2020 marks the beginning of a new paradigm. During the unprecedented start to this tumultuous decade, assets fueled by recovery stimulus and loose monetary policy rocketed to new highs. The wealth divide grew considerably along with micro and macro tensions across the globe.
Marketcap remains one of the best metrics for comparing investment opportunities. As Apple continues to dominate and pave the way to new highs, others will eventually follow its path. 2T is the new 1T marketcap standard now. Gold at 10T is a major marketcap milestone to reach. Most FANG and tech stocks now have a growing competitive moat, especially those which rely on AI where more data drives more success (unlikely another car manufacturer will surpass Tesla anytime soon). The top tech companies will continue to become stronger and more concentrated. Capital is abundant and obvious opportunities are crowded with baked in upside. 50% return might be obvious but what about a 5x return?
Taking on asymmetrical risk is what will bring asymmetrical returns.
Going into 2021, opportunities will remain crowded with major gains made by taking on unknown risk (opportunities) and rotating between assets at opportune times to compound returns. Holding cash will continue to be a losing proposition until there is a sudden crash which will reward those brave enough to deploy capital during the horrific, gut-wrenching dips.
Moving forward, Bitcoin is now a recognized performance asset with a possible upside of 10x+ ($25k -> $250k or more, so says the gurus) or 65%+ annualized return over the next 5 years. As funds and institutions continue plowing into it, BTC will continue to inch its way up while building new price support along the way. Although not immune to a systematic crash of the traditional markets, Bitcoin will be held strongly by participants that believe in an alternative financial system built-on hard money that is incorruptible and immutable — quite the opposite of Central Bank issued fiat. Bitcoin’s value proposition is inline with the digital era and future of transferring value without limits. Even at $250k and a $4.5T marketcap, Bitcoin will only be half the value of all the yellow pet rocks on earth and who knows how many in outer space. Moreover, central bank digital currencies will only lend more fuel to the fire and propel the cryptocurrency sector beyond the “moon”.
2021 opportunities abound but for upsized gains considerable risk and unknowns must be taken. With cash no longer a real reserve to fallback on, Bitcoin’s potential 65% annualized return may be the “risk-free” benchmark to beat. Conviction and strong hands is what will set apart the real winners in this new paradigm.