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2020 has been unforgettable, especially for Bitcoin. To help commemorate this year for our readers, we asked our network of contributors to reflect on Bitcoin’s price action, technology development, community growth and more in 2020, and reflect on this. that all of this could mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. Click here to read all the stories in our 2020 year-end series.
The Bitcoin bet: the heads I win, the tails you lose.
I bet that in 2020 you would never have guessed that a pandemic would take over the world. You could not have imagined that the global economy would shut down and we would be plunged into a major financial crisis. You couldn’t have dreamed that central banks would start printing money as if it were happening.
But here we are. And you know who does pretty well in this environment?
Bitcoin, of course.
In fact, it’s one of the few things you might have guessed for 2020.
Bitcoin is resilient, predictable, and has an algorithmic monetary policy. This means everyone knew the third halving was coming this year. And with a lower supply comes higher prices.
Yet how many times before may have you heard that the price of the halving was included? Remember: Back then, BTC was still below $ 10,000.
As the year draws to a close, I think we can finally settle the debate. No, the halving was not taken into account. And you know what? To date, the halving is still not taken into account.
Halving Bitcoin is not priced
Do a simple exercise:
- Take the BTC price at the time of the third halving
- Apply the growth path of the first halving
- Apply the growth path of the second halving
Assuming the third round of halving looks like the previous two, this gives you a range of possible growth paths. No need to do the math yourself, I’m here for you. This is what you get:
We’re just at the start of a new phase of exponential growth, which means this cycle probably has 15 times the returns.
So again: no, the halving is not taken into account. It is still early to take the Bitcoin bet.
Make the Bitcoin bet
The Bitcoin bet has two elements:
- Bitcoin is a store of value
- Bitcoin is an asymmetric bet
The store of value component is by design and it will not go away. As long as the Bitcoin network is functioning, BTC will be a safe, predictable, and foolproof way to preserve your wealth.
At times when central banks around the world are relying on a debt monetization strategy to keep the existing financial system running, you don’t want to pass on a good store of value. This is valid now and will remain so in ten years.
On the other hand, the asymmetric bet has a timing component.
What’s the idea? The Bitcoin market is small. In fact, for an asset that is essentially digital gold, it’s ridiculously small.
You do not believe me? Consider the facts that:
- The Bitcoin market with 1 BTC valued at $ 20,000 would be as important as JPMorgan’s total market valuation.
- The Bitcoin market with 1 BTC valued at $ 50,000 would be as important as Google’s total market valuation.
- The Bitcoin market with 1 BTC valued at $ 100,000 would be as large as Apple’s total market valuation.
- The Bitcoin market with 1 BTC valued at $ 300,000 would still be below the total valuation of the gold market.
And you were wondering why giant asset managers like BlackRock haven’t taken a stand yet. The answer is simple: until now, the Bitcoin market was just too small.
So, for its use case, Bitcoin is very early on its adoption curve. In order for it to grow to the same size as the gold market, Bitcoin will need to grow 30 times. This is the asymmetric bet.
If you invest in bitcoin now, you get both the benefits of a store of value and the potential for 30 times the return.
Even if you think that the likelihood of Bitcoin being as big as gold is low, it’s still a bet worth taking. Obviously, the earlier you enter, the greater the expected reward.
Do the math
You can do the math. I can do the math. Michael Saylor can do the math. This means that smart money can do the math too.
Just look at the influx of Bitcoin trust in grayscale over the past year to convince yourself that small institutional investors, family offices and high net worth individuals have already started to increase their exposure. We can also add to this some large hedge funds, such as those managed by Paul Tudor Jones and Stanley Druckenmiller.
And don’t forget publicly traded companies like MicroStrategy and Square, which invest in bitcoin as a cash asset.
The point is, Bitcoin is climbing the adoption curve. Investors with deep pockets buy at the same time as the supply becomes scarce. You don’t need complicated models to see the writing on the wall. You don’t have to be a genius to realize that all of this will push the price high enough that bitcoin will start to seriously compete with gold in terms of market size.
When that happens, everyone will want a piece of the pie, including the big mutual funds and asset managers. And from there, things are going to snowball into something much bigger than we can imagine now.
How long will that take? Ten years? Less? More? Who knows. It is not under your control.
What is in your control is how you are going to act now.
Whether you are using your favorite stock-flow model, applying growth from previous cycles, or doing calculations on the towel, it seems likely that bitcoin will surpass $ 100,000 in 2021. If you’ve accumulated sats so far , good for you . Continue like that.
If you are not yet invested, go down from zero.
Bitcoin is one of those rare asymmetric bets that anyone can make. Don’t let your luck slip away.
This is a guest post from Nick. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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