Bitcoin is my Rock, But I Now Believe the Metaverse Opportunity, Though Far Riskier, Has At Least as Much Upside Potential
Over a three-decade financial market career, the primary reason my cumulative annual return (41%, since I started investing in 1999) has been in the world’s top 1% has been my ability to spot major trends early, and adapt investment theses when warranted. This, even if it meant a 180 degree shift from a previous, long-held belief that could, and likely would, make enemies of those who stuck with my previous views.
It happened at the dotcom peak, when I sold everything in early 2000; in early 2007, when I sold a significant portion of my holdings near the peak of a raging bull market; spring 2011, when despite soaring gold and silver prices. I sold all my mining stocks; and 2016-17, when despite being a leader of the global Precious Metal community for the previous 15 years, I sold all my gold and silver for Bitcoin.
It’s happening again now, though in this case it won’t change my liquidity portfolio composition (98% BTC); but instead, my increasingly bullish view – SELECTIVELY, of course - of the altcoin market. The reason being, that I FINALLY understand the enormity of the Metaverse opportunity…and with it, why the BTC price follows ETH, decidedly NOT because anything is “wrong” with BTC.
In September 2017, the week I launched CryptoGoldCentral.com, I was nearly 100% in Bitcoin, with a smattering of Litecoin which I foolishly believed could be “silver to Bitcoin’s gold.” That said, the space was so novel, I found it hard to believe there wouldn’t be material uses for cryptocurrency other than the monetary asset Bitcoin aspired to be.
To wit, “the process will take many years, but make no mistake it’s commenced. And when the movement matures; which, due to the speed technology develops, and spreads, could be less than five years; today’s $100-$150 billion cryptocurrency market capitalization will be many multiples higher; very likely, above $1 trillion. Heck, hyperinflating Central banks may well print $1 trillion of incremental fiat toilet paper by then!”
Of course, I had not a clue what such applications would be – only that they were inevitable due to the revolutionary improvement cryptocurrency could make to traditional financial market products. More so, that cryptocurrency could not only make capital markets more efficient; and long-term value storage (and appreciation) viable; but completely change the world’s political and social environments.
As the crypto markets evolved, Bitcoin decidedly, unmercifully won the store of value battle, setting up what I believe will be a run at global reserve currency status within 2-3 years.
No, that’s not a typo – as in 2021 dollars, I expect Bitcoin to be worth well over $1 million per coin by then. Which is why, no matter how my views change about the Metaverse, I have no intention of selling any Bitcoin, or materially reducing my current liquidity allocation of 98%. Not to mention, at age 51, I’m too old to have the same risk profile as in earlier times – particularly when, in my view, Bitcoin’s CURRENT reward/risk ratio is BY FAR, the most favorable in its 13-year history.
https://twitter.com/Andy_Hoffman_CG/status/1473293081235570690
Since ETH emerged in 2017, the altcoin market has undergone massive transformations, typically ending in misery due to the fact that 90%+ were pump and dump schemes to start with. However, as I personally learned when working with the dev teams of two altcoins in 2018-19, at least 10% are founded with good intentions, seeking to carve a niche that investors can embrace over the long-term.
In the store of value space, all such attempts miserably failed. In other words, there will NEVER be a “silver to Bitcoin’s gold” - as NOTHING can replicate, or even challenge, Bitcoin’s first mover status.
However, contrary to Maximalist dogma, Bitcoin CANNOT be everything to everyone. As money, it’s Total Addressable Market (TAM) is in the hundreds of trillions, and I firmly believe it will get there by decade’s end. However, as the “Digital Age” explodes globally, and assets of ALL kinds (not just monetary) go digital, I expect hundreds of altcoins to rise sharply, and some parabolically. This, with the tailwind of hyperinflation, as fiat currencies are summarily destroyed by suicidal Central banks.
For the past 18 months, I have very vocally questioned WHY the Bitcoin price follows ETH tick for tick – via algorithms that clearly depict Ethereum’s growth opportunity relative to Bitcoin to be superior. The reasons being, that 1) I am trying to figure if I am “missing” something about Bitcoin relative to Ethereum; and 2) having watched, and very publicly chronicled Precious Metal price suppression for 15 years, I have developed a complex that no matter how “right” I am, I will somehow lose to thieving governments or other unforeseeable obstacles.
This is why I have in the past year shifted from a passive, leery stance about Ethereum to fear, anger, and aggression – as in my view, there should be NO WAY the much smaller, much less stable ETH should lead BTC, given how powerful Bitcoin’s market share is; and oh yeah, the fact that BTC are not in the slightest way “competitors.”
https://twitter.com/DylanLeClair_/status/1474064920069251074
Irrespective of my new revelation on the Metaverse – which is as wildly bullish as my views of Bitcoin when I first started aggressively acquiring it in early 2016 – I STILL don’t understand why BTC follows ETH tick-for-tick; recognizing, of course, that the ETH/BTC ratio, whilst trending sharply upwards for more than a year, is subject to violent short- and long-term trend changes…that have NOTHING to do with ETH’s “competitiveness” versus Bitcoin, but the market’s cumulative view of its relative upside potential.
