Ecoinometrics - August 17, 2020

Everyone is buying Bitcoin...

Aug 17, 2020

News keeps on coming that everyone suddenly wants to own Bitcoin.

Yesterday it was Paul Tudor Jones and Fidelity Digital Assets. Today it is publicly traded companies and the ex-CEO of Prudential.

Tomorrow it could be Warren Buffet… who knows.

But it’s about time.

The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:

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Momentum

In this newsletter I tend to focus on Bitcoin. The reason is that the game of which cryptocurrency is going to redefine money for the 21st century is a winner takes all.

Bitcoin with its reliability and existing network effect is the best candidate for that. Period.

But it doesn’t hurt to look at the global crypto space to get a sense of what is going on.

And at the moment the least we can say is that cryptocurrencies are gaining momentum.

Check it out:

Each point is a cryptocurrency.
The x axis and the size of the point represents the market cap.
The y axis is the growth in the past 30 days, i.e. tracking momentum.

Pretty much everything is up in the past 30 days.

If you start from the low end of the market cap of course DeFi is the space to be in. Tokens such as Swipe (SXP) or Ren (REN) are up more than 100% in a month. But of course the smaller your market cap the easier it is to do.

The only DeFi project that has reached escape velocity seems to be Chainlink (LINK). In terms of market cap it is now number five overall. And the most impressive is that it is keeping its momentum.

That’s not surprising but Ethereum benefits from all that. It feels like DeFi is to 2020 what ICOs were to 2017. Most projects will die. So be cautious if you decide to put on your straw hat and go do some yield farming.

Meanwhile Bitcoin is sitting tight just below $12,000 and still has positive momentum for the past 30 days.

Can you get better returns than BTC in a shorter time frame by doing some quick DeFi trades? Probably yes.

But you also run the risk of getting stuck with dead tokens on your hands. The other option is to accumulate more Bitcoin and wait for the halving effect to play out.

That’s a safer bet and for way less work you are very likely to get a 10x growth during this cycle. Seems like a no brainer to me.

Microstrategy is buying Bitcoin

Here is something I didn’t see coming. A publicly traded company decides to use Bitcoin as part of their treasury reserve strategy.

I thought this day would come but definitely not so fast.

When you think about institutional money coming into Bitcoin the usual suspects are: hedge funds, mutual funds, banks and so on. But public and private companies are also part of the space.

Microstrategy is a NASDAQ traded company and they just bought 21,454 BTC as part of their treasury reserve strategy.

Their stated goal for this move is to maximize long term value for the shareholders of the company. Definitely wise.

What I like about this is their reasoning behind the choice of Bitcoin:

Bitcoin has the advantage of network effect and is a dependable store of value.
Bitcoin has potential to generate outsized returns.
Bitcoin is digital gold.

Read the press release.

George Ball is buying Bitcoin

Here is one more convert to Bitcoin: the former CEO of Prudential, George Ball.

If you have been listening long enough you might remember when George Ball was counting Bitcoin as trash.

Things have changed. Why?

Here are the reasons:

The Fed is propping up the stock market by constantly injecting liquidity.
Most of the markets can be manipulated by the government with their use of the money printing machine.
But Bitcoin has its own monetary policy. One that cannot be manipulated. So that’s what you should invest in for those uncertain times.

Plus he basically mentions that millennials FOMO will push Bitcoin higher...

All in all George Ball’s best observation is that Bitcoin is both a store of value and a speculative investment.

Indeed.

I’ve been hammering that here. At this stage of adoption, Bitcoin is already a store of value. But the market is so small that adopting it as a store of value now is also making an asymmetric bet.

The transition from aspirational store of value to full blown global store of value is pretty much a guarantee for exponential growth.

If you haven’t invested yet, don’t waste any more time.

Watch the interview.

Warren Buffet is buying GOLD

Obviously you have seen this one. Of course the headline is a bit misleading. Berkshire Hathaway is not buying any physical gold.

No. What they bought is Barrick Gold, a gold mining company whose ticker on the NYSE happens to be GOLD.

Warren Buffet is staying true to his philosophy. His comfort zone is investing in businesses that pay dividends. He is not a commodity or macro trader.

But Berkshire investing in a gold mining company is definitely telling us something about what he thinks about the demand for hard assets in the future.

So the real question isn’t when is Warren Buffet going to invest in Bitcoin. The real question is: when is Warren Buffet going to invest in a Bitcoin mining company?

Read the article.