$20,000 in 2020: Bitcoin’s Point of No Return

Three years ago (almost to the day), I wrote about Bitcoin reaching $10,000:
Bitcoin is at $10K — and that’s just the beginning of how it will revolutionize money.

We know how that story ended. CNBC put together a clip of my comments on the currency, stating I was the VC who “called Bitcoin’s correction”:

What’s different this time around now that Bitcoin has reached and passed the $20K milestone?

In the 2017 article, I wrote “True alpha returns have been difficult to achieve in the globally low interest-rate environment…”
Fast forward to 2020 and truer words have never been spoken. A global pandemic and recession has put quantitative easing on turbocharge in 2020, leading to near zero interest rates and significant dollar decline, which has led to a search for higher yield as well as an inflation hedge.

In November 2017 I wrote: “It’s important to note that a fair amount of the recent capital in the market is driven by speculation from the astronomical returns that cryptocurrencies have achieved in 2017, and a ‘fear of missing out.’”

In the heady days of 2017, my hairdresser asked me to show him how to buy crypto. Two weeks ago in 2020 the same hairdresser was surprised to hear “Bitcoin was still a thing”. When I told him it was vastly outperforming traditional assets this year, including NASDAQ, he was incredulous. He had long ago sold his BTC at a loss and forgotten about it. Like him, many retail investors were drawn into nonstop television coverage and headlines that were (to me, scarily) reminiscent of 1999. When CNBC walked its viewers through an XRP purchase I knew we were near the top of that cycle.

What happened after that crypto crash were 3 intense years of building behind the scenes – namely the scaling, custody, regulatory clarity and transparency required before institutional investors could feel comfortable holding this emerging, computer based asset class. In fact as I write this, we’ve had the opposite of FOMO – the many recent billion dollar buys have been announced after the fact. Hedge funds and corporates have quietly been accumulating Bitcoin over the past year – these names include legendary investor Paul Tudor Jones, Square, Mass Mutual, and countless others. Yesterday, UK investment firm Ruffer Investment Management revealed it was holding over $700M in BTC. Later in the day US crypto exchange Coinbase filed a confidential S1 with the SEC to go public. Guggenheim CIO Scott Minerd appeared on Bloomberg TV and put a $400K price on BTC, based on its “scarcity and relative valuation of such things as gold as a percentage of GDP”. All in one day!

In a 2020 news cycle dominated by the pandemic, civil unrest and US elections, many previous price movements garnered, at the most, a quick mention until this week.

Given the headlines, I am sure we will see more retail investment in the digital asset space – Paypal, Robin Hood and other global fintech companies have also opened up their platforms for customers to buy, hold and sell cryptocurrencies during the past year. In a year when the stock markets hit all time highs, and digital platforms grew exponentially, the pent up demand, and access, to invest in digital assets has never been higher. The brainpower building infrastructure for Bitcoin as well as other digital asset infrastructure is unlike anything I have seen in the past seven years, along with a significant generational shift. Try telling a Gen Z that a rock mined out of the earth (using low cost labor in terrible market conditions and which takes physical storage space) is worth more than a decentralized, fixed supply digital asset that is censorship resistant. You will catch yourself wondering why you even believe that – the world as we knew it has crumbled in 2020 and will be rebuilt by those who believe that digital infrastructure can enable human talent to overcome the challenges we face.

Bitcoin has firmly taken its place as a store of value -I had alluded to that being a key valuation metric in my CNBC 2018 clip – and I look forward to seeing how its underlying infrastructure enables programmable assets of all kinds.

One thing is for certain: 2020 was a point of no return for Bitcoin and digital assets – and $20K, regardless of any short term retreats, is another milestone towards the inevitable.