On November 10th, 2018, I wrote an article discussing the risk/reward potential of Bitcoin. I explained how Bitcoin could appreciate 50x if it continues to evolve as a digital and superior form of gold. I also briefly touched on how Bitcoin is programmable money and the upside is incredibly higher if the applications being built on top of its protocol come to fruition. I concluded that due to the potential upside of this investment, it is riskier not to own any Bitcoin than it is to have some in your portfolio.

At the time of my last article, Bitcoin was trading at about $6,300 and my conservative thesis projected about a 25% return/year over the next 10 years. At this time, Bitcoin is trading at about $9,000 which translates to a 43% ROI over the last 12 months.

My main argument I went over in the previous paper has not changed. I continue to believe Bitcoin will help separate money from state and evolve as the best form of money humanity has ever seen. However, despite that being the foundation of this movement, that’s not the only reason people are investing in it today. Bitcoin means many different things to people right now due to its infancy and it helps to acknowledge the different perspectives that are drawing people to this space.

In my previous article — related to my comparisons to gold and off shore banking — I mentioned how Bitcoin could be viewed through a macro lens as the ultimate hedge to your portfolio. It has no political agenda and has little correlation to any financial asset.

Despite the negative press Bitcoin gets in regards to its volatility, it actually has the potential to both decrease a portfolios’ volatility and increase its’ Sharpe Ratio if positioned appropriately.

This is a portfolio managers’ dream of an asset class. However, we still need more clarity on regulation and investment vehicles that are tailored to family offices and hedge fund managers that ensures adequate custody and insurance solutions. As those issues are addressed, we should see an explosion in adoption as people will see the utility this asset can have in one’s portfolio and will also be able to buy and sell it in an easy and secure fashion.

Another investment thesis to consider is PlanB’s Stock-to-Flow model that predicts Bitcoin to have a market-cap of $100 trillion by 2030. This is a metric that accurately predicts the value of assets that don’t produce any cash flows (like Bitcoin, gold, silver) based on their scarcity. This hypothesis is statistically significant, has an r² of .95, and proven co-integration between price and stock-to-flow.

Because Bitcoin’s supply schedule is transparent and cannot be changed, PlanB was able to forecast how much Bitcoin should be worth in the future, assuming this model continues to hold true.

If price action does follow this path through the next Bitcoin Halvening we should see the price of Bitcoin reach at least $55,000/btc no later then December 2021. Right now, this model is not well known and those that have read about it are skeptical about whether the correlation between price and stock:flow have just been a coincidence or not. This next halvening will serve as a major test and if the model model is proven right once again — meaning the price of Bitcoin does reach >$55k before December 2021 — that will bolster its credibility and should lead to the market pricing in the rest of Bitcoin’s halvenings many years in advance.

In addition, due to Bitcoin’s overall nascency and volatility, there are incredible trading opportunities that can provide early adopters with double digit returns with almost zero risk. Bitcoin’s futures market, for example, frequently trades at a relatively steep contango compared to other commodities.

Right now, there are institutions that could borrow fiat at zero or even negative interest rates, buy Bitcoin, and then sell futures against it and pick up ~1% per month. Annualized, that’s 10+% returns with almost no risk at all. In this negative interest rate environment where people are desperate for yield, opportunities like these will force adoption. Early adopters will be/have been rewarded tremendously.

Other highly valued traits of Bitcoin are that it is seizure resistant and permission-less. This may not mean much to people in the US; however, to people living under tyrannical governments who steal from their citizens through inflation and financial restrictions (think China, Venezuela, Argentina, etc.), Bitcoin is very useful to keep one’s capital outside of their control.

The alternative, gold, is very hard to hide or to carry across borders. With Bitcoin, it’s possible to cross borders with billions of capital buck naked if you’re able to memorize 12–24 words. In addition, one can send money anytime and to anywhere in the world.

Lastly, let us look at the basic supply/demand of Bitcoin to see how realistic it is to predict this massive price appreciation. For the next 185 days, Bitcoin will produce 12.5 new bitcoin every ~10 minutes. At a price of $10,000/coin that means we need about $1.62 billion of new capital each quarter to soak up the supply of newly mined Bitcoin (for reference, that’s equivalent to just .065% of assets under management of a single financial institution — Fidelity). Recently, Grayscale Investments Trust and Square revealed their 3rd quarter inflow numbers for Bitcoin, which came out to $171.7 million and $148 million, respectively. That’s a combined $319.7 million which would have bought ~19.5% of Bitcoin’s new supply at the 3rd quarter’s average price of ~$10,000.

This demand for ~19.5% of Bitcoin’s new supply is from just these two products alone (these are the only 2 companies I know of that publish BTC inflow numbers). Also, these are not trading platforms. My point being, people use these platforms to buy for the long term and that those Bitcoin are basically being taken off the market. After the May 2020 halving, if demand from these two products stays stagnant, the $317 million will buy up 39% of Bitcoin’s new supply assuming a price of $10,000. However, if we continue to see triple digit growth in demand like we have the past year this demand could easily quadruple to 80+% of Bitcoin’s new supply post the halving. The price of Bitcoin would have to 4x from here to bring that percentage back down to where it is now at 20%.

As you can see, Bitcoin is still incredibly small and the halving will have enormous effects on the price. It does not take many big players to move the price of Bitcoin significantly higher from here. Also, Bitcoin has many use cases for any ones’ portfolio and has the potential to take trillions of dollars of market-share from many different asset classes. Currently, its market-cap is just ~$165 billion.

Along with all of that, here we are in a world that continues to trend in the direction of digitizing everything. We interact/transact on the web for hours on end on a daily basis with people all over the globe. Gaming has become a multi-billion-dollar industry and continues to grow. Tech companies are making incredible strides in virtual reality and “Ready Player 1” type applications. It makes sense to think that one day soon, there will be a digital money native to the internet.

And think of what the internet has done for us: it has completely democratized communication and information. Anyone, anywhere with internet has free and permission-less access to information and can interact with anyone on the planet. This is what Bitcoin will do to money.

Money will no longer be a commodity monopolized by big banks and government. Fiscal policy won’t be decided behind closed doors by un-elected officials trying to satisfy their own financial/political agendas at the expense of the rest of us.

Bitcoin and its immutable/transparent properties will continue to evolve as our generation’s safe haven asset. This is our opportunity to not only capitalize immensely from the monetization of Bitcoin, but to take back our financial sovereignty and peacefully opt out of the irresponsible monetary experiment they call “MMT.”

Keep stacking sats.