Bitcoin Investment Thesis
Why I invest in bitcoin
Have you noticed all the different reasons people own bitcoin?
When the price goes up, it’s a store of value. When the price goes down, it’s financial liberty.
Government ban? It’s self-sovereign money.
Wall Street wants to buy it? It’s a non-correlated asset, a great addition to an investment portfolio.
You hate “fiat” currency? It’s the world’s greatest medium of exchange (eventually).
Technologist? It’s the payment network of the future (once it can scale and somebody makes it easy to use).
Too volatile for daily use? Trade it, short it, long it, and play the markets!
My Investment Thesis
All those reasons are valid. Mine is different.
I invest in bitcoin for only two reasons:
It’s a hedge against the collapse of our financial system.
Its price tends to go up over time.
You can find lots of things that hedge against the collapse of our financial system. You can also buy lots of things that tend to go up in price.
Only bitcoin does both.
Maybe my rationale for owning bitcoin is too simple, but it’s based on facts.
Saves you from financial disaster
Bitcoin’s technology relies on math, not people.
No matter what happens to banks, governments, businesses, or credit card companies, bitcoin will always work.
Math never fails. Computers will always do what they’re programmed to do. Equations do not have counterparty risks. Nobody can default on their bitcoin.
Do I expect our financial system to collapse?
I also don’t expect to die within the next 27 years, but I own term life insurance coverage through 2047. If that’s worth investing in, why not bitcoin, too?
Price goes up
Since its inception, bitcoin’s price has never gone below the 200-week moving average, a measure of price over time. That line always goes up. Check it out:
Heatmap of the 200-week moving average through March 2020, courtesy of LookIntoBitcoin.
Additionally, we see on-chain data and network patterns that correlate to movements along that line. As long as those patterns remain intact, those correlations should hold. As long as those correlations hold, the 200-week moving average should serve as the floor for bitcoin’s price.
Since the 200-week moving average keeps going up, you can expect bitcoin’s price will go up, too.
Bonus—you can use bitcoin for stuff!
You can also send bitcoin to anybody, anywhere, anytime, in any amount, instantly, with certainty the payment will go through, without needing to collect or share any personal data.
While that’s no reason to invest, it’s a nice perk. You can’t do that with stocks, bonds, gold, real estate, tax liens, private equity, businesses, or pretty much any other financial asset.
What to do with this thesis?
I use this investment thesis to frame my thinking about bitcoin and make the best decisions possible.
Everybody seems to change their reasons for owning bitcoin. Its price goes up and down like crazy. News and social media give all sorts of conflicting messages, positive and negative. Analysts and traders disagree with each other. Normal people have no clue what’s going on.
As long as my thesis remains sound, I don’t have to worry about any of that. With the data above, I can set realistic expectations and manage my risks. I have clear reasons to stay in the market and exit the market. Those reasons do not change with every shift in market sentiment.
Check out my plan for making the most of bitcoin’s bull market and avoiding the crash that will probably follow: