Value in Crisis
When legal structures break down in society, these assets don't require institutions to retain their value.
From: Bitcoin for Institutions
Validation Costs
Even if secured, it's extremely expensive to prove its existence and authenticity. Gold bars need to be melted down and assayed.
From: Bitcoin for Institutions
Key Insight from Bitcoin for Institutions:
3. BlackRock pivoted dramatically from calling bitcoin "only useful to money launderers" to launching the largest bitcoin ETF.
Chapter: BlackRock (Redefining Portfolio Construction)
Key Insight from Bitcoin for Institutions:
4. Institutions must shift to Future Value thinking to properly understand bitcoin's role in protecting purchasing power.
Chapter: Bitcoin Requires a Deflationary Mindset
Key Insight from Bitcoin for Institutions:
1. Bitcoin is peer-to-peer. It is a cash system designed for individuals, and companies are always an individual acting on their behalf.
Chapter: HODL'ing Bitcoin is Irrational
BlackRock was the largest investment manager of pension schemes utilizing a strategy called "Liability Driven Investments" (LDI). Understanding their history with LDI is crucial to understanding why they pivoted so dramatically to bitcoin - and why they may be the most important institution for bitcoin adoption .
From: BlackRock (Redefining Portfolio Construction)
ℹ️ While gaining ETF exposure is a rational position for those not ready for self-custody, it does not make for a landscape to provide robust solutions to the public using bitcoin. The ETF is capable of capturing the volatility of bitcoin's price exposure but at an enormous level of counterparty risk.
From: Bitcoin Custody Requires a Higher Understanding of Tradeoffs
Circular Economies
Bitcoin holders who build relationships and trading networks create more powerful capital than passive accumulators.
From: Bitcoin for Institutions
The IBIT Success Story
Launch Date: January 2024 Assets Under Management: $50+ billion in first year Record Breaking: Fastest ETF to reach $10B, $20B, $30B, $40B, $50B AUM Significance: Validated bitcoin as an institutional asset class BlackRock's entrance into bitcoin is significant not just because of IBIT, but because of what they will do next: integrating bitcoin into their mutual fund complex . BlackRock manages trillions in target date funds for 401(k)s. Adding even 1-2% bitcoin allocation would create massive demand.
From: Bitcoin for Institutions
The Question
If there's no risk-free asset, where does bitcoin belong in an investment portfolio? This is what BlackRock had to grapple with.
From: Bitcoin for Institutions
Key Insight from Bitcoin for Institutions:
5. Long time horizons align perfectly - executives deferring for 10-20+ years match bitcoin's optimal holding period.
Chapter: Deferred Compensation - Riding the Wave
⚠️ The Devastating Revelation: The structural underpinning of virtually every investment portfolio in the world is the idea of a "risk-free asset" and high-quality government bonds. This was devastated in 2022 because those "risk-free" assets performed horribly.
From: BlackRock (Redefining Portfolio Construction)
Six Minutes Left
It's time to pull the goalie. Bitcoin is ready. The volatility increase is actually the correct risk measure for winning.
From: Bitcoin for Institutions
Long-Term Focus
Bitcoin's benefits emerge over years, not quarters. Fund managers must resist pressure to sell during drawdowns.
From: Bitcoin for Institutions
Key Insight from Bitcoin for Institutions:
1. CBDCs threaten financial privacy —China's CBDC is a preview of the totalitarian panopticon Western governments could implement.
Chapter: Bitcoin Users Value Privacy
Debts are assigned a priority so lenders understand where they stand on each particular loan
From: Bitcoin for Institutions
⚠️ Ticking Time Bomb: This is now a ticking time bomb on the scenario that in 2030, Coinbase's failure leads to the destruction of $2 trillion of value.
From: Bitcoin Custody Requires a Higher Understanding of Tradeoffs
""The crux of the matter is the notion that HODL'ing is an irrational and unreasonable act, or at least requires a willful ability to be irrational or unreasonable.""
— Brian Hirschfield
From: HODL'ing Bitcoin is Irrational
Unlike traditional bearer assets, bitcoin does not represent a claim on any other asset; instead, it is a digital asset directly owned and controlled by the key holder . This digital form of bearer asset emphasizes the importance of securing private keys. The key feature of a bearer asset is that its ownership is entirely determined by physical possession. This property exists with other assets like gold and silver, but the cost of custodying a bearer asset with a physical form is prohibitively expensive . Depending on how much you have, you might need a military to secure it. The value must justify the costs of defending it. Even if secured, it's extremely expensive to prove its existence a...
From: Bitcoin is a Bearer Asset
HODL'ing requires a willful ability to be irrational or unreasonable. This ability is difficult to model into software, and even more difficult to execute through corporate or institutional governance, where reputations are built and destroyed at these crucial points. Human action is based on an individual's unique set of circumstances at a given moment— specifically, the largest source of dissatisfaction that can be removed at the lowest cost. This is the water/diamond paradox : a person would forgo all the diamonds in the world for their first glass of water. At an institutional level, the decision to remove the largest source of dissatisfaction stems from the human beings who have the pow...
From: HODL'ing Bitcoin is Irrational