Welcome to another edition of Crypto: Decrypted, where I’m excited to say that the “Run after the Race” has begun. We anticipated that a crypto asset run would occur once uncertainty was removed, ostensibly due to the presidential elections. Certainly, we’ve seen the precursor to this with bitcoin making a large price move starting Nov 4th and continuing with support when the election was called for Joe Biden. While there is still some time to go before January 20, 2021 and there are rumblings of recounts, we’re seeing a favorable response to this clarity. The markets don’t care who wins. They just care that someone wins.
It remains an historic time for many reasons. The Bitcoin whitepaper had its 12th year anniversary on 10/31/20 and it’s amazing to see what has transpired. One item of note is that it’s becoming a given that bitcoin is an asset that investors need to have in their portfolio. Stanley Druckenmiller became the latest billionaire to publicly disclose his bitcoin investment, stating that it would probably outperform gold. Mr. Druckenmiller joins Paul Tudor Jones who continued on the bitcoin bull wagon and who now states that buying bitcoin is like investing in early-stage Apple or Google. This is again on the heels of big business as Square recently acquired $50M of bitcoin, and MicroStrategy moved $425M of corporate treasury into bitcoin. Interestingly, MicroStrategy’s Q3 investment has now yielded gains that outpaced the company’s core revenues. This article at the end of October noted that the investment was worth north of $525M, and at today’s prices the value of their $425M investment is worth over $600M. Not too shabby.
With all of this, many people are concerned they have missed the wave; we don’t think so. We believe it is just beginning, and there is plenty of time to jump into the pool. In fact, this recent article points to the fact that the ultra-wealthy are now buying up bitcoin even now as the price nears all-time highs. Why would they do that? Well, perhaps because the run has just begun!
Many of the brightest minds in finance are now beating the drum and some predict that that 2021 could be a year where prices could soar up near $100K per bitcoin. That’s approximately a 10x jump from the Halvening in May, and approximately a 7x jump from today’s prices.
This is just the beginning of the crypto asset landscape however, and we think it’s important to understand the full picture. We’ve spent most of the year working to raise awareness about bitcoin and this run. Now that this awareness is here and, frankly, now that we’re seeing broader acceptance of bitcoin, it’s time to expand the dialog, because bitcoin is just the beginning.
Back in 2018 our CIO Jake Ryan wrote his well-regarded article Crypto Asset Classes, which discuss the different types of crypto assets that one will encounter in this new world. The world has expanded and matured since then and, just as bitcoin has played a key role in the world of finance, other types of crypto assets will play a key role in the evolution of technology across the board as we enter the Age of Autonomy. Some of the asset classes we look at include platforms, governance tokens, utility tokens and stablecoins. For those not familiar with these, fear not! We’ll be discussing them in upcoming updates. What is relevant, however is that, just as bitcoin is transforming the world of currency, these distinct asset classes will transform other aspects of the world in which we live.
This is why we believe it is essential to understand what they are and how they fit into a diversified portfolio. (Note that At TRADECRAFT we even go one step further and organize these crypto assets according to investment themes, which include sound money, decentralized finance, autonomous protocols and provable scarcity.)
The key takeaway here however, and what we focus on from a pure investment standpoint is that we believe assets in these other classes will outperform bitcoin, mitigate risk, produce greater returns and be an even better investment. Of course we believe in bitcoin. But bitcoin is just the beginning. This is why we are a crypto asset fund, not just a purely bitcoin fund.
Going forward, just as our goal has been education regarding bitcoin, in these updates we’ll be sure to explore in detail these different classes and why we feel they deserve a place in a well-structured, diversified crypto asset portfolio.
Ultimately, it’s a very interesting time. We’re excited to share it with you and are grateful to have the opportunity to Decrypt: Crypto for you!