I have something important to share today:
“It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy,” said Satoshi Nakamoto, the creator of Bitcoin in 2009.
Fast forward to 2019 his words are not letting me sleep as every day I see Bitcoin becoming a self-fulfilling prophecy that is exciting me & probably you too equally that’s why you are reading this now.
On to today’s case of small allocation of your portfolio into Bitcoin which I am betting you haven’t contemplated but you should. The idea is to allocate 1% of your portfolio to Bitcoin.
This isn’t investment advice but a gentle nudge to you my friend to look into the dynamics of Bitcoin’s price. For the better or worse, price is the only single most thing that makes many to talk about Bitcoin.
But there is more to it and that is its ability to give you asymmetric returns.
What maximum could go wrong?
I was forced to think about this when I read ‘The case for a small allocation to Bitcoin‘ by Wences Casares, CEO of Xapo.
Our boy Wences is from Argentina- the second most distressed country after Venezuela in terms of inflation and this ultimately brought him to Bitcoin to run Xapo-a Bitcoin wallet cum Bitcoin debit card provider.
Wences paints the picture of the future price of Bitcoin in 7-10 years being $1 million per coin.
And Bitcoin is believed to be contending for two markets one is, store of value which is captured by gold from thousands of years and second is money markets.
Wences and I too believe in this.
All the gold that was ever been mined is worth ~ $7 trillion the world’s narrow supply of money is ~ $40 trillion. If Bitcoin is ever worth as much as gold each Bitcoin would be worth ~ $300,000, and if Bitcoin is ever worth as much as the world’s narrow supply of money it would be worth ~ $2 million.
My preferred way of guessing how the price of Bitcoin may evolve is much more prosaic. I have noticed over time that the price of Bitcoin fluctuates around ~ $7,000 x how many people own bitcoins. So if that constant maintains and if 3 billion people ever own Bitcoin it would be worth ~ $21 trillion (~ $7,000 x 3 billion) or $1 million per Bitcoin.
That’s very much feasible according to my calculations too.
So the answer to ‘What could maximum go wrong’? Is that you lose your principal investment amount but if you think hard that’s the only thing you will lose at max whereas the upside potential is more than 1oo to 200 times of your principal.
To give you a perspective, if you buy BTC worth of $1000 now there is still ample fuel left in it for your investment to go to $100,000.
But things don’t come so easy.
There are bear markets to deal with and the responsibility of keeping your funds safe but I think it is worth the learning. Also, price is not the only thing that matters but it is, of course, the first thing that matters to most.
What matters next, we will discuss in the future issue of Tuesday Bitcoin Musings newsletter but I am betting you are not doing this yet !!
If you liked this stuff, you should probably sing-up for my weekly Bitcoin Musings Newsletter to get the future editions of it 🙂