As bitcoin hovers around 18k, I have been amazed by the velocity of the recovery and how little press coverage it has gotten recently. When looking at google trends, you can clearly see that it is not a “hot” topic this year as it was in 2017.
I have never been a crypto bull or anything close to it, however, this year I began to notice an interesting pattern of price action, smart investors changing their minds and not a lot of interest from media or friends on the topic.
There are a few points that consistently come up on the macro side that should drive demand for inflation hedge assets (gold, real estate, stocks and bitcoin)
- Massive fiscal stimulus around the world: 3 Trillion and 2Tr+ on the way
- Unprecedented monetary policy – FED balance sheet expansion
- Interest rates near cero or negative – not going anywhere soon
- Officials willing to overshoot on inflation targets
- World is craving new “safe” assets
This has led to an awakening of demand for all of these types of inflation protection assets and bitcoin is not an exception.
- Paul tudor jones published a paper where he describes bitcoin as potentially the “fastest horse” in the great monetary inflation race. He has invested 2% of his assets in bitcoin. You would be up 2X today if you bought the day he published the paper.
- Stan Druckenmiller recently came out saying he owns a tiny bit of bitcoin but owns a significant amount more of gold. Same thesis around inflation and excess monetary supply in the system. “If the gold bet works, the bitcoin bet should work better”
- Square (50M) and Multistrategy (425M) investing their balance sheet in BTC
- John Malone is buying "hard" assets - unrelated to BTC but relevant
I recommend reading these articles by Pomp and Brian Armstrong which give a very bullish case of what is to come in the following years, not only in bitcoin but in crypto in general. Fred Wilson called BTC the gateway drug.
Other interesting twitter follows are Raoul Paul and Dan Tapiero who have been pounding the table on BTC for a while.
All of this is happening when there is less supply out there for Bitcoin. This scarcity effect is also applicable to Gold. The reflation thesis has a lot of similarities between gold and bitcoin bulls.
There are a number of risks associated with bitcoin like its volatility, anonymity, liquidity, etc but I continue to think that the biggest risk is that of a regulatory nature. Governments can always change the rules of the game when it comes to money. I also am not such a big believer on the application/transactional use case of BTC, at least not for the near future.
I realize that I am writing this near BTC´s all time high and could be set for a fall. Even so, all of this made me think that there is an interesting case for bitcoin as a store of value within the great inflation race and deserved a place in my portfolio. We will see how it holds up in 10 yrs.