Investing in Bitcoin might not be as risky as you think. In fact, many people out there believe it to be the best investment opportunity of our lifetime.
This is primarily due to Bitcoin's:
Core properties as an asset
Scalability and adoption growth
Influential supporters
Bitcoin is unlike any innovation we've ever seen, as it is completely rewriting the rules of the entire financial system.
Bitcoin Is the Best Asset
You might hear people call Bitcoin "digital gold." That is because Bitcoin and Gold have both infamously been considered store of value assets for many years. These kind of assets allow investors to protect their wealth from inflation over a long period of time.
With inflation recently reaching 40-year highs and showing no sign of slowing down, it's officially irresponsible to save in dollars.
There are many assets that allow people to park their cash, but let's just focus on Bitcoin vs. Gold for now. When thinking about the characteristics of money, Bitcoin is superior.
Bitcoin's predetermined scarcity, built by programmatic monetary policy is one of its most important principles. There is a finite supply of 21 million.
Now, why the hell does that matter?
To put it simply: Things with a limited supply have more value. Bitcoin is the only asset on the planet where its supply is unaffected by demand, which in theory, makes it the most desirable piece of property ever created.
If there's one thing we've learned over the last two years, it's that the world is going digital ... and Bitcoin is and will be the digital transformation of capital.
Bitcoin has Huge Upside Opportunity
Bitcoin is the creation of a new asset class with a truly scarce supply that you have a chance to take a piece of. A trillion-dollar asset that 99% of the world does not own (yet).
Let's do some basic math:
There is a total of $500 trillion assets that make up the global economy
There is a finite supply of 21,000,000 bitcoin
If Bitcoin were to capture just 2% of that $500 trillion market cap / 21,000,000 coins =
$476,190 per coin.
That seems absurd right. And why did I choose 2%?
Because, Bitcoin is competing with Gold as the new, dominant store of value asset and Gold's market cap currently sits around $10 trillion ... ala the 2%.
In a year of record inflation numbers, I'd hope that a popular store of value asset like Gold would do, well just that...store my value. Well, in 2021, Gold returned -4.5% ... yes, negative. Bitcoin returned 57%.
Okay, maybe that was just an off year, but how about the last 10 years?
From 2011-2021, Gold had an annualized return of 1.7%, while Bitcoin's was 222%.
Ten years of investing in a shiny rock to not even beat the annual inflation rate of 7.9% that the U.S. announced last month... really makes you think. Maybe humans need a new safe haven, alternative asset to protect wealth over time. But which one(s)?
Here's a neat chart from Charlie Bilello, founder of Compound Capital Investors, that breaks down the investment returns of each major asset class over the last decade.
Bitcoin, built in the digital age on math and software, is the clear winner and specifically designed to thrive in these kind of environments ... but how far can it really go?
A well-respected Bitcoin analyst, PlanB, created a Stock-To-Flow model using bitcoin's scarcity to assign a dollar value (shown below). It has become one of the most popular and accurate pricing prediction tools in the bitcoin community.
Some hard to believe numbers - I get it. Let's look at one more.
The chart below is a hypothetical representation of how Bitcoin could achieve such a monstrous market capitalization in the near future.
If you're not up to date on the technological advancements happening in today's society, I highly recommend reading the entire report (above) from Yassine Elmandra from Ark Investments. Published earlier this year, Yassine's report provides great insight and data around Bitcoin as a monetary revolution as well as other aspects of technology.
Although these price predictions and graphs are fun, it's good to remember that it's not Bitcoin or even other assets that are increasing in price ... it's simply the massive devaluation of fiat currency taking place on a global scale.
Bitcoin Is Too Big to Fail
Like many things in life, an asset is only as good as the number of people using it.
And this is where people usually stop, consider Bitcoin a marketing scheme, and never do the homework.
Many things in life are too good to be true, but Bitcoin doesn't fall into that category.
Once upon a time, the Internet, smartphones, Amazon, and Facebook... all seemed too good to be true and started at zero users. Yet, look where they are now - they all turned out to be great investment opportunities.
These life-altering innovations can attribute part of their success to Metcalfe's Law, which states: the value of a network effect is proportional to the square number of connected users of the system.
Founder of SkyBridge Capital, Anthony Scaramucci highlights this perfectly in his book, the Sweet Life with Bitcoin, by comparing Bitcoin's scalability trend to the old fax machine and today's social networks:
"The technology has advanced but the principle is the same when applied to modern social networks; Metcalfe's Law says the greater the number of people using it, the more valuable the platform becomes."
Although I still consider Bitcoin to be in the very early stages, there are currently around 130+ million users on the network. And while currently growing at a faster rate than the Internet, Bitcoin is projected to see 1 billion users by 2025.
Bitcoin's Supporting Cast
Some of world's smartest and most powerful people support Bitcoin. Here is a short list below:
Jack Dorsey, Twitter co-founder, now focusing more on Bitcoin
Michael Saylor, CEO of Microstrategy
Elon Musk, CEO of SpaceX and Tesla
Nayib Buchalele, President of El Salvador
Kevin O'Leary and Mark Cuban
Luiz Suarez, Mayor of Miami
Eric Adams, Mayor of New York
Cynthia Lummis, U.S. Senator of Wyoming
Steve Wozniak, co-founder of Apple
Ted Cruz, U.S. Senator of Texas
Now check out the people that believe in crypto in general: Blockworks Tweet.
From someone who is obsessed with following current events and updates around Bitcoin, it feels as if a new "supporter" gets announced daily. And they're all coming from different backgrounds...
Whether it's a nation state, institutional investor, U.S. senator, or just a popular celebrity, their individual influence brings a lot of wandering eyes to the cryptocurrency space.
And it's not just eyes...Bitcoin is an open, decentralized system, which means anyone in the world can opt into the network using a smartphone. That is more than 80% of the global population that now has a programmatic savings technology at the tip of their fingers.
When looking at the current state of the economy, there is a massive need for investment alternatives to cash and Bitcoin offers a lifeline.
Bitcoin is bridging the gap for financial inclusion by leveling the playing field and rewriting the rules of the market, and it's clear some of the world's most influential people are starting to wake up to that reality.
Conclusion
Bitcoin is the hardest form of money the world has ever seen.
Dollars can be printed out of thin air
Real estate, although much harder to create, can still add more buildings
Gold is susceptible to counterfeits and commodity-market shifts
Bitcoin, however, is digital property in cyberspace, run by incorruptible software, and will forever have a supply 21,000,000.
Consider this: you're with a friend and there is a box of cookies on the table ... you might not grab one right away because you know there is a good chance that there will still be some later.
Now consider: you're at a party with 100 people and you see the same box of cookies on the table ... you're going to grab one. Even if you're not hungry, you will probably grab one because you know there might not be any left later.
As Bitcoin continues to grow at an extremely rapid rate, it seems reasonable to at least explore the opportunity.
I am not a financial advisor and I don't have a crystal ball, but it is clear that game theory is being played out on a global scale. I'll leave you with a quote:
"It might make sense just to get some in case it catches on." - Satoshi Nakamoto (2009)
Thanks for reading ... till next time.
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