say past performance is no guarantee of future results and any assertion of the contrary is a federal offense. I don't know if it'll happen. Personally, I'm rather bullish on the subject, but we're going to have to wait and find out.
Meantime, if you are interested in adding crypto to your portfolio, I'll give you a couple of ETFs that give you the opportunity to invest in companies that are engaged in the crypto marketplace. One of them is the Global X Blockchain ETF. The symbol is BKCH. This ETF invests in companies that are building the technologies involved in crypto. The second one is the Global X Blockchain and Bitcoin Strategies ETF, Symbol BITS. It not only invests in companies, but also invests in futures contracts, which indirectly gives you an exposure to bitcoin itself. You can learn a lot more about both of these ETFs by visiting Global X ETFs.com or talking with your financial advisor.
And I also want to remind you, tomorrow join me for a one-hour webinar at 2 p.m. Eastern called Crypto and Self-Custody: The Future of Wealth and Asset Management. It's an online virtual event. It's free. The target audience is financial advisors, but you're welcome to watch as well. Simply register at DACFP.com.