Bought Bitcoin in 2013 at $180 USD, now it’s worth $18000 USD in 2020. #HODL
A case for bitcoin & #HODL'n forever.
People will read the headline of this week’s newsletter & maybe feel a little bit of FOMO. Have you really missed out on the bitcoin hype? I don’t think so. Bullish investors believe that Bitcoin is going to cross the $1Trillion market cap (currently sitting at around $300Billion - yes that’s more than the market cap of companies like Intel, Coca Cola that have been around for decades), and if that does happen we’re easily talking about each BTC to be valued at over $50,000USD by 2022. So no you have not missed out!
To add to that, the market volatility (in March $BTC fell down to $3800 USD) presents multiple opportunities to buy regularly. As they say, volatility is a friend of the long-term investor. After buying BTC in 2013, many times I had the urge to cash in & sometimes traded small amounts to buy other crypto assets like Ethereum & Ripple (both are going up again this year as well) but then decided to trade those & sit (forever) on BTC.
Here’s why:
Gaining Institutional Trust as a defense against currency devaluation : Why does a man-made, piece of paper i.e currency hold value? Because we as citizens and corporations ‘believe’ that it does & the institutions that run our countries back it. BTC believers argue that at some point the USD won’t work as the world’s reserve currency, and that’s when BTC will win. Some examples of more layers of ‘trust’ getting added to the crypto world:
Fidelity Investments recently published a paper showing positive impact for 1%-5% Bitcoin allocation in clients’ portfolios. Stone Ridge ($10B asset manager) now owns $115M in Bitcoin. Paul Tudor Jones publicly revealed that he has put 2% of assets into Bitcoin. Multiple public pensions in the US have now gained exposure to Bitcoin via fund managers. MicroStrategy ($1.2B+ market cap on NASDAQ) put 85% of their $500M balance sheet ($425M) into Bitcoin. And most recently, fintech company Square announced that it had purchased about $50M of Bitcoin for their balance sheet (approximately 1% of assets).
High demand by institutions and corporates will lower volatility: The 2017 rally was highly speculative in nature, as individuals dived into the hype & were trading BTC without really understanding crypto. But the 2020 rally is backed by institutions & corporations that are committing hundreds of millions & billions to BTC, hence volatility is expected to be much lesser.
Limited supply, capped at 21million: Currently, there are about 18.4million bitcoin in circulation, out of the 21million Bitcoin that will ever be available! At one point, there were 7200+ BTC entering circulation every day, which is now down to roughly 900 BTC per day, hence the supply shocks have driven the price higher.
Long-term believers: People have started parking 1-10% of their net worth in the crypto world. 60% of investors in BTC haven’t traded it in the last 12 months, which means that people have accepted the volatility of this asset class & are willing to hold on to it long-term.
To summarize, high demand, limited supply, and long-term investors make a strong case for BTC’s price moving upwards. Will there be periods of volatility & uncertainty? 100% but…“Never mind what haters say, ignore ’em till they fade away.” — T. I.
Superb piece!