I Was Wrong

Reflections on the early days of crypto

Author

Ramp Capital
October 24, 2021

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I was wrong:

The big news this week that dominated the headlines was the launch of the first Bitcoin futures ETF (BITO) from ProShares. This was a long time coming and a critical step to now give lazier investors—who don’t know how to use a crypto exchange—easier access to bitcoin.

The fund does not invest directly in bitcoin, but rather seeks to provide capital appreciation primarily through managed exposure to bitcoin futures contracts. Investors didn’t seem to care about that minor detail because BITO has already amassed $1.2B in assets under management since launching on Tuesday, the quickest billion-dollar fundraising on record according to the WSJ. The day after the launch, bitcoin hit a new ATH, briefly touching $66,999. At the time of this writing, bitcoin broke below $60,000 on Sunday afternoon. Maybe the launch of the bitcoin futures back in 2017 was the first top and the launch of the bitcoin futures ETF is the second top? That would be too easy.

To refresh your memory, on December 11, 2017, the day that CBOE launched the bitcoin futures contract, the price of a single coin hovered around $17,000. It ended up peaking right below $20,000 that year and marking what most thought would be the bursting of the Bitcoin bubble and generational top. And it seemed that way for a long time, with Bitcoin taking more than an 80% haircut in less than a year. It took 3 years for Bitcoin to get back above the previous ATH near $20,000.

Now that we have bitcoin futures and a bitcoin futures ETF, the next step will be the launch and approval of a bitcoin ETF that tracks the spot price. Then Ethereum and other cryptos. A boy can dream.

The reason I wanted to write this post was to take a step back and reflect on my previous attitude around crypto—privately and publicly through my Twitter account. Let’s start with the private side you don’t know about. I was exposed to Bitcoin very early on its digital infancy. It was around the 2010-2011 timeframe. At the time I was living with my brother and another roommate. I remember my roommate (who was a huge stoner btw) trying to explain this magic internet money called bitcoin to me. At the time of this discussion I’m pretty sure it was trading around a few dollars if not maybe even under a dollar. (!!!)

I didn’t get it. I told my stoner roommate it was a bubble. Things just don’t go up hundreds or thousands of percentage points in a few days. I’ve seen this movie before and I knew how it ended. I wrote off my roommates idea to invest in this digital coin along with most of his other galaxy brain ideas that I was exposed to daily. At the time, and the way he explained it to me, I really did think this was just a digital currency used to buy drugs on the black market.I also had a lot of other stuff on my plate and didn’t need another rabbit hole to go down. My sole focus was the equity markets and my head was buried in stocks. I wanted to know everything about every publicly traded company. I was reading every investing book I could get my hands on, watching CNBC and Bloomberg, and trading options like a degenerate. I didn’t have time to listen to my roommate rant about this magic internet money. I didn’t foresee it becoming as powerful as it has become today. I am here to admit I was wrong about bitcoin (and other cryptos) from the beginning.

And saying that has nothing to do with the price of the coins. If Bitcoin traded at $100 or $10,000 today it would still be considered a success in my eyes. Because what I didn’t envision were the thousands of jobs being created in the crypto space and the countless industries that already have been revolutionized by blockchain technology including numerous other industries that are about to be in the near future. Like many others, I was too focused on the price, not the technology. While a lot of you may think I’m a hater on crypto, I’m here to tell you that it couldn’t be further from the truth. I can be and have been skeptical for years, but now I just do it jokingly. I actively trade some of the more popular cryptos while keeping a base long term holding.

