Why Bitcoin Is The Ultimate Diversification Play

It is my belief that if you’re looking for the ultimate level of financial diversification, you can accomplish this by literally selling everything you own today and simply buy Bitcoin. Now, I fully expect that this will instantly strike many as strange and even more as outright financial heresy but allow me to explain.

You see, I believe that Bitcoin will ultimately demonetize a portion of every asset class that has existed before it. To say this another way, Bitcoin will gradually, then suddenly, attract and suck into itself some portion of the energy or capital currently sitting in all analog asset classes. These analog assets include gold, silver, property, art, bonds, equites and of course all the deteriorating fiat currencies of today. I am highly confident of this because Bitcoin is far more superior to each one of these markets and the awareness of such will only grow over time.

While gold, silver, property and art offer some protection against inflation and the deterioration of one’s purchasing power, they are much more complex and expensive to store, protect, divide and transport. Here is a simple example using only one of these assets. One’s property in the form of a building cannot be moved from one location to another and there will always be a cost associated with its ownership. These costs like maintenance and upkeep, insurance, management and legal will never go away. It’s cumbersome, involved and can be outright tiresome to deal with, yet hundreds of trillions of dollars are still stuck in buildings, land, oil fields, farms, ranches and the like. While I will admit there is value in this analog asset, it’s just old and greatly disadvantaged in today’s digital society. If you were to ask your average 20-something year old, the future generation, would he/she rather own $1 million dollars in land, gold or art or $1 million in Bitcoin, you know what the answer would be.

Bonds traditionally offered a degree of security and safety via their coupons (yields), but in today’s fiat driven world, they have been greatly impaired by monetary forces that simply can never again let their yields rise to levels that protected their owners years ago. We must face the fact that low to negative yielding debt (essentially free money) is here to stay and it is my thesis that bonds, a 300-year asset class, have already seen their best days. This is one of the biggest markets in the world and a growing percentage of the holders no longer wants to be there. Where will they and their money move to next? Cash? A fresh new bond earning 1.5% at best or negative at worse? I doubt it.

Equities, despite there gross overvaluations, continue to be a fairly decent store of value that adequately keeps up with real inflation, which by the way is about 14% — 16%, not 6.1% proclaimed by the CPI. However, equites are limited in their scope. They are very location specific and they lack a universality that a global world with blurring borders increasingly demands. There are 8 billion people in the world, yet the vast majority of them simply can’t own or gain access to Google or Amazon. What’s more, all equities, like all bonds, are denominated in fiat currencies, all of which are steadily marching toward zero. Equities also have selection risk, as all stocks do not perform well. In fact, most stocks don’t perform well over time. This is why, despite there being 100s of thousands of stocks to choose from, you only hear about the same 100 or so over and over and over again. The rest aren’t even worth mentioning.

Fiat currencies, as I’ve stated above, are all in a race toward zero. Some are approaching zero faster than others, but they are all headed in the same direction. Some say that the average lifespan of a fiat currency is only 27 years, and while this is heavily disputed, we do know one thing with absolute certainty: more fiat currencies have died than currently exist today. You don’t see any clipped Roman coins floating around today do you? German marks?

Now that I think of it, just in my lifetime, I’ve witnessed the death of a gold-backed US dollar (1971), a Russian ruble debacle, the collapse of the Venezuelan Bolivar, the Zimbabwe dollar, the Turkish Lira, the Argentine peso, the Lebanon pound and a slew of others that the newly formed Euro replaced in the year 2000. How much of the world’s value is stuck in crappy currencies losing value each month and year of their existence? A lot. Even the more sound ones like the U.S. dollar and the Euro are losing value, although more slowly. But the point is that they all lose value. They do not gain in value and they never will. Today “cash is trash” and over $150 trillion trapped in crappy, deteriorating fiat need a home.

Here is my point. Over time, the money trapped in all these flawed assets will find its way to Bitcoin. At least a portion of it will. And let me tell you. We are talking about a truck load of wealth in the area of $700 trillion to $1.3 quadrillion, depending on who’s counting. If I’m right that Bitcoin will, over time, take at least 20% of each one of these assets, isn’t owning Bitcoin as a single asset like owning all of them? Wouldn’t that make owning Bitcoin and Bitcoin only the most diversified play of all? Over time, it would be like owning a piece of everything. It would be the same as owning all of them with no need for anything else.

If this does happen, Bitcoin’s current value of $50,000 a coin will increase by an order of magnitude. In fact, I would go as far as to say that the market has already recognized what I’m saying here as true. Why else do you think Bitcoin is the fastest growing asset in the history of mankind? Where did the money to make that so come from in the first place? Humm…..

Think about this for a moment. Let this sink in. Bitcoin is the best performing asset in the history of the world. It’s performed better than all the assets listed above over the last 10 years, over the last 5 years, over the last year, over the last quarter. It’s the fastest asset and/or technology that has ever been adopted or created by mankind. It has reached over $1 trillion in value faster than any asset in history and it’s the only truly global asset that has ever existed. And unlike anything else, it can, and dare I say will, be owned by all 8 billion people on planet Earth. That could never be the case with gold, or art, or a building or Apple stock.

I have 35 years of professional market experience and I have come to realize that over time, free markets eventually find and communicate the truth. Now that Bitcoin (the freest market of all) has the best 10 years of history of any asset that has existed, isn’t it clear that the truth has already been spoken? I say the market has already decided that Bitcoin has won. It could not be winning in every single 10-year financial metric you can come up with if that were not the case. It could not have accomplished what it has or reached the heights it has with only 2.5% of the world onboard if the market did not already recognize this.

This truth is now self-evident. It is undeniable, irrefutable, in my opinion. Bitcoin is the best diversification play that has ever existed and what is even more amazing is that it is accessible to all.

We are still early. Get yourself some!