Bitcoin + Traditional ETFs, why YOU need to care, and why now
What % of my investments should I allocate to a Bitcoin ETF?
I was recently asked a great question: What percent % would you allocate to a Bitcoin ETFs in your retirement?
This person is like many of you. They’ve heard about Bitcoin over the last few years, thought it was a fad or gamble, Ponzi scheme even, though never really understood it. It’s a popular topic of conversation again and some of those same cautionary sentiments return.
However, other thoughts that weren’t there before now come into play - it’s had tremendous staying power this whole time, its value has continued to increase as the purchasing power of the dollar has deteriorated, it’s never been compromised, it’s been the best performing asset class over the past 10 years, traditional financial institutions like BlackRock (who were ALWAYS opposed to it) have done an about face are now marketing the asset to their wealthiest client-bases, and most importantly now I can purchase it through an ETF just like I buy a normal stock like Apple AAPL 0.00%↑ or Tesla TSLA 0.00%↑. What have I been missing? Or, was it that I truly never took the time to understand it.
Since inception in 2009, Bitcoin has outperformed any traditional asset over the same timeframe. Over a period of 15 years, that can’t be by mistake.
On your own time, watch the video below. It’s a great overview on what is Bitcoin.
Even if after reading this piece or watching this video you still don’t fully understand, it’s ok. Keep reading about it until you do.
Understanding Disruption
With any emerging industry, whether it’s new or disruptive, there’s always a period of time where the market demonstrate some form of resistance. Especially so if it’s a new form of an asset, in digital form, that goes against the traditional convention of wealth and money. Yet, if you told anyone 30 years ago that their entire life would be fit and be conducted in the palm of their hand in the form of digital device that could call, send a message, take a photo, send $ internationally, sign legal documents, etc, they’d tell you your crazy.
Typically, this comes from a lack of understanding.
But, over time as the asset matures, demonstrates durability, and the market begins to understand its dynamics and its importance, adoption slowly starts to set in. This is EXACTLY what has happened with Bitcoin and those that were willing to take the risk early on and invest even a small amount have been rewarded for it.
Always know what you’re investing your hard-earned money in. You do yourself a disservice in not being educated on something that could potentially be life-changing.
By reading this and if I’ve peaked your curiosity you’ve done more than most people have.
So let’s go back to question above, which essentially translates to:
How much Bitcoin should I have?
My short-answer? As much as you can, within reason. BUT I’m going to show you with math, how INSANE you’d have to be to not have AT LEAST 1-5% of your total investments in Bitcoin, and now there’s ETFs you can purchase them through.
Remember, we here care about creating long-term wealth, not gambling away hard-earned money for a quick buck. That said, please bear with me.
The Bitcoin ETFs & Why It Matters
Wasn’t Bitcoin supposed to disintermediate traditional finance? Maybe initially, but that’s not where we are at now in 2024. It has evolved. Let me explain why having an ETF is the catalyst that Bitcoin didn’t know it needed to get mass global adoption.
Many of you are familiar with the traditional ETFs issued by Asset Managers like BlackRock, Vanguard, Fidelity, etc. These guys pretty much run and own most of global wealth.
From the image below, you’ll see as of 2023 they manage more than ~$40 Trillion!
To put things in perspective, as of last year, the Global GDP of the world economy was $105 Trillion. Yes, you read that right….The top 10 asset managers in the world own 40% of ALL global wealth.
Knowing what you know now, hope you’re starting to see the importance of the ETFs.
An ETF is a a financial product wrapper that fits the current infrastructure of the capital markets and traditional financial distribution. With the issuance of 11 spot Bitcoin ETFs (which include BlackRock and Fidelity) these products plug into massive traditional sales channels and becomes part of a new “asset allocation” model that defines crypto as an asset class in the presentations of every single wealth manager in the world.
