Greetings fellow learners!
Here you have found yourself another fresh new newsletter, focused on the ‘Digital Disruption’ that is rapidly unfolding in front of our eyes today.
The term ‘Digital Disruption’ can be loosely defined as what happens when advances in technology change our consumer behaviors and in turn the financial markets.
Given this is my first article, it leaves me with the perfect opportunity to lay some ground rules;
> Each month, my aim will be to pick a topic on Digital Disruption and write an informative piece of how one can express a view in the Financial markets.
> The theme is not exhaustive and will most likely relate to objects that are within my usual observations and interests; (mainly trends across Finance, Sports, Art, Fitness & Health).
> This intro piece is more of a macro outlook & does not drill into anything in particular.
Having been challenged by Dan Held on Twitter yesterday (shameless plug, sign up to ‘The Held Newsletter’ on Bitcoin, it’s awesome!) to create my own content, alas, I find myself unable to sleep at 4am, drafting my first article on the most trending topic of Digital Disruption right now, the worlds most valuable & disruptive Digital Asset, Bitcoin.
A favorite quote of mine is from Jeff Bezos;
I very frequently get the question: 'What's going to change in the next 10 years?' And that is a very interesting question; it's a very common one. I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two -- because you can build a business strategy around the things that are stable in time.
Taking a step back to 2008;
> the Credit Crunch brought the financial system as we know it to its knees, banks were 'too big to fail'.
> Bezos’ Amazon had a market cap of $56 billion (https://www.macrotrends.net/stocks/charts/AMZN/amazon/market-cap).
> Satoshi Nakamoto produced the White Paper on 31st October 2008 'Bitcoin: A Peer-to-Peer Electronic Cash System' and subsequently released the code in January 2009.
Fast forward roughly a decade later;
> the COVID pandemic caused abrupt & revolutionary changes in consumer behavior leaving most small business on governmental support. They are evidently 'too small to fail'.
> Amazon’s market cap is now 26 times what it was in 2008 at $1.5 trillion (1,500 billion $) & a $1,000 investment back in 2008 would be worth roughly $46,139 today if you pro rate CNBC’s data. (https://www.cnbc.com/2018/09/21/heres-how-much-youd-have-if-you-invested-1000-in-amazon-and-apple.html)
> Bitcoin ($BTC) from $0 in 2008 now has a market cap of $325 billion & the price for 1 Bitcoin, today, sits at around $18,285 (£13,638).
That is ALOT of change in roughly a decade.
Could we have used Bezos' long term thought process to predict these changes? Perhaps not.
My aim therefore, is not to provide all the answers (since I can not proclaim to know more than you as the unlucky reader…) but rather to open up the dialogue for discussion and critical thinking (@samr2nson, previously @satoshisamuel on twitter) by unpacking all the change over the next decade into some short(ish), punchy threads that look at particular investment plays.
As an introductory piece, I’m going to pick an arbitrary concept, the topic of 'trust'.
The word ‘trust’, appears over 13 times (unlucky for some) in Satoshi's 8 page doc that has gone on to spectacularly disrupt the world of Finance.
As an accountant who qualified at a big 4 firm in London, my whole profession is said to be built on trust.
Being an ex auditor (lucky me) I was tasked with ensuring the 'Financial Statements are true and fair' so that stakeholders can make appropriate financial decisions on the company. Your job is effectively to go into companies and ask all the employees 'Please explain to me how you do your job so I can document it on my own file'.
Yet here I am, starting my first newsletter post on a subject that boldy claims 'There is never the need to extract a complete standalone copy of a transactions history'.
Oh the irony.
Yet sadly with the good inevitably comes some bad or should I say, there is 'no such thing as a free lunch'.
With all the benefits of the decentralised, peer to peer system for electronic transactions for consumers (e.g. greater control and access to assets by cutting out the middle man), Satoshi unfortunately did not leave us with all sunshine & roses.
'The necessity to announce all transactions publicly precludes the traditional banking method of limiting access to information via trusted third parties, but can still be maintained by breaking the flow of information in another place; by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without linking the transaction to anyone.'