Giving credit where credit is due, Adam Meister, who has been my most trusted confident, source of conviction, and in numerous cases colleague, has finally helped me see the light. The “BitcoinMeister,” as Maximalist as it comes from a portfolio standpoint (all BTC), is also one of the most open-minded crypto analysts – recognizing that whilst scams, pump and dumps, and DOA concepts dominate the altcoin landscape, some MAJOR, world-changing trends are evolving, too…that ultimately will produce (some already), some of the best performing assets in financial market history.
The way I have always viewed Ethereum has mirrored the consensus view that my heavy exposure to the Maximalist community has fostered; i.e., it’s a “centralized,” pre-mined pump and dump whose sole purpose is facilitating other pump and dump scams. Particularly baffling to me have been the concepts of “DeFi” - as currently, no asset other than Bitcoin is truly decentralized (and certainly, none worthy of holding for monetary purposes); and NFT’s, given their limitless supply.
However, in the big picture, ETH is, like it or not, an asset created with noble purposes – which, like Bitcoin, has developed massive investor and development communities that will NOT go away (especially if ETH 2.0 is successful)…and likely, not shrink one bit.
Yes, its evolution and maintenance have been “centralized” per se, the network is now so big, it is just as unassailable as Bitcoin. Plus, whilst many of the aforementioned applications will not work (with the vast majority of tokens going to zero), DeFi and NFTs are unquestionably here to stay – and like all crypto technologies, will equally unquestionably develop into viable use cases at exponential rates.
That said, the one area that REALLY interests me – and in my view, DOES possess a total addressable market as big or bigger than Bitcoin (kudos to Raoul Pal, one of the first legitimate analysts to conclude this) is the “Metaverse”; i.e., a network of hundreds, or even thousands, of social communities willing to transact in unique tokens as both currencies and stores-of-value…as well as Bitcoin, Ethereum, and other major coins.
When I saw “Ready Player One” last year – which particularly interested me because when I was nine years old, was introduced to the Atari Adventure Easter Egg – I didn’t realize the concept was NOT pure fiction, given advancements in virtual gaming, AI, and crypto technology; not to mention, the mega-cloistering effect of governments’ cumulative, horrifying response to the COVID virus.
Subsequently, watching the “Dueling Vipers” episode of the amazing Netflix series “Black Mirror” this month gave further insight into Metaverse applications (and addiction) – and more importantly, that such things are not only POSSIBLE, but occurring NOW.
So, when earlier this week, whilst on vacation with my family in Key West, Adam posted this AMAZING, MUST LISTEN podcast about the Metaverse’s potential, I not only FINALLY understood what the (NON-MANIPULATED) market was saying about Ethereum, but that the total addressable market of a Metaverse-dominated social environment (cultivated by a decade of exponential growth in “linear” social media) is AT LEAST as big as global money itself.
https://twitter.com/Andy_Hoffman_CG/status/1473289137004371969
So, whilst my liquidity allocation remains 98% Bitcoin, I’ve moved some of my 2% fiat allocation into selected Metaverse names – and would you believe it, STAKED them on Gemini. To that end, whilst I still believe strongly in the virtue holding one’s own keys (which I do 100% in Bitcoin), I recognize that given improved network and exchange security; an explosion of POLITICAL support; and the end of the “Cryptodividend Era” (forks, airdrops) ; I no longer think holding one’s own private keys has the same level of urgency. I continue to do so (via complex, unassailable multi-signature technology), but with each passing day look forward to the day when I can hold it as confidently at Gemini or Coinbase as I’d hold stocks or bonds at Charles Schwab.
Though the reward/risk profile of any given Metaverse token remains extremely high (in some cases, CONSIDERABLY lower than others), I now believe the Total Addressable Market of the Metaverse (which includes NFTs, DeFi, pay-to-earn, and other applications) is AT LEAST as big as being the global reserve currency. In fact, I don’t believe there’s a chance that Bitcoin will replace ALL fiat currency (though I do believe it’s store-of-value position is unassailable); but that cumulatively, cryptocurrency will completely envelop the legacy monetary and capital market regimes.
To conclude, though Bitcoin’s reward/risk remains, BY FAR, the best in the cryptocurrency universe, I believe the upside potential for non-risk averse investors in the Metaverse space is AT LEAST as large…keeping in mind, Maximalists, that all investors do not have the same investment goals!
Moreover, I believe that the entire crypto market is on the cusp – as in, NOW – of a parabolic adoption surge that will catalyze, in 2022, the most spectacular asset class explosion of all time.
https://twitter.com/Andy_Hoffman_CG/status/1474042725502758917