A little over a year ago I disclosed having bought a few shares of the Grayscale Bitcoin Trust (GBTC). I bought in the middle of it's parabolic run before Thanksgiving and sold it after just two weeks with a 44% gain. I bought it as a lottery ticket thinking that it could easily go to zero but that if it went as high as some thought, well I didn't to watch that happen from the sideline having invested time into learning about it. It went up so fast that it was obviously unsustainable which is why I sold so quickly. My writing about it has been fairly consistent, if you have to dabble, make sure the risk you take is asymmetric such that a wipeout won't hurt you but if it skyrockets you could benefit.
That aspect hasn't changed in the last year. I also still believe that the idea of safer more efficient transactions promised by cryptocurrencies will come but that we are not there yet. For many months I have asked publicly on Twitter why all of the attributes ascribed to Bitcoin won't instead accrue to some yet to be created cryptocurrency while Bitcoin goes to zero. Lately, I have come to believe that unlike the previous 80-90% drops for Bitcoin, there is no wave of new speculators to come in and bid it back up. This creates a big obstacle for it to overcome in order to make a new high. I Tweeted that sentiment out the other day and someone replied that there are still 7.4 billion people left to discover it. I came back with an article from eleven months ago about how popular Bitcoin was in Africa.
The recent slide in Bitcoin has taken the price pretty far below the cost to mine it. This implies, but does guarantee, that something has to give. Either the cost will come down which is a good bet at some point (maybe already happened) or that the price will (should) go up but that is more of a potential short term catalyst. The long term catalyst is what all the touts say it is. I have no idea if they will be right and I am plenty skeptical, as I have been all along but the touts could be right.
I decided last night that I would buy a little GBTC personally (not for clients) taking what I believe as asymmetric risk. I put in less than one Roth IRA contribution. If it goes to zero, it won't damage my financial plan but if it goes to any of the ridiculous numbers put forth by the extrapolators (touts) last year, then it would be enough to meaningfully benefit our finances.
Who knows how long I will actually hang on if it goes up. If Tom Lee somehow turns out to be right and Bitcoin gets to $15,000 by year end (has he backed off of that yet?) I'm probably going to take that and be gone again. If it goes up a lot over a longer period of time I could see selling off a little at a time periodically but it all depends and again, this could be a total bust. As a side note, I would need a lot convincing, an awful lot, to think Lee isn't hurting a lot of people with his touts. If memory serves he's been very wrong about a lot of things over the last decade or so including Bitcoin it would seem.
I have no idea whether this rises to the level of contrarianism that The Death Of Equities from the early 1980's was but if it is then that was just a lucky coincidence. I want to be very clear that zero is on the table here as an outcome as it was a year ago when I did a similar trade.