These institutions don’t really care about Bitcoin as a technology as much as the fees they will be able to generate from managing the BILLIONS in these ETFs. Guys, it's not about the tech adoption of blockchain-based financial or economic systems, IT’S ABOUT FINANCIAL ADOPTION OF A NEW ASSET CLASS.
In the ~1 month since these ETFs were issued look at the volume of $ that has flown into these products. And more importantly, is the following image which shows that there’s only 1.38M Bitcoin left to be taken out from the system. Simple supply & demand principles are that if something there’s high demand and limited supply of anything, price only has one way to go. Up.
Bitcoin price predictions for 2030 and 2040:
If you’ve read this far, thank you!
These predictions may seem outlandish, but recognize the fact that in 1 month since issuance of the 11 spot Bitcoin ETFs, they’ve amassed MORE than $15B in Bitcoin inflows! This breaks literally any previous ETF record.
Demand isn't slowing, and as more countries around the world build the capital market infrastructure that allows big $ (pensions, retirement, funds) to invest, there's really only 1 direction for price to go over time. These price predictions might be more attainable than you think when you consider adoption over the next decade.
Personally, I don't care too much about near-term price as I don't plan to sell my Bitcoin. I'm 29 and my retirement is very far away. These predictions also come from some of the most credible institutions and investors who've been supporting Bitcoin adoption for years.
In case you can’t read the image, these are the average BTC price predictions:
2024 / 2025: $157,445
2030: $526,328
2040: $505,000,000
In next 12 months:
The average of most price predictions over the next year is $157k, which is VERY conservative, but it’s good for the sake of our example. Taking today’s price at $61k, a $157k target for 1 BTC = a +157% return.
Let’s say you have a $1k position at today’s price, or .016 BTC, which currently represents 5% of your investment portfolio. The other 95% is invested in the S&P 500 $SPY. This means
BTC portfolio allocation: $1,000
Non-BTC portfolio: $19,000
Total investment portfolio value: $20,000
Now, let’s apply the standard +8% yearly return for 12 months on the $19k and the +157% on the $1k. Let’s look at how your portfolio has changed.
BTC portfolio allocation: $2,570
Non-BTC portfolio: $20,520
Total investment portfolio value: $23,090
Your BTC position (previously 5% of your folio) has now MORE than doubled, now representing 11% (without you having done any other adds)
Now, let’s go to 2030. This is where it gets REALLY interesting. Let’s assume:
Your Non-BTC portfolio continues growing at +8% through 2030
You continue to hodl your bitcoin position without any adds
By 2030:
The average Bitcoin price prediction is $526k, representing a +762% return from today. This means,
BTC portfolio allocation: $8,620 = ($1,000 x (8.62))
Non-BTC portfolio: $30,150 = ($19,000 x ((1.08)^6)
Total investment portfolio value: $38,770
By 2030, your BTC position now represents 22% of your total portfolio WITHOUT you literally contributing $1 to any of these investments as of today.
There are 70 months between now and January 2030. If you start buying $100 of BTC every month through 2030 (aka an additional $7k invested) imagine what your bag would be.....
By 2040:
Fidelity is literally on the record for saying that Bitcoin will have a $1B price target by 2038 - 2040. The math is insane at this point. Your little $1,000 investment would be worth $185M by this time. LOL
99% of people should honestly be buying the ETFs, including you. Why? The asset has never been more accessible, there’s been a cleanse of all the bad actors, and you don't have to worry about losing your keys or your password with self-custody.
Most brokerage platforms like Robinhood HOOD 0.00%↑ , Charles Schwab SCHW 0.00%↑ and Fidelity offer all of them.
I ran this math being VERY conservative assuming you ONLY allocated 5% of your total investments to Bitcoin, and look at how small of an allocation can completely change the composition of your portfolio over a long period of time.
Moral of the story is: Don't overthink this, have some Bitcoin, your future self will hate you if you don't.
But first, get educated and I hope this helped :)
Here are the ticker’s for the Bitcoin ETFs:
BlackRock: IBIT 0.00%↑
Fidelity: FBTC 0.00%↑