Part of the reason for my skepticism in the crypto space comes from the frequency in fraudulent activity littering my timeline. Any new industry ripe with disruption and low on regulations (too difficult for our lawmakers to understand) will always attract this kind of behavior. For an untrained n00bwhale it can be difficult to discern what’s worth investing in (gambling on) without risk of losing all of your capital. So if I spot something that looks shady, I’m going to call it out.On the flip side, it’s quite astounding to see how many people’s livelihoods have changed because of crypto. And I’m not talking about the dumbest guys you know from high school that got in early. A buddy I used to work with a few years ago quit his job to launch a crypto hedge fund. I still keep in touch with him occasionally but I know firsthand his life was completely changed by crypto. I remember when he told me he was collecting rent from his other roommates in bitcoin. At the time bitcoin was in the $100s. I don’t know how much he currently owns or his net worth but I do know he’s a successful self-employed entrepreneur and that makes me feel content.I think there are still multiple reasons why so many people continue to hate on crypto. First, they missed out on the move. They (boomers) see the youths making 100x, 1,000x, 10,000x returns or higher in short order and can’t help but label it a bubble. They’re used to their 8-12% returns per year so anything above that isn’t sustainable for the long run. Also, as the price of Bitcoin continues to rise and heads towards $100k, the financial news networks can’t help but talk about it 24/7. So they get bombarded with crypto news daily as a reminder that they missed out on life changing money.

Secondly, I think there are some concerns from legacy finance and other industries that are getting disrupted by crypto and blockchain tech. They may see the writing on the wall and it’s a threat to their business model. Just like any other big industry (food, pharma), when someone encroaches on their space, they get protective and the lobby machine starts humming.What I don’t really understand though is why people like Jamie Dimon continue to shit on Bitcoin, calling it worthless. It’s a $1T asset class Jamie, not worthless. Again, boomer mentality. His daughters got rich off of it and he watched from the sidelines because he was too stubborn to put a fraction of his $2B net worth in it. Ngmi.

There is no point in digging in your heels when you’re wrong on crypto, especially if friends or family members are involved. You’ll look like a fool when it skyrockets and they blame you for telling them to sell. I’ve learned that the hard way when telling my friend to sell hundreds of his bitcoin because it was a bubble. Even though they would be worth 10s of millions of dollars today we both know he would have sold them for a profit a long time ago. Just like there only a handful of people who are probably still holding to their Microsoft, Apple, or Amazon IPO shares. You’ll never sell the top.

It’s okay to be wrong. It’s also okay to change your mind when the facts change instead of digging in your heels.

The 3 hardest things to say:

  1. I’m sorry.

  2. I was wrong.

  3. Worcestershire

Performance Update:

Now let’s see how the People’s Portfolio did this week…

The indices rallied for the 3rd straight week in a row. After a sluggish September, the Dow and S&P 500 hit fresh ATHs on Friday—Christmas in October. The S&P 500 is now up 21% YTD. Not even a hyperinflation tweet from Jack could bring down the markets.

On Friday, we voted Square (SQ) to remain in the portfolio for another 10 weeks. Our 10-week minimum holds will start to get shorter heading into the end of the year.

NVIDIA (NVDA) is on the chopping block next week for the 3rd time. We’re currently holding onto a +65.66% unrealized gain over the past 39 weeks. This has been our portfolio’s biggest winner of the year by a longshot.

Keep an eye out for the new Twitter poll every Friday. Follow along in real-time with nearly 300,000 others on Public.

Portfolio News Highlights:

The biggest stories affecting our portfolio this week:

  • U.S. crypto companies are at the crossroads of regulation (Fortune)

  • Nvidia Stock Gains on Next Generation Cloud Gaming Platform (Investing.com)

  • Exxon Mobil (XOM) Earnings Expected to Grow: What to Know Ahead of Next Week's Release (Zacks)

  • ‘The industry has been in denial’: As hotels recover from the pandemic, they’re planning how to compete with another threat — Airbnb (MarketWatch)

What Else We’re Reading:

Blogs/Articles:

  1. Commodity Futures Investing: Complex and Unique - Wes Gray (Alpha Architect)

  2. Don’t be Afraid of Commodity Futures: Understand Them - Rich Shaner (Alpha Architect)

  3. It Sounds Crazy - Collab Fund

  4. Lock The Doors - Mike Solana (Pirate Wires)

  5. These Aren't the Bitcoin ETFs You're Looking For - Ben Johnson (Morningstar)

Books:

Need new reading material? Visit my Amazon page for my most purchased book recommendations.

Tweets of the Week: