Diversification is a great strategy against uncertainty. Once this is removed it does not make any sense. Imagine a plane going down would you diversifícate your strategy or stick to a parachute. Or a boat sinking will you try creative diverse strategies or put your life jacket and get into a dingy?
A nice way to summarize it, diversification is valuable to protect against uncertainty. But when something is less uncertain, less diversification is needed. Such a paradigm-breaking opportunity with Bitcoin
Another great article! I appreciate your insight and try to stay up to date with your newsletter. One barrier I've come up against when talking to investors about the value of bitcoin is it being a "non-productive" asset (no cash flow), vs. "productive" assets like stocks. One friend of mine is hung up on this and would rather own stocks because they also typically go up with inflation (many stocks have relatively finite supply compared to USD) and also have a cash flow / productivity helping increase their value.
I think a piece comparing bitcoin to stocks would be great, and I'd be excited to share it with both peers my age (20-somethings) and older investors (family, friends' parents etc. in their 50s/60s).
Thanks for the feedback and for the article idea! I do roughly plan to address the other major buckets in the global asset landscape (have only done the bondholders piece, so far)
Just a lot harder to have a clear and simple thesis with assets besides bonds, imo. Everything else will rise with inflation, but bonds won’t
You didn't mention the most salient "managerial framework to evaluate various capital projects":
career risk
Treasuries, stocks, private equity, VC all share one important characteristic -- low career risk. After the gig is secured people are disincentivized to actually seek out the highest and best return on capital. They want the highest return with the lowest career risk.
That's a really interest point, David. And I agree, probably the most significant of rubber-meets-the-road frameworks with regard to evaluating capital allocation. And a big part of why Bitcoin adoption has been slower than one would expect (and why there's still an opportunity to front-run most of the finance world)
Hi Jesse, I’ve written a short post on one way to potentially deal with the lack of enthusiasm for Bitcoin as part of a capital allocation strategy at huge companies throwing off significant cash flows and just returning them to shareholders. Would be very interested in your reaction
Question from a dimwit, so forgive me if it sounds stupid: if the cycle that’s ending next year averages 25% as you suggested it could, wouldn’t that land the post-halving at c. $23k? And then if we continue to see diminishing 4 year average returns, might we only be at c. $47k by the end of the 2028 cycle? That’s based on a starting point of 23k and an average of 20%. Still blows your classic low-risk options out of the water of course.
Diversification is a great strategy against uncertainty. Once this is removed it does not make any sense. Imagine a plane going down would you diversifícate your strategy or stick to a parachute. Or a boat sinking will you try creative diverse strategies or put your life jacket and get into a dingy?
A nice way to summarize it, diversification is valuable to protect against uncertainty. But when something is less uncertain, less diversification is needed. Such a paradigm-breaking opportunity with Bitcoin
Another banger! 💪🏼😎🔥
Thank you Jacques! Glad you enjoyed it
Another great article! I appreciate your insight and try to stay up to date with your newsletter. One barrier I've come up against when talking to investors about the value of bitcoin is it being a "non-productive" asset (no cash flow), vs. "productive" assets like stocks. One friend of mine is hung up on this and would rather own stocks because they also typically go up with inflation (many stocks have relatively finite supply compared to USD) and also have a cash flow / productivity helping increase their value.
I think a piece comparing bitcoin to stocks would be great, and I'd be excited to share it with both peers my age (20-somethings) and older investors (family, friends' parents etc. in their 50s/60s).
Thanks for the feedback and for the article idea! I do roughly plan to address the other major buckets in the global asset landscape (have only done the bondholders piece, so far)
Just a lot harder to have a clear and simple thesis with assets besides bonds, imo. Everything else will rise with inflation, but bonds won’t
You didn't mention the most salient "managerial framework to evaluate various capital projects":
career risk
Treasuries, stocks, private equity, VC all share one important characteristic -- low career risk. After the gig is secured people are disincentivized to actually seek out the highest and best return on capital. They want the highest return with the lowest career risk.
That's a really interest point, David. And I agree, probably the most significant of rubber-meets-the-road frameworks with regard to evaluating capital allocation. And a big part of why Bitcoin adoption has been slower than one would expect (and why there's still an opportunity to front-run most of the finance world)
Hi Jesse, I’ve written a short post on one way to potentially deal with the lack of enthusiasm for Bitcoin as part of a capital allocation strategy at huge companies throwing off significant cash flows and just returning them to shareholders. Would be very interested in your reaction
https://bitcoinlbo.substack.com/p/a-new-use-case-for-bitcoin-collateral
Question from a dimwit, so forgive me if it sounds stupid: if the cycle that’s ending next year averages 25% as you suggested it could, wouldn’t that land the post-halving at c. $23k? And then if we continue to see diminishing 4 year average returns, might we only be at c. $47k by the end of the 2028 cycle? That’s based on a starting point of 23k and an average of 20%. Still blows your classic low-risk options out of the water of course.