On Bitcoin.
What follows is a note that I’ve sent to a number of friends these past few months. I thought that you might want to see it. I’m happy to answer any questions below.
At the end, I share how I’ve invested both personally and in my company.
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The following isn’t financial advice. It’s simply my opinion. I’ve bet big on this and have already put my money where my mouth is. I’ve nothing to sell. This isn’t my business. It’s just an exciting space with a lot of bad information in it right now.
I intend to keep what I have now for years no matter what happens. Day to day fluctuations really don’t make a difference unless you’re day trading. It’s the greater movements and trust that matters.
In essence:
Bitcoin is a story. (All money is a story.)
It’s value is correlated to how much faith there is proven in the story, and how many people believe in it.
Part of the reason why I’m so bullish on it now vs a few years ago is because a few years ago the story wasn’t as strong. It was more fringe.
Despite the price being lower, it had more risk. Too much risk. I’ve been watching the space since 2016 and the risk profile only began to be right for me at the start of this year.
Now is very different. The majority of the major financial institutions have made massive investments into it. So big that they can’t back out.
Every major bet made by a large hedge fund or major financial institution or corporation and every major test it withstands strengthens the story.
Basically the only thing that could take it out right now is if major governments create their own crypto and force it on their citizens. Game theory in the worldwide financial markets pretty clearly opposes this happening.
Still, this is not an impossible scenario. But with so many powerful people and institutions that have made such big investments that have so much influence over government, it seems less likely that this will happen every day. And even if that does happen, Bitcoin as a store of value will very likely remain. The network effects are simply too big now.
Right now I believe that there’s an unprecedented asymmetric opportunity.
It’s possible that it’ll go to zero but that’s unlikely. It’s possible it’ll stay around where it is now. And it’s possible that it’ll go to 500k, or even a million a Bitcoin in the coming years.
For a relatively small investment that you’ll never miss, you can take a position now that could result in tremendous wealth in the coming years.
Right now the combination of the strength of the story and how difficult and hard to understand it is to buy and hold is the perfect storm.
Once it gets easier to buy and spend, the opportunity will have passed.
Or, as I say, once your Mom and Dad know how to buy it, the biggest opportunity zone has passed.
(And of note: I’m personally all in on BTC. There’s absolutely potential in ETH but I feel like it’s function and therefore time to realize it’s real value will take much longer to be realized. Some of the alt coins will likely win out but it’s a crapshoot. The risk profile of them is not what I’m looking for. That, and they’ll all track to BTC anyway and I’ll be able to buy them with BTC at any time so that space is irrelevant to me.)
Because I think it’s important to know what somebody giving advice does themself, here’s how I’ve invested in crypto:
1. I have systematically put 15% of my company’s cash on reserve into BTC since January. I bought a lot at 30k and have been buying all of the way up. I bought more this morning at 60k. Every week I do a small buy. This is called Dollar Cost Averaging (DCA) and it’s likely the safest and most intelligent way to accumulate sats (the smaller denomination of Bitcoin.) Trying to time the market is impossible and is a fool’s game. Investing money you cannot lose is a fool’s game.
2. Personally, I maxed out my TFSA with the QBTC Bitcoin fund earlier this year. Alison’s TFSA has no exposure to crypto. My TFSA has almost doubled in less than two months as a result. Tax free. In Canada there are now ETF’s as well that track BTC and can be placed into any tax sheltered account.
3. Additionally, alison and I have bought a smaller chunk personally that we’re holding separate as a sort of reserve fund. We figure that in a few years we’ll be able to travel anywhere in the world with a USB key and simply trade some BTC for a vacation or months away. After 8 years abroad I welcome the idea of accessing funds abroad with ease and without exorbitant fees.
4. I have not sold any BTC. But I have had a number target on price since day 1 of investing where I plan on removing my principle investment.
In this space, if you are going to get into it, you must remove emotion. Do your research, don’t bet anything you can’t lose, and set a logical plan and follow it objectively.
