Bitcoin

All About Bitcoin

Each archive contains the following sections: General, YouTube, Write-Ups, Tweets, Podcasts, and Miscellaneous.

As I come across a relevant piece, it will be added.

Happy perusing.

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Last Updated: 07/21/22

General

Why most portfolios should allocate up to 1% to Bitcoin

Summary

Bitcoin is a fascinating experiment but it is still just that: an experiment. As such it still has a chance of failing and becoming worthless. In my (subjective) opinion the chances of Bitcoin failing are at least 20%. But after 10 years of working well without interruption, with more than 60 million holders, adding more than 1 million new holders per month and moving more than $1 billion per day worldwide, it has a good chance of succeeding. In my (subjective) opinion those chances of succeeding are at least 50%. If Bitcoin does succeed, 1 Bitcoin may be worth more than $1 million in 7 to 10 years. That is 250 times what it is worth today (at the time of writing the price of Bitcoin is ~ $4,000).

I suggest that a $10 million portfolio should invest at most $100,000 in Bitcoin (up to 1% but not more as the risk of losing this investment is high). If Bitcoin fails, this portfolio will lose at most $100,000 or 1% of its value over 3 to 5 years, which most portfolios can bear. But if Bitcoin succeeds, in 7 to 10 years those $100,000 may be worth more than $25 million, more than twice the value of the entire initial portfolio.

In today’s world where every asset seems priced for perfection, it is hard, if not impossible, to find an asset that is so mispriced and where the possible outcomes are so asymmetrical. Bitcoin offers a unique opportunity for a non-material exposure to produce a material outcome.

It would be irresponsible to have an exposure to Bitcoin that one cannot afford to lose because the risk of losing the principal is very real. But it would be almost as irresponsible to not have any exposure at all.

Source: The case for a small allocation to Bitcoin