Anti-Collapse Tonic: 1%BTC + 10%AU

“This year,” a new Bloomberg report reads, “will confirm Bitcoin’s transition from a risk-on speculative asset to the crypto market’s version of gold.”

The report is called “Bitcoin Maturation Leap.”

(Read full report here.)

The title says it all.

The bitcoin market is growing up, say the authors… and it’s due for a 2017–like bull run.

Dan Tapiero, a veteran global macro investor and co–founder of Gold Bullion International, agrees.

In 2013, he admits, he saw it as nothing more than a “VC plaything.”

In 2020, however, he’s come to believe it’s one of the best asymmetric bets you could make in the 2020s.

The potential downside is predictable –– zero.

But, compared to the amount of fiat sloshing through the global financial markets (especially now), the upside potential is astronomical.

“One day,” Tapiero speculates, “people in the legacy system will wake up and it will be $2 trillion… and then $4 trillion… at some point, there will be a flourishing system which will in some way, I think, be integrated with the legacy system…”

Given this, bitcoin is placed in a strange space of “crisis insurance” (in the words of billionaire Chamath Palihapitiya) and “network investment.”

Because of this, many bitcoin pundits have suggested that not holding at least a TINY bit of bitcoin is bordering on financial negligence.

Take that, of course, for what it’s worth.

Bitcoiners –– myself included –– have been accused of conjuring up “reality distortion fields”… a trance of which they are the first to fall in.

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Fortunately, there’s a simple strategy to take advantage of bitcoin’s upside potential without worrying about the outcome.

If you have ZERO exposure to bitcoin, consider the…

1% Bitcoin Strategy

“Everyone should have a 1% allocation of their asset in bitcoin,” says former Facebook executive and Chairman of Virgin Galactic Chamath Palihapitiya.

“Every investor, including retail investors should view an investment in Bitcoin as a sort of crisis insurance, which they keep under the mattress and hope they never need. But if you do, then it will protect you, because it will have a value of hundreds of thousands or millions of dollars per coin.”

1% is 1%.

If you have $100 in your savings account and live in a shoebox, that means allocate $1 to bitcoin.

Why do this?

Let’s zoom out on the bitcoin market.

Bitcoin’s market cap is $200 billion.

Grand scheme, that’s puny.

To see just how puny, check out this brilliant infographic from the guys at The Money Project below.

(Also notice the interesting tidbits on silver.)

And yet, says Tapiero, “if you just see what’s been built… it would cost more than $200 billion to build that.”

What’s been built? An incredible, mathematically elegant system.

That is, a frictionless, autonomous, “always–on” monetary utility that can be used to transfer value from anywhere in the world –– without permission –– for pennies on the dollar.

Wences Ceasares, CEO and founder of bitcoin bank Xapo, has outlined the 1% strategy for bitcoin in three simple steps.

Take 1% of what you have, and buy bitcoin (all at once and at the market price)
Carry it at cost
Do not touch it for 10 years

But like many things that are simple, it’s easier said than done.

Wences:

“It requires a great deal of discipline. I have given this advice to many people, but few have followed it. The ones who have followed my advice, however, had more success, even if they started later. The difference can be surprising; I have seen a number of friends buy at ‘expensive’ prices (say, $300+ per bitcoin) and make considerably more money than others who bought at ‘cheap’ prices (say $30 and below) but then traded along the way.”

Here’s why Wences recommends this strategy:

Investing 1%, and only 1%, helps you keep a cool head. If you invest more, you put yourself in a position where the ups and downs become hard to bear. At times, especially in the beginning, you may be down by 50% or more. If you invest too much, these swings inevitably lead to panic, causing you to trade the position, selling or even buying more. You may be able to afford more than 1%, but I would stick with 1%: given how big bitcoin can be, it is enough.
Carrying your bitcoin position at cost helps you hold your ground. If you adjust the value of your position as it goes up in price, you will feel tempted to take money off the table. Feeling that you have “too much in bitcoin” makes you worry about losing your gains, and works against the original premise of creating a multiple of your entire net worth.
Not touching your bitcoin for 10 years helps you avoid being influenced by constantly changing sentiments about Bitcoin. It lets you remember the reason you originally invested, regardless of whether others laughing at you (which they will, when the price is down) or calling you a genius (which they will, when the price is up).