An investment thesis is a reasoned argument for a particular investment strategy. Having a documented investment thesis helps you justify your decisions in the hindsight and minimize regrets. I encourage you to come up with your own written investment thesis after reading this post.
Here’s my personal investment thesis for investing 20% of my income in Bitcoin and other crypto-assets. This is not investment or financial advice.
Downside is limited, upside is unlimited
You can not ever lose more than you invested in bitcoin (BTC). The amount you could lose is always fixed and known. However, your upside has no cap.
If you had invested $1,000 in BTC (roughly 10 BTC) in 2013, it would now be worth ` ~$300,000. As you were holding throughout those years, the maximum amount you could have ever lost was your initial investment, $1,000.
As long as your life is not affected by losing your initial investment (worst case scenario), it’s worth exposing that capital to uncapped upside.
We are still early
The world population is roughly 8 billion. Only 2 billion people have heard of bitcoin so far. The US population is roughly 330 million. As of mid-2019, only 11% of the Americans owned BTC. These stats might have changed due to the most recent bull run. However, the point is that crypto is still a niche subject. As the awareness increases, there will be more adoption leading to more demand and higher prices.
Regret Minimization Strategy
Crypto has a big potential to go up. Living with the fear of missing out (FOMO) is not healthy and distracting. You don't want to look at this space in 10 years (2031) and realize why you didn't expose yourself to this space enough, despite knowing what was going on.
Exponential upside with liquidity
There are not many asset classes you can invest in and expect 100X+ upside with on-demand liquidity.
Supply and Demand
The laws of supply and demand are universal. As the demand for something increases, the price of that item naturally increases. In the case of Bitcoin, the supply is limited to 21 million. With more and more institutions coming into space, the demand for bitcoin will continue to surge, leading to higher prices.
bitcointreasuries.org - List of public companies that hold Bitcoin in their balance sheets.
BlackRock, the world's largest asset manager with 8.7 trillion in AUM is showing interest in bitcoin for the first time.
Short-term, volatility is irrelevant
The price of bitcoin has been extremely volatile ever since its inception. However, if you zoom out and see the general trajectory of the BTC price charts, the price has always been increasing steadily. Expand your time horizon for investment, all of a sudden you will look like a genius.
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