With the emergence of bitcoin, there is a generational buying opportunity you must consider.
Each generation is usually gifted with at least one lifetime investment opportunity. You may have heard your parents, grandparents and their friends talk about the real estate they’ve bought and how much it was worth back then versus how much it’s worth today. Or how about “the stock market will continue to trend upwards just keep buying the dip!” narrative? Guess what, that ship has sailed. Rates have hit the zero bound and financial assets are at all time historical highs in both price and valuation right as the Boomers begin liquidating their retirement funds, trying to dump their bags onto us at the top.
By many metrics, the 12 year outlook for stocks and bonds is 0% or worse (in real terms). A lot of risk with little to negative return. Sure, this bull run might still have legs but I know I won’t be able to nail the top of this cycle and don’t want to be caught holding the bag for 12 years just to break even. So I’ll pass on this latest FANG dip. I’d rather take some risk with legitimate upside.
What do I think our generational investment opportunity is? Bitcoin.
Now hear me out:
Let’s take what we are good at and what we know. That is, we have grown up with the internet and have become fluent with this technology. Now, Satoshi (pseudonymous author of the Bitcoin White Paper) has blessed us with a protocol that has enabled digital scarcity. A protocol that you can purchase and that will continue being built upon for generations to come.
As Andreas Antonopoulos says, this protocol has the potential of becoming “the internet of money.” Decentralized. Immutable. Uncensorable. Borderless. Globally accessible. And damn near impossible to kill. Holy shit.
So, let’s take a step back and discuss the potential here. Recently, Fidelity, the Yale Endowment Fund, and The Rockefellers have made investments in digital assets and bitcoin and have joined the individual pioneers like Peter Thiel, Marc Andreessen, and Jack Dorsey. Think about that, some of the best and brightest within the institutional investment world have climbed on board and now consider digital assets and Bitcoin a new asset class worthy of investment. As custody solutions continue to develop and ETF proposals continue to be submitted, the on and off ramps of Bitcoin at institutional scales will continue to grow. Exposure to those buyers brings trillions of potential capital to something that has a strict monetary policy — a supply cap of a mere 21 million coins.
What are a couple bull theses for Bitcoin? One example is if, like me, you think of Bitcoin as a ‘digital gold’ and a form of ‘sound money’ then consider this back of the envelope math: gold’s market cap is ~$7.2 trillion dollars. If Bitcoin takes a conservative 10% of that market over the next 10 years, Bitcoin’s $100 billion market cap turns to $720 billion, which gives you an average return of 21.82%. That’s some decent upside potential.
What if you consider Bitcoin as a hedge against political or financial risk? In addition to gold, I would consider the offshore banking market an applicable comparison, which turns out to be just under $30 trillion according to the BIS international banking statistics. Now, people who store capital offshore have another option to consider. They could continue storing their capital in some foreign country thousands of miles away in different types of currencies (and incur all the costs associated with that). But what if there was an asset that shares all the same benefits of an offshore bank except it’s even harder to seize, much cheaper, more liquid and accessible to you from potentially anywhere in the world? Enter Bitcoin.
Imagine if BTC takes a small 2.5% of this market over the next 10 years. $750 billion of straight cash comes to Bitcoin. The effects of that would bring Bitcoin’s market cap well above $1 trillion and takes your average annualized return well over 21.82%.
These are just two very conservative scenarios that I think have great odds of playing out within the next 10 years (likely sooner) which would yield phenomenal returns. And this only scratches the surface of use cases and reasons to buy Bitcoin. I haven’t even gotten into scaling solutions such as Lightning Network and Liquid Network and many other potential integrations that increases Bitcoin’s use case beyond just a hedge and store of value. The valuations get much crazier when you consider all of that.
The bottom line here is this:
Bitcoin is a digitally scarce protocol you are able to purchase a piece of that shares all the characteristics of sound money. Not to mention, its protocol continues proving to be unhackable and something that can be built upon via 2nd and 3rd layer scaling solutions without changing the integrity of its base layer. And guess what…
There will only ever be 21 million of these things! I can’t say this enough because it is the first time we’ve discovered an asset that we can’t dilute with new supply when price appreciates. And it’s actually much less then 21 million if you consider the ~4 million that are considered lost, the ~1 million that Satoshi has never moved, and the millions people have already bought and hold in cold storage because they already believe all of this! There are really only ~5 million BTC in circulation today.
Here’s another crazy thought: there are more millionaires in the world then there will ever be Bitcoin. Even the wealthiest people in the world are not guaranteed to ever own an entire Bitcoin in their lifetime. Also, there are already more Coinbase accounts then there are Bitcoins in existence today and those users keep growing by the day.
Owning a single Bitcoin is only getting harder and harder to do and I think it is something every Millennial should strive to accomplish over the next few years. It is the most asymmetric investment opportunity of our lifetime, which makes not owning Bitcoin a lot riskier then owning some.
The gift, the lifetime investment opportunity for our generation is not the most recent stock dip, it’s Bitcoin.