Essentially, transactions on the decentralised network are not entirely traceable and can leave someone with an extremely bloody nose. If you don't believe me, ask Markus Braun, the ex CEO of Wirecard, a German crypto payments and card issuer which spectacularly managed to misplace 1.9 billion euros in cash in June.
If you think $18,000 is expensive & too risky you’re not alone, the majority consensus is that $BTC is still seen as a somewhat ‘speculative’ hedge against inflation (the rising cost of goods & services using traditional fiat currencies like £GBP or $USD).
The market depicts this as $BTCs all time high market cap of ~$325bn is just 0.003% to that of Gold at an estimated $7 trillion.
Despite this, at the time of writing, the energy around $BTC feels somewhat different this time around as we are coming through the back of incredible amounts fiscal pumping across the world as a result of COVID 19.
(In short, we are finding ourselves in an unprecedented situation where we are creating or printing more fiat currency into the economy to artificially hold asset values, pushing them to their all time highs. The money created is also going to ensure millions of consumers that can’t afford to pay the rents on those asset prices can continue to live. )
As a result, it appears the level of trust in worldwide government's capabilities is at getting progressively lower as they have the unenviable task of trying contain the virus and keep its citizens safe whilst simultaneously maintaining a thriving economy and currency.
$BTC on the contrary, is not controlled by a central governing body and is instead stored in a cyber space, that can not be manipulated. They key is that that Bitcoin adopts scarcity by issuing just 21 million Bitcoins (that can be split into several millions of pieces like any other currency), no more, no less.
There are multiple theories on where $BTC will end up. Vijay Boyapati summarised the view nicely in Preston Pysh’s awesome podcast ‘We study Billionaires’ ;
Full Skeptics; $BTC = $0. It is a crazy bubble and has no value. It is not backed anything and is not better than the current financial system.
Curious; $BTC = $10,000 - $100,000. It is interesting but will never be geo political significant. It is for people that are libertarians and technologically savvy and will never be for the average person since it is inherently volatile due its small user base and adopting of funds.
Believer; $BTC = $100,000 - $500,000. It is a direct competitor to Gold & the market will realise that the monetary properties that make gold good for savings make Bitcoin great for savings.
Ultimate Believer; $BTC > $500,000. It is the dominant means of savings by nation states as global reserve currency. It will be a means of settlement between financial institutions and consumers will price everything in Bitcoin.
Irrespective of where you sit in the above, today we are seeing more & more retail investors buying and selling $BTC on multiple exchanges today (Gemini, Kracken, BlockFi, Binance etc.)
High profile companies (Microstrategy, Square, Fidelity & Mode Banking) & institutional investors (Stanley Druckenmiller, Paul Tudor Jones) are starting to invest more capital into $BTC as part of their hedge against inflation.
Even celebrities such as @Masie_Williams of Game of Thrones are getting in the mix suggesting they are willing to 'go long' on Bitcoin.
Given the desperate circumstances in economies like Venezuela & Argentina, whose to say governments wont start purchasing $BTC?
As you can see from the split on her survey & the charismatic Elon Musk’s witty follow up, where Bitcoin will end up is a highly contentious & debated area of Digital Disruption in Finance.
Forgive me as I try to practice what I preach and set out on producing this Digital Disruption newsletter, which I hope, will encourage you into doing more of your own research and making your own informed decisions.
It seems like the future is faster than you think... one this is for sure, we are all here experiencing it one way or another, the question is, who do you trust?
Be Great,
Sam
For those of you that are interested in learning more as observers, I would encourage you to follow the highly credible and knowledge minds in the space on twitter;
Anthony Pompliano @APompliano
Cameron @cameron & Tyler Winklevoss @tyler
Michael Saylor @michael_saylor
Jack Mallers @JackMallers
Dan Held @DanHeld
Preston Pysch @Preston Pysch
Vijay Boyapati @real_vijay
Nic Carter @nic_carter
Max Keiser @maxkeiser
Robert Breedlove @breedlove22
In the meantime, tell your friends!