A year ago, the world-renowned money expert Niall Ferguson sold his bitcoin.
He recently confessed: “I was a fool.”
He had good reason to sell: In December 2022, Terra/Luna had collapsed, FTX had just gone bankrupt, SBF had been arrested, and the contagion was spilling over into traditional banks like Silvergate, SVB, and even the storied Credit Suisse.
“I had forgotten rule No.1 of crypto investing,” Ferguson wrote. “Once you have bought the stuff, you should always HODL.”
Ferguson is the author of one of my favorite books on finance, The Ascent of Money. (It was later turned into an Emmy-winning PBS documentary.) He’s a senior fellow at both Stanford and Harvard. He did a series of economics lectures for the BBC. Money is kind of his thing.
Yet even Ferguson panic-sold his crypto last year.
If you, dear reader, have patiently followed our investing approach this year, HODLing your crypto and continuing to sock away a little bit each month, then Merry Cryptmas.
Merry Cryptmas indeed.
We’re Making Progress
If there is a single takeaway from 2023, it is that we’re making progress.
(Keep in mind that progress in crypto is usually “2,000 steps forward, 1,000 steps back.”)
From the outside, it was the terrible, horrible, no good, very bad year for crypto. The trial and imprisonment of Sam Bankman-Fried dominated the headlines. The SEC continued its onslaught against crypto firms, both big and small. And Binance settled with the CFTC for $2.7 billion.
Despite all this bad news, the price of bitcoin is up 162% year to date. The price of BTC has more than doubled.
This is 15x better than gold (which had a good year). It’s 9x better than the S&P 500 (which had a great year). It’s 5x better than the tech-heavy Nasdaq (which had a spectacular year).
It’s hard to get your head around the headlines, when you compare them with crypto’s actual headway.
This is why we try to ignore Crypto Twitter, patiently investing in our Blockchain Believers Portfolio, regardless of whatever drama the industry is facing this week.
Drip, drip, drip goes the water on the rock. Until one day, the water wins.
Why Price Go Up?
I explained the excitement over a possible bitcoin ETF a few weeks ago, in The Parable of the Bitcorn, which is the current narrative on why the price is going up.
A bitcoin ETF — which is still not approved by the SEC, but looks increasingly likely — will make bitcoin much easier for ordinary investors to hold in their investment portfolios. It will bring crypto to the masses.
There’s another hopeful development, though: the flood of institutional money that’s coming into bitcoin.
I serve on the board of the Boston Blockchain Association, and we held four conferences this year focused on institutions (think large banks and companies). The conferences were sold out.
The crowds at these events are not “crypto bros.” They’re suits, not hoodies. They’re talking “digital assets,” not crypto. They are serious about using blockchain technology for moving real money between the traditional financial system and the new one.
To some, this may sound boring. I find it tremendously exciting.
Slowly but surely, our existing system of paper money is merging with this new system of digital money. While the government can tame and control this forward march of progress, it’s too big to stop. It’s inevitable.
While most are still trying to figure out how we integrate crypto into the financial system, I see it the other way around: the financial system will become crypto.
By this I mean that the financial system will truly become global and digital, with one international currency that will be shared by all.
As I said in my TED talk several years ago, the ultimate endgame is One World, One Money. A better financial system that truly benefits the world. A more fair and equitable sharing of the world’s wealth. One ka-ching to rule them all.
That’s what we’re building. And those of us investing in it now are reaping the rewards.
This Cryptmas, we wish you peace on Earth, good wealth to all.
Thanks for believing. Merry Cryptmas.
Over 50,000 investors get this column every Friday. Click to subscribe and join the tribe.