Emma’s Note: As longtime Diary readers know, Bill’s a self-proclaimed fuddy-duddy when it comes to cryptocurrencies. But he recognizes their potential, and has a small (1%) speculative allocation to cryptos in his portfolio.
For this special edition of the Diary, we hear from world-renowned crypto expert Teeka Tiwari. Teeka’s track record in cryptos is second to none. One of his recent picks was up 1,493% after just six weeks. And his best pick to date would have turned a small $500 stake into $783,765.
So when Teeka says he has an urgent message about bitcoin – the world’s biggest crypto – we listen…
For years, I’ve been telling my readers there’s a new narrative emerging on Wall Street.
This story is still being written… and it won’t be finished overnight. But it’s unfolding in front of your very eyes.
Back in January 2019, I said it would be the year of Wall Street greed. This was right on the heels of the brutal 2018 Crypto Winter.
Here’s what I wrote back then…
2017 was the year of individual greed. That year, we saw a massive bull market driven almost entirely by individuals. It wasn’t possible for most institutions to get into the crypto market then.
Then, 2018 was the year of individual fear… We saw the markets pull back in a big way. And that leads me to my crypto theme of 2019… It will be the year of institutional greed.
You see, despite the 2018 bear market, institutions continued to lay the groundwork for crypto adoption. And despite the naysayers… I knew it was here to stay.
In 2020, my narrative is gaining momentum…
The Holy Grail of Wall Street
One reason I said institutions would put bitcoin into their portfolios is because it will improve their overall performance.
You see, cryptos are uncorrelated to the markets. In other words, their movements aren’t tied to the stock market or overall business cycles.
And Wall Street is now realizing the price of bitcoin is unrelated to the prices of gold, stocks, bonds, or commodities.
Here’s why that is valuable to them…
A study by Bitwise Asset Management concluded that allocating just 1–10% of your portfolio to bitcoin gives better risk-adjusted returns than holding just stocks and bonds.
That potentially makes bitcoin Wall Street’s “Holy Grail” – an uncorrelated asset performing well under diverse market conditions that improves performance, while lowering volatility across the entire portfolio.
Now, this doesn’t mean we won’t see rare occasions when bitcoin moves in the same direction as other assets.
We certainly saw that happen during the depths of the COVID-19-related sell-off in March 2020. There was a big drive to create liquidity to meet margin calls… and nearly every asset – including bitcoin – sold off.
Outside of that, there’s little correlation between bitcoin and other assets. And that’s why I believe we’re seeing big-money men like Paul Tudor Jones buying bitcoin.
Tudor Jones is the founder and CIO of Tudor Investment Corporation, which manages about $40 billion in assets today. Personally, he’s worth over $5 billion.
And last month, he announced he’s allocating up to 2% of his personal portfolio to bitcoin.
I believe big-money men like Paul Tudor Jones have done their research. And they see bitcoin as an uncorrelated asset with phenomenal potential upside.
Think about it this way…
If you have a $1 million brokerage account with a traditional 60/40 split of stocks and bonds, why wouldn’t you allocate 2% to bitcoin?
If your hypothetical $20,000 position goes to zero, it doesn’t affect your net worth. The income you receive on your stocks and bonds will more than make up for the loss.
But let’s say bitcoin goes up 10 times. Your $20,000 balloons to $200,000. And your $1 million portfolio grows to $1.2 million. Growing your entire portfolio by 20% by only risking 2% is unheard of. But that’s the opportunity in bitcoin right now.
Think of the impact on Paul Tudor Jones’ net worth if bitcoin goes up 10 times. He could potentially see his $5 billion net worth grow to $6 billion by only risking 2% of it.
I’m wagering many more big-money guys are going to make the same bet.
The Time to Act Is Now
The asymmetric opportunity in bitcoin won’t last forever. Once it becomes a multitrillion-dollar asset class, forget about 10-times returns. The rate of growth will slow, just like it has for once high-flying but now mature stocks like IBM, Intel and Oracle.
This window of opportunity is closing much faster than you might imagine…
According to a recent survey by Fidelity Investments, 36% of institutional investors in the U.S. and Europe are currently invested in cryptos. And looking ahead five years, 91% said they’re open to exposure to digital assets in a portfolio.
Just think about that… It was unheard of in 2016 that 91% of institutions would consider adding bitcoin to their investments.
When I pull back the camera, I see a future where managers adjust the traditional 60/40 asset allocation model to include a 2% allocation for bitcoin.
This process of bitcoin adoption by institutions will be a huge tailwind for the entire space.
What’s Good for Bitcoin Is Good for All of Crypto
Bitcoin is the gateway to crypto. When someone gets their feet wet with bitcoin, they move into Ethereum, and then into smaller altcoins (any crypto other than bitcoin). So what’s good for bitcoin is good for the entire crypto market.
What I’m sharing with you today is concrete proof the investment world is moving into alignment with my narrative of bitcoin adoption. Bitcoin is becoming a core holding of money managers – and, in time, will be held by virtually all money managers.
Helping this adoption along will be Wall Street’s marketing machines. After all, it’s had to sit back and watch its fintech rivals like Binance and Coinbase make billions in fees without it.
Wall Street is coming for those profits, and I won’t bet against Wall Street’s greed. I fully expect Wall Street to engage its global marketing machines to promote the virtues of diversification via bitcoin, so it can shepherd millions of customers into high-fee bitcoin trading products.
We’re at the beginning of the biggest allocation of capital to a new asset you’ll ever see in your lifetime.
But don’t just rely on me. Rely on Wall Street’s greed… Rely on the relentless self-interest of money managers… Rely on the profit motive of big-money institutions.
That’s what I’m asking you to believe in. That’s what I’m asking you to put your faith in.
Let the Game Come to You!
Editor, Palm Beach Confidential
• This article was originally published by Bonner & Partners. You can learn more about Bill and Bill Bonner’s Diary right here.
Editor’s note: If Bitcoin isn’t your thing, check out this company that is behind the energy revolution.