2020 was especially memorable for Bitcoin. To help commemorate our readers this year, we asked our network of contributors to reflect on Bitcoin’s price action, technological development, community growth and more in 2020, and to reflect on what it’s all about. 2021 can mean. These authors responded with a collection of thoughtful and thought-provoking articles. click here to read all the stories from our end of year 2020 series.
The Bitcoin bet: heads I win, tails you lose.
I bet if you go in 2020, you would never guess that a pandemic would take over the world. You would not have imagined that the world economy would come to a standstill and that we would remain in a great financial crisis. You would not dream that central banks would start printing money as if it were going out of fashion.
But here we are. And you know who’s doing pretty well in this area?
Bitcoin, of course.
This is actually one of the few things you could guess for 2020.
Bitcoin is resilient, predictable and has an algorithmic monetary policy. That means everyone knew the third Halving was coming this year. And with lower supply comes higher prices.
How many times have you heard of the Halving pricing in before May? Remember: BTC was still under $ 10,000 back then.
As the year draws to a close, I think we can finally end the debate. No, the Halving was not praised. And you know what? As of today, the Halving is still not priced in.
The Bitcoin halving is not priced
Do a simple exercise:
- Take the BTC Price During the Third Half
- Apply the growth path of the first Halving
- Apply the growth path of the second Half
Suppose the third halving cycle is similar to the previous two, offering you a variety of possible growth pathways. It’s not necessary to do the math yourself, I covered you. Here’s what you get:
We are just at the beginning of a new exponential growth phase, which means that this cycle is likely to yield 15 times more returns.
So, again: No, the Halving is not priced in. It’s still early to tackle the Bitcoin bet.
The Bitcoin Bet
The Bitcoin bet has two components:
- Bitcoin is a value store
- Bitcoin is an asymmetric bet
The value-value component is by design and it does not disappear. As long as the Bitcoin network is up and running, BTC will be a safe, predictable and a debilitating way to preserve your wealth.
Sometimes when central banks around the world rely on a debt monetization strategy to keep the legacy of the financial system going, you do not want to give a good value boost. It is now valid and will remain valid for ten years.
On the other hand, the asymmetric bet has a timing component.
What’s the idea? The Bitcoin market is small. Actually, for an asset that is essentially digital gold, it is ridiculously small.
Do not believe me? Consider the facts that:
- The Bitcoin market with 1 BTC worth $ 20,000 would be just as big as JPMorgan’s total valuation.
- The Bitcoin market with 1 BTC worth $ 50,000 would be just as big as Google’s total valuation.
- The Bitcoin market with 1 BTC worth $ 100,000 would be just as big as Apple’s total market valuation.
- The Bitcoin market with 1 BTC worth $ 300,000 would still be smaller than gold’s total market valuation.
And you wondered why giant asset managers like BlackRock have not yet taken a position. The answer is simple: until now, the Bitcoin market was simply too small.
So, for its use, Bitcoin is very early in its adoption curve. To reach just the same size as the gold market, Bitcoin needs to grow 30 times. This is the asymmetric bet.
If you invest in bitcoin now, you get both the benefits of a valuable store and a potential 30 times return.
Even if you think that the probability that Bitcoin will be as big as gold is still a bet? The earlier you get in, the greater the expected reward.
Do the math
You can do math. I can do math. Michael Saylor can do math. This means that smart money can also do math.
Just looking at the Grayscale Bitcoin trust inflow over the past year is enough to convince you that smaller institutional investors, family offices and high value individuals have already started increasing their exposure. We could also add some large hedge funds, such as those run by Paul Tudor Jones and Stanley Druckenmiller.
And don’t forget listed companies like MicroStrategy and Square that invest in bitcoin as a treasure trove.
The point is: Bitcoin is climbing the adoption curve. Deep pockets that investors buy at the same time as supply becomes scarcer. You do not need complicated models to see the writing on the wall. You do not have to be a genius to realize that all this will cause the price to rise so high that bitcoin can seriously compete with gold in terms of market size.
When that happens, everyone wants a piece of the pie, including big mutual funds and asset managers. And from there, things will snowball into something much bigger than we can imagine right now.
How long will it take? Ten years? Less? More? Who knows. It is not in your control.
What is in your control is how you will act now.
Whether you use your favorite stock-to-flow model, apply the growth of previous cycles or do napkin math, it looks like bitcoin will rise to more than $ 100,000 in 2021. If you have stacked bags so far, then this is good for you. Continue like this.
If you have not yet invested, then come from scratch.
Bitcoin is one of the rare asymmetric bets anyone can make. Do not let your happiness get lost.
This is a guest post by Nick. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.