A Thesis: ETFs, Halvening, Hopium, & What I've Learned Investing in BTC Since 2017

Hey Friends,

I wanted to spell out my current thesis in more detail, in hopes it might benefit someone here:

Part One: Historic BTC Halvening Data

Yesterday I shared the following in a comment that ~140 of you upvoted:

The post-halvening bull run has been smaller each time. From GPT:

2012 Halvening: The price increased from around $12.50 (pre-halvening) to a peak of around $1163 in late 2013, which is approximately a 93x increase.

2016 Halvening: The price increased from around $650 (pre-halvening) to a peak of around $19,783 in late 2017, which is approximately a 30x increase.

2020 Halvening: The price increased from around $8,500 (pre-halvening) to a peak of around $64,000 in April 2021, which is approximately a 7.5x increase.

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Based on this trend we would expect a ~2x increase post-halvening.

I’m calling the top at around $150k in this next cycle and predicting we then drop back to $40k or so in the next bear market. Good luck.

The main counter-thesis you guys provided was essentially: "This time may/will be different because of the ETFs."

Part Two: Data on ETFs + Reasonable Extrapolations

ETFs have poured $50 billion into BTC in the last ~2 months. That's definitely a lot of money. In total, about $100 billion of BTC was bought and sold in the last ~2 months. And in that time, the BTC market cap increased by ~$450 billion.

BTC's market cap (total supply x price per coin) now sits at a whopping $1.3 trillion.

For BTC to even double from here, the market cap must increase by another $1.3 trillion. For it to triple, $2.6 trillion. For it to quadruple, $3.9 trillion. And so on.

Now, granted, that doesn't mean that $1.3 trillion of new money needs to flow into BTC in order for it to double. No one knows exactly how much new money would need to flow in, because market cap is a function of [price x supply], and price is a function of mass-psychology + supply/demand + geopolitical/macroeconomic conditions + regulatory changes + tech innovations + other factors.

Yet personally I think it's safe to assume—based on the fact that BTC's market cap increased by $450 million in the past 2 months with $100 billion of buying/selling volume; and based on the inevitability of more people being willing to sell as price gets higher—that ~$600-700 billion dollars of money will need to flow into BTC over the next ~12 months in order for us to double. Probably ~$1.5 or 2 trillion of inflows are needed for us to triple. And it might require more than this, depending on how soon people start selling en masse.

Personally I think we will see the shortest historical post-halvening bull cycle this time around. The ETFs are certainly well-aware of the halvening and are stocking up pre-halvening while the 'getting is good.' They're likely buying far more supply than they have yet sold to investors—so their buying rate will likely decline precipitously once we near the ~$150k mark (or sooner).

So the halvening is more 'priced in' than ever this time around. I'm guessing we'll see about ~$1 trillion of inflows over the next ~6-8 months, driving the price up ~2-2.5x from here—peaking at ~$130-180k per coin.

I don't think we'll see a $200k Bitcoin in this cycle. I'd love it if we did, but that's a tall order.

Part Three: Understanding Hopium, Mass Psychology, and the Slowness of Fundamental Change

It's crucial to remember that 'magic internet money' is still a very, very new concept. 99% of people globally have virtually zero real understanding of it. Its history—while massively upward-moving overall—has evidenced bucking-bronco-like volatility. There are still many question marks around its future, despite what the maximalists may say. There are too many factors involved, and no one really knows. So people are rightfully hesitant to 'bet the farm' on 'digital gold.'

And when the 'knife starts falling'—when the market begins to backtrack—do not underestimate herd mentality. Especially in cryptocurrency, which most people view as unproven and speculative. Historically, the masses start off-loading faster than an ice cream truck on a hot summer day. That is, they sell. They jump ship.

The r/Bitcoin community—while a fun and exciting place to hang out with many optimistic futurists—is a quintessential filter bubble. It is an echo chamber where high-grade hopium fuels wildly unrealistic dreams of fast cash and the rapid demise of fiat.

The legacy financial system—while most certainly broken, probably beyond repair—is still deeply, deeply entrenched. One cannot overestimate how deeply the 'religion of fiat' is imprinted upon the psyches and DNA of the global populace. We're talking about a ~millennium-long hypnosis here.

Most of us here have a strong rebellious, freedom-loving streak—and therefore it's easy for us to get excited about 'being our own bank' and cutting out governments, big banks, and other corrupt middlemen who prey on the masses.

