1/ Threading together my presentation from @coindesk's #ConsensusInvest this week.
2/ The presentation was inspired by the 2016 white paper put out by @ARKInvest & @coinbase, which involved @WhiteAdamL, @wintonARK, @CathieDWood & myself. Link to whitepaper here: research.ark-invest.com/bitcoin-asset-…
3/ When the white paper came out in July 2016, it got fanfare from the #cryptocommunity, but many from #WallSt dismissed it b/c the aggregate network value of #cryptoassets was $10.5B at the time. Asset classes store trillions, #crypto would never get there...
4/ Structure of the asset class WP:
-Investability
-Politico-Economic Features
-Correlation of Returns
-Risk-Reward Profile
Which is also how I structured the @coindesk prezo
5/ First bar an asset class has to clear is being sufficiently liquid so as to be relevant, measured here in #bitcoin’s daily trading volumes. For the last 50 days straight, $BTC has traded > $1B, and the 2017 average is $1.4B+.
6/ Note that the chart showed was only for #bitcoin. #Cryptoassets as a whole regularly trade north of $10B in daily volume.
7/ #Bitcoin is often compared to gold, but gold’s supply = slightly inflationary, bitcoin’s supply = disinflationary going on deflationary. $BTC better set up as a store of value.
8/ In other words, #bitcoin's mathematically metered supply schedule is superior to the whims of man controlling gold & fiat supply (graph from original white paper)
9/ *transaction* value per min:
2017: $513,647
2016: $109,910
2015: $50,770
2014: $43,478
2013: $28,368
2012: $1,149
2011: $821
#bitcoin as a means of exchange.
(graph is log scale)
10/ In other words, #bitcoin moves a half a million dollars worth of value around the world per minute, and that’s up 5x from 2016, which was up 2x from 2015.
11/ If you're still stuck on #bitcoin only being used for nefarious activity, then you should update your views as that's an overplayed & outdated story: papers.ssrn.com/sol3/papers.cf…
12/ Ratio of trading to transacting can reveal which asset is being speculated upon more on a relative basis. Global FX volumes are 10x greater (~$750T/yr) than global GDP (~$80T in 2017), while global bitcoin trading (~$1.4B/day) is only 2x > transaction volume (~$750B/day).
13/ While some may want to debate the assumptions that go into calculating this ratio, it reveals to me that fiat currencies are more actively speculated upon *on a relative basis* than #bitcoin.
14/ A giveaway for #cryptoassets representing an emerging asset class (unlike any existing asset class) are the correlations. #Bitcoin near zero correlated with all others. Graph from the book: amazon.com/Cryptoassets-I…
15/ One year rolling average correlations show the same pattern of #bitcoin being indifferent to the movement of traditional asset classes. research.ark-invest.com/bitcoin-asset-… (graph from original asset class white paper)
16/ Turning to risk-reward ratios, we first have volatility, which as I’ve discussed before shows a nice long-term downtrend as the liquidity deepens in the #bitcoin markets. While 2017 has been more volatile than 2016…
17/ 2016 was an example of how much #bitcoin’s volatility has dropped, as it was less volatile than @twitter stock & on par with oil (as represented by $USO)
18/ On the *reward* part of risk-reward, #bitcoin has stomped other asset classes, included @facebook @amazon @netflix & @Google stock (image from book: amazon.com/Cryptoassets-I…)
19/ Dividing reward by risk, we get the #SharpeRatio or "risk-adjusted returns," for which #bitcoin has consistently outperformed the other asset classes.
20/ #Cryptoassets are akin to equities as a new way to organize & incentivize human activity... except equities are 400+ years old, while #crypto is a 21st century creation that is native to information networks.
21/ All mainstream media wants to talk about these days is whether or not #crypto is in a bubble 🙄
22/ Each successive #crypto "bubble" will dwarf the prior "bubble," until people realize the illusion of value is the bubble that never pops.
23/ We're ~5% of the way to where the tech & telecom frenzy peaked in 2000 (inflation adjusted). Successive J-curves will lead #crypto to an inflection that takes our collective breath away.
24/ I then told everyone at #ConsensusInvest to buy the book 😂
25/ And that was the end.
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