Let me start off by saying that I am not a Bitcoin evangelist. Because I’m not part of the tribe, I thought it would be interesting to hear the thoughts of an outsider that now owns the asset.
My thoughts and feelings have changed, or maybe my feelings have changed my thoughts. That’s no surprise when something you own goes up 10% in a day (today), 15% in the last week, 63% over the last month, and 160% in the last 3 months.
The truth is, I am more than a little turned off by the Bitcoin zealots. The ones who claim that Bitcoin will fix inequality, abolish the dollar, and bring peace to the galaxy, rub me the wrong way.
For example, Cameron Winklevoss said
“We think it could appreciate something like 25 to 40 times of today’s price.”
His brother Tyler said:
“$500,000 is a really conservative target. “That’s only if it’s a store of value and gold 2.0 and disrupts gold. If it also becomes a payments network, the sky’s the limit.”
Ouch. My brain.
Maybe I just don’t get it. In fact, I know I don’t get it. Aside from the talking points that we’re all familiar with, I can’t explain what Bitcoin really does. They say if you can’t teach something to a 5-year old, then you don’t understand it yourself. Guilty as charged.
I’m a stock market guy. Always have been. I can explain ownership in a business to a 5-year old. My 401(k), by far my largest liquid asset, is 100% invested in stocks. My taxable account at Liftoff is 100% invested in stocks. I’ve got another taxable account where I pick stocks for fun. My entire financial future is tied to saving and investing in the stock market. So I’ve been thinking about ways to diversify into other asset classes that are far away from the stock market. Bitcoin certainly fits that description.
I first bought Bitcoin in June at $9,500. There were two main reasons that gave me the confidence to finally pull the trigger. The smartest people in the world are super bullish on this thing. And after an 80% decline that took the price from nearly $20,000 down to $3,500, it was starting to show signs of life again.
I bought a few initial chunks then started putting money in every week. Now that the price has nearly tripled from when I first bought it, my plans haven’t changed, but my feelings certainly have evolved.
Of course, with the benefit of hindsight, I wish I bought more Bitcoin. The only thing worse than watching Bitcoin go vertical without owning is owning so little that it doesn’t move the needle. I am getting close to owning 1 coin, but as the price has run away from me, it’s going to take a little longer to get there. Oh well.
People are taking Bitcoin seriously now. Everyone is paying attention. This is why I’m bullish. Said differently, the price is going up, and therefore, I think it will continue to do so. Sounds silly, but sometimes that’s really all you need to know. Very few institutional investors own Bitcoin, and as they get more involved, you would think that the demand will continue to outpace supply, sending the price higher, and taking demand with it, thereby driving the price higher, and taking demand with it.
I don’t think supply will meet demand because like Tesla, Bitcoin has religious-like qualities. Even though the price is up ten-fold, the hodlers think it’s just begun, and therefore are in no hurry to sell their supply.
I’m not selling Bitcoin, despite this ridiculous run, because what would I do with the money? Buy more stocks? I bought Bitcoin to diversify my portfolio, and the run-up in price doesn’t change this. Not to mention, taxes would take a large bite out of my gains.
So, where would I sell Bitcoin? I really don’t know. 40,000, 50,000, 100,000? Uh oh, now I’m starting to sound like one of them 😃
All kidding aside, I view Bitcoin as part of my long-term asset allocation. If it does keep going up, then eventually it will represent a large piece of my portfolio, and I will trim it down to a level that makes me comfortable. But I would prefer that doesn’t happen just yet, because as somebody who is still buying, I would much prefer the next 50% move to be down rather than up.