Yet again: We are not the norm. The vast majority of people still do not think this way. Even though many people are deeply dissatisfied with global affairs, it will take a long time for most of them to make the leap to, "Well, the most promising way to overthrow the established order is to go to the root: Abandon their corrupt financial architecture, create our own money, and be our own banks."

Part Four: Factoring in Competition and Technological Lag

One must also consider that Bitcoin has a lot of competition at this point. Other coins do a lot of things way better than Bitcoin—vastly lower fees, faster transaction speed, better smart contract architecture, etc. I still believe Bitcoin is the most likely to remain the big winner of cryptocurrency due to its momentum, renown, household-name-ness, dedicated community, and yes, its truly beautiful design. Yet this is far from a certainty, despite what maximalists may tell you.

And one must also understand that public-facing cryptocurrency interfaces still suck in 2024. The tech side of crypto still has a lot of catching up to do to be anywhere near as accessible, smooth, seamless, intuitive, and functional as the PayPals, Venmos, Visas, and Wise.coms of the world. Yes, ETFs help solve this (for investors), but when it comes to actually building a functional parallel financial system that the average person can reasonably/confidently use, we have a long way to go.

Part Five: The Uncertainty of Investing and the Necessity of Following a Clear Strategy

So there are many factors. Investing is always uncertain. If people tell you anything is a 'sure bet' in the investing world, be very skeptical. The top investors in the world look for asymmetric gains on easy bets, yes, but they are also unimaginably vigilant when it comes to protecting their downside. They understand that a clear plan for diversification (into other non-crypto assets), systematic profit-taking, and rebalancing will *always* win out in the end, in the world of investing.

That is why I have already begun to systematically take profits at every $5k level and will continue to do so (without selling my full stash)—with intent to diversify into other asset classes and set aside a chunk of liquidity to likely re-enter BTC/crypto during the next bear market in the $40-50k range. You can view my systematic profit-taking/exit strategy here, if you like.

Do understand that my strategy is tailored to my unique situation: I am overexposed to BTC/crypto as an asset class due to being more risk-prone a few years ago compared to now. I now have a wife and daughter, and I do not want the great majority of our life savings tied up in a highly-volatile asset class. It's too risky and not worth the psycho-emotional stress. I will likely continue to take profits until BTC/crypto accounts for ~15-20% of our total portfolio of investments. The rest I will use to 1) finish building a 6-month 'emergency fund' buffer of cash savings in a high-yield ~4.7% savings account on Wise.com, 2) start investing in more conservative, time-tested asset classes such as index funds and bonds, and 3) be on the lookout for other asymmetric investing opportunities in the 21st century, as there will inevitably be more. I recommend each person find a strategy that fits well with their life-situation and level of risk-tolerance.

Part Six: What I Learned Living Through Two BTC Crashes

Lastly, I'll close by saying that, having invested in BTC since 2017, I have lived through two major BTC/crypto crashes. These experiences taught me more than everything I've ever read on investing and money management. There is no replacement for the viscerality of getting #wrekt. Thankfully, I remained a diligent HODLer and have done well over the long-term, yet the pain of watching sizable sums of money evaporate in a matter of days/weeks leaves a deep impression.

From this I can earnestly tell you: Take profits. Implement a systematic profit-taking strategy. You will be glad you did. In every cycle there is hopium-fueled mania. There are people saying, "This time is different!" There are people saying, "We're headed to $1 million Bitcoin this time!"

The wise investor has a cool rationality and a piercing vision that *sees through* the mania. They have a rational plan and they stick to it. They master their emotions. They sell when the hype is booming, and they buy when there's "blood in the streets." They admit that no one really knows what will happen, and they develop a strategy that can thrive across a wide array of possible futures. This requires true clarity and discipline. Most people are not serious about mastering themselves, so they end up being losing or ~break-even investors. The sooner you get serious, 'go pro,' and stop investing based on hype and hopium, the sooner you'll lay the solid foundations for a good life and generational wealth.

Part Seven: Conclusion

One final thing: A lot of people in this sub are unnecessarily mean to each other. Let's change that. The masses will be more apt to migrate to a parallel financial system/community if the people of that community are kind and loving to one another—and actually demonstrate living examples of "the more beautiful world our hearts know is possible."

All right, I think that's all from me. Thank you for the opportunity to clarify my own thoughts. Thank you, Satoshi Nakamoto—you have the coolest name ever. I hope this was valuable to someone.

Peace, