Security Costs
Depending on how much you have, you might need a military to secure it. The value must justify the costs of defending it.
From: Bitcoin for Institutions
""Cryptography is ruthless, and there are two types of people in the world — those who have been burned and those who have yet to be.""
— Brian Hirschfield
From: Bitcoin Custody Requires a Higher Understanding of Tradeoffs
The Right Risk
Pensions need to think about the right risk - not volatility of returns, but probability of meeting their obligations.
From: Bitcoin for Institutions
Pensions are the king when it comes to OPM expertise. By OPM, I mean "Other People's Money." Everybody is an expert on how to manage other people's money, and nothing brings out people's greatest and wildest ideas like pensions. There is very little written about pensions that is truly original - but as an actuary with 30 years of experience who understands both pensions and bitcoin deeply, some insights can be offered.
From: Pensions
Key Insight from Bitcoin for Institutions:
3. The Freedom Convoy showed government power over money —crowdfunding was blocked, bank accounts were frozen, and credit cards were cancelled.
Chapter: Bitcoin Users Value Privacy
Key Insight from Bitcoin for Institutions:
2. "Risk-free" assets proved to be an illusion - government bonds lost 30-50% of value, shattering Modern Portfolio Theory.
Chapter: BlackRock (Redefining Portfolio Construction)
Company Discretion
Companies have broad discretion over investment options - they can offer bitcoin when 401(k) plans cannot.
From: Bitcoin for Institutions
Key Insight from Bitcoin for Institutions:
4. Bitcoin expertise is scarce —arguably fewer than 5,000 people on Earth have the required mastery for institutional implementation.
Chapter: Bitcoin Requires More Patience and Time than Institutions Have
The 2022 Reality
"Risk-free" assets lost 30-50% of value. The foundation of portfolio construction was revealed to be an illusion.
From: Bitcoin for Institutions
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 .
From: BlackRock (Redefining Portfolio Construction)
Key Insight from Bitcoin for Institutions:
4. Cash is a melting ice cube - the new paradigm views bitcoin as superior to cash for corporate treasuries.
Chapter: Strategy (Balance Sheet Strength)
Key Insight from Bitcoin for Institutions:
3. Hard money enables capital to flow to those who make the best allocation decisions.
Chapter: Introduction
ℹ️ The Four-Year Rhythm: The earliest that bitcoin collateral can be wound down is four years, aligned with bitcoin's four-year halving cycle. The loan carries a single-digit interest rate and has a maturity of 10 years.
From: Structured Credit
""Using bitcoin in funds is the most obvious and non-thinking way for a fund, their investors, and their investors' shareholders to sleepwalk their way to unimaginable wealth.""
— Brian Hirschfield
From: Mutual Funds / ETFs - Wielding the Blade
These stories are becoming rarer because the hardware available to individuals for self-custody has improved greatly in the past half-decade. Hardware wallets have become extremely intuitive and easy to use, making the only real obstacle to bitcoin self-custody one's ability to protect a 12- or 24-word seed phrase.
From: Bitcoin Custody Requires a Higher Understanding of Tradeoffs
The Lesson for Institutions
Bitcoin users will increasingly demand privacy-preserving solutions. Institutions that don't understand this fundamental value proposition will find themselves offering products that sophisticated bitcoin users don't want.
From: Bitcoin for Institutions
Key Insight from Bitcoin for Institutions:
5. There is no free lunch - deploying bitcoin means sacrificing its long-term potential and superior monetary properties.
Chapter: Treasury / Balance Sheet - Having Optionality
The timeframe from a person seeing bitcoin as a solution to a problem, and gaining the understanding of bitcoin to have the skill and conviction to successfully implement such a solution, is multi-year and closer to a human lifetime than a quarter .
From: Bitcoin Requires More Patience and Time than Institutions Have
Key Insight from Bitcoin for Institutions:
1. Hardware wallets have made self-custody accessible , but the only real obstacle remains one's ability to protect a 12- or 24-word seed phrase.
Chapter: Bitcoin Custody Requires a Higher Understanding of Tradeoffs
Key Insight from Bitcoin for Institutions:
1. LDI strategies failed spectacularly when rates reversed in 2022, requiring Bank of England emergency intervention.
Chapter: BlackRock (Redefining Portfolio Construction)