Bitcoin at $75,000: Reflecting On My Price Target 5 Years Ago

As I watch the Presidential election unfold tonight, I wanted to celebrate Bitcoin hitting $75,000 which was my original price target 5 years ago. The original post:

I think the thesis was more or less correct. Bitcoin hasn’t achieved transactional use, which has instead been dominated by stablecoins (I wrote about Facebook’s Libra in that post), but that wasn’t necessary as Bitcoin’s unique properties has made it an asset class worth allocating to. A common refrain is put 1% of your assets into Bitcoin as a hedge against fiat currencies. If the world does that, we estimated that Bitcoin’s fair value would be $75K.

I think the steel bubble framework and comparison to Picasso art piece in that post still holds true.

I think over time, Bitcoin will reach market cap parity with gold. Because gold’s price has doubled since the time of that post, Bitcoin will have to hit a $860,000 target to reach that. Maybe it steals some of gold’s monetary premia, so gold declines and bitcoin rises, to reach parity at $500,000. In the long run, I believe it will far exceed gold’s market cap. Quote from the original post:

To explain: asset classes rise and fall based on their perceived returns relative to other asset classes. Equities today trade at a P/E (price to earnings) of 20–25x, while real estate trades on the same principle called cap rate (just an inverse of P/E). If investors globally decide that the returns of crypto make it an attractive investment, they may take funds invested in equities and real estate, and reallocate to crypto. No asset class trades in a vacuum — their prices depend on its perceived return potential relative to other asset classes. In other words, while it may be attractive to own stocks at 20x earnings today, the emergence of crypto as a legitimate asset class may reduce what multiple investors are willing to pay for stocks as they allocate funds to crypto. This is crypto taking other asset classes’ monetary premia.

What’s interesting is that to this day, people are skeptical about Bitcoin. And that tells me there is still a long way to go. It’s why bitcoin remains my single biggest investment today, one which I bucket in my “compounders” category (the others being venture and small-cap net-nets). On another note, I don’t think people fully appreciate the conviction one needed to hold a position in size through the years of volatility.

I’m not a huge fan of most cryptocurrencies. My somewhat contrarian belief among my circle of crypto folks is that most of the big innovation in crypto is done. 1) Currency & smart contracts, 2) centralized and decentralized exchanges, 3) decentralized lending protocols and 4) stablecoins were the big game changers. Of course there are tons of other innovations - custody, DePIN, NFTs, bitcoin smart contracts, layer 2s, and the list goes on. Or even sites like Polymarket, which has come to dominate Presidential election betting (and an investment I first sourced five years ago for the venture fund I worked at!) But those were the big ones. The innovations I see today look less interesting than in 2017.

I started re-allocating most of my crypto positions to bitcoin related assets from 2022 and that was the right move. This is the first cycle in which we saw Bitcoin and bitcoin assets outperform, while altcoins didn’t. The market is maturing.

Personal Update

Personally, I will continue to observe this market, but my career interests have been moving back towards fundamental value investing. I’ll most likely be studying value investing at Columbia for the next two years. I’m not crazy about New York City given that I already studied there for my undergrad, but Columbia is the #1 school for this style of investing, where Benjamin Graham taught and Warren Buffett studied.

I’ve been learning more about OTC stock investing in cigar butt / net-net stocks, which many traditional value investors started their careers doing. I’ll write about some of those in the coming months.

I still have a lot to work on. Today, I was grateful to speak to a famous value investor running a $15 billion highly concentrated fund with an investment staff of eight. He’s known as the Chinese Warren Buffett. I’d love to pursue that style of investing, but I was told I need to work on honing my deeper analyses. So I’ve got some ways to go. He’s a Columbia Business School alum and said if value investing is what I want, I should go there. I just hate to leave the Bay. The weather here is so good.

So the next time I write, it may be from NYC. 12 years later, and I’m going back to my first and original career interest - value investing.