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- 🚀 150% CAGR since 2010
Welcome to this week’s Altsights!
Bitcoin hit the $100,000 mark yesterday!
A ₹1,000 investment in Bitcoin in 2010 would be worth about ₹250 crore now 🤯
Bitcoin’s price has compounded at a rate of 150%+ for the last 14 years.
Today, Bitcoin is a $2+ trillion asset and ranks among the top 10 assets (the top 3 being Gold, Apple stock and NVIDIA stock).
In other words: Bitcoin is an un-ignorable asset today.
In today’s newsletter, I discuss Bitcoin, the asset.
I discuss its sharp price rise over the last month, compare it with gold and point out a few potential issues with Nakamoto’s creation.
I have a reasonably favourable view of Bitcoin today for one particular reason that I have discussed in the newsletter.
I do not wish to impose this (or any other view!) on you. I am simply writing this newsletter as it is within the ethos of Altsights. It’s not investment advice.
The $100K Coin 💰
Earlier today, Bitcoin breached the $100K mark.
But as you can see the flagship crypto has gone up from about $70,000 to $100K+ over the 30 days or so.
No wonder Bitcoin’s been in the news and on your social media feed in recent weeks.
So, what exactly happened in Nov that resulted in a 50% pop in Bitcoin’s price?
Donald Trump Got Elected The President 👑
Just months before his election, Trump spoke at Bitcoin2024, a Bitcoin conference attended by the leaders and supporters of the crypto industry.
In his speech, Trump expressed his unequivocal support to the crypto industry and pledged to make the USA ‘a crypto capital’ and ‘a Bitcoin superpower.’
Now with Trump all set to occupy the White House for the next 4 years, crypto investors are thrilled.
What investors seem to be the most thrilled about is the USA creating a ‘strategic Bitcoin reserve’ under Trump’s leadership.
This strategic reserve would be similar to the gold reserves most nations have on their balance sheets.
A strategic US Bitcoin reserve would give Nakamoto’s brainchild the ultimate stamp of legitimacy and result in a ‘crypto gold rush’ among other nation states ✅
Countries like El Salvador and Bhutan have already started accumulating Bitcoin on their balance sheets.
In Nov:
👉🏼 Brazil’s govt proposed a bill to create a strategic ‘Bitcoin Reserve.’
👉🏼 Russia recognised Bitcoin and other cryptos as ‘property.’
Past The Bubble Phase 🫧
Many who dismiss Bitcoin as a bubble compare it to previous bubbles in tulips in the Netherlands of the 17th century and the South Sea Company stock in Great Britain of the 18th century.
However, bubbles tend to be very short-lived as seen below.
But What The F Is Bitcoin? 🤔
Believers and critics have varying interpretations of Bitcoin. Here are some of them:
I think Bitcoin is a store of value.
There’s over $400 trillion of capital around the world that seeks protection against inflation and currency devaluation.
Bitcoin, just like any other scarce asset like land or gold, offers a solution to store this capital without losing value.
Is Bitcoin Like Gold? 🥇
Gold is often referred to as God’s Money as it has been in existence and in use for thousands of years as a currency, a store of value and even in industries.
It is a well-established asset class with well-defined rules and regulations.
However, it has certain limitations. Some of the crucial ones are:
👎🏼 Cumbersome and expensive to move to settle large transactions
👎🏼 Only a few use cases in traditional industries and almost none in the new economy
👎🏼 Exposed to counterfeit risk
Bitcoin has none of these limitations…
✅ Easy and very cheap to transfer and settle large transactions
✅ Many potential use cases in finance, banking and the new economy
✅ Cannot be counterfeited
Bitcoin has gained legitimacy through adoption by influential individuals and large institutions.
While the supply of gold is fairly stable, it increases by about 2% every year. But Bitcoin is truly limited and there will only ever be 21 million Bitcoins in existence.
Potential Issues with Bitcoin 🤷🏻♂️
It’s not all rosy in the crypto world though.
Crypto invokes intense greed in investors and many flock to it only to make quick profits as they gamble their money 🎰
Moreover, not all governments and institutions are onboard with the prospects of crypto yet.
This makes it is difficult for investors to fully commit to Bitcoin and other cryptocurrencies today, especially in countries like India.
#1: Collapses, Bankruptcies and Hacks 🕵🏻♂️
Vauld. FTX. WazirX. 🤦🏻♂️
Crypto exchanges going bust is pretty common. In most cases, this is because of mismanagement generally arising from greed of the exchanges.
Because crypto exchanges are not as well regulated as stock exchanges, disastrous decision making is far more common.
#2: No Regulatory Clarity ❌
While many countries have embraced Bitcoin, the Indian authorities have not warmed up to Bitcoin and other cryptocurrencies yet.
While there is taxation clarity in India (making crypto quasi-legal), regulations/laws that protect investor interests or explicitly assign a status to crypto don’t exist yet.
#3: Very High Price Volatility 📉
If you are in the habit of checking your portfolio frequently and trading based on emotions, Bitcoin may not not for you.
Bitcoin experiences drawdowns of 20-80% quite frequently 🤯
The high volatility is the price investors pay for the supernormal returns that Bitcoin has generated over medium and long periods.
Hope you liked this week’s Altsights.
See you next week!
Cheers,
Madhu,
Founder, Altcase