GOLD vs BITCOIN vs EQUITIES
ISSUE # 75
Tech entreprenuer Peter Thiel keynoted this year’s Bitcoin 2022 Conference held in Miami last week. He talked about the relationship between Gold, Bitcoin and the Equity markets. A link to Peter’s keynote video is at the end of this letter in the podcast section.
In short, Peter makes the case that Bitcoin is similar to Gold. Both Bitcoin and Gold are scarce, cannot be counterfitted and act as a store of value. New York Times columnist Nathaniel Popper wrote about this in his 2015 book Digital Gold, which I also highly recommend.
Peter also makes the case that Ethereum is a payments platform, which makes it easy to model Ethereum’s potential value. Peter compares Ethereum to Visa and says that Ethereum is relatively fully valued. Personally I think Ethereum has many other use cases beyond just payments, but we must take into account that Peter’s audience was full of Bitcoin maximalist.
Below is graphic illustrating the current value of Bitcoin and Ethereum.
The next graphic compares the value of a payments network, Visa, to the value of the gold market. The point of this graphic is to illustrate the ETH is close to fair value when compared to Visa and that Bitcoin is undervalued when compared to Gold.
But perhaps the most interesting chart in Peter’s keynote was the one below which compared Gold to Equities in 1980 and in 2022. In 1980 the value of Gold was equal to the value of the Global Equity markets. He made the case that in a high inflation enviroment, Gold is undervalued relative to Equities and that Gold has a lot of upside potential.
Finally, Peter goes back to his original premise that Bitcoin and Gold are interchageable and that in the current high inflation enviroment Bitcoin’s real competition are the Global Equity markets. In that context, he feels that Bitcoin is extremely undervalued.
I am not sure whether Bitcoin can compete with global equity markets, but I thought that Peter definitely makes you think and if nothing else he made a strong case to own both Gold and Bitcoin as a part of a well diversified portfolio.
VIDEOS / PODCAST:
Paypal Co-Founder Peter Thiel - Bitcoin 2022 Conference Keynote - April 7, 2022: Peter discusses the idea of digital money and its evolution over time, looking back at Paypal and moving forward to examine the role of Bitcoin and Ethereum. In short, he sees Bitcoin as a store of value similar to Gold and Ethereum as a payments platform similar to Visa. A lot of good information in this video.
Cryptocurrency: The Wild West | Meet The Press Reports - April 1, 2022: The explosion of cryptocurrency has states chasing a new gold rush and Washington scrambling for a response. This short video offers a Washington viewpoint on what is happening in the digital asset space.
TEXAS CPA ACCOUNTING & FINANCE LEADERS CONFERENCE, Austin Texas, April 21: I will be presenting on digital assets as a diversifier to improve long-term risk adjusted returns. Specifically, I will be covering blockchain, DeFi, Web 3.0 and lending. I will also be hosting a dinner for like minded investors, reach out if you are in Austin and free Thursday evening.
MILKEN GLOBAL CONFERENCE, Beverly Hills California, May 2-4: I’ll be attending the conference which will examine various disruptions, lessons learned, and innovations brought on by the global pandemic as well as other health, social and economic issues. This is one of my favorite conferences of the year. If you are attending and would like to connect for a coffee, etc. reply to this email.
CONTEXT365 WEST 2022, Beverly Hills California May 9-10: I will be attending this in-person event which brings together qualified investors and alternative investment managers for several days of productive, pre-scheduled one-on-one meetings along with networking opportunities. If you would like to learn more about Prime Meridian’s short duration, high yielding private credit funds reply to this email.
STATE ASSOCIATION OF COUNTY RETIREMENT SYSTEMS (SACRS), Rancho Mirage California May 11-12: This is a great conference that provides an opportunity to network with over 500+ like-minded colleagues, to brush up on the latest investment strategies, and get current on pension-related legislation. I will be part of a panel discussing digital assets and how they fit into institutional portfolios.
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