I started learning about investing when I joined Amazon in the late 90’s and couldn’t stop staring at each day’s ticker. What did all that movement mean? Why was the stock splitting all the time: How were investors evaluating the company? Was I going to be a fabulously wealthy customer service rep (spoiler alert: only those who joined literally several months prior to me and before got that privilege thanks to the timing of the e-commerce bubble pop). Fast forward 22 years and I now run an investment advisory and have created valuable frameworks that I use to invest on behalf of myself and others.
And now, Bitcoin. A few years back when I took a small position, I spent time reading about it (and all blockchain technology), listening to podcasts, and just generally attempting to educate myself. There’s nothing like skin in the game to keep your interest high, so I took a very small position in 2017 and just watched it.
And then this year in May, even though I can’t say I full understand Bitcoin and the other various major cryptos, I decided to purchase an “option call on the future” by purchasing shares of the private Bitwise 10 Crypto Index Fund, using some money from my self-directed IRA. As of tonight, that stake is up 175%. While it would be nice to claim brilliance and keen insight, I clearly do not have a handle on the space yet.
Even though I’m a long way from being a Bitcoin bull, and I have yet to recommend it to any of my advising clients, I do find most of the arguments against Bitcoin to be moronic and largely addressed answered by reading the first few paragraphs of the original Bitcoin White Paper.
Based on what I see, my hope for Bitcoin is that it starts to roll up more and more transactional value, working up from the least credible and highly volatile fiat currencies to the most trusted and most stable over time. You might have trust in the full faith and credit of the US government, but that doesn’t mean your home bias should apply to the rest of the world’s population. Citizens of Venezuela and Greece, for example, may have a very different tolerance for their currencies than you do. Trust in the USD is not universal and probably not deserved.
My guess is that we’ll see Bitcoin transfers happening across borders at a much larger scale ahead of it being used to purchase daily groceries. The price of Bitcoin is stable enough to transfer funds and convert it into a local currency that can be spent. I would take the uncertainty of that principal changing between point a and point b, over the certainty of feeding financial intermediaries like Western Union or banks.
My strategy, until I learn more, is this. Take a percentage of my assets I am comfortable learning with, find a way of covering as many of my blind spots as possible (hence the cap-weighted index from Bitwise), and let it go. I don’t have to understand everything to understand the asymmetry present if any of these large crypto projects get real traction and adoption globally.
Eric Frankl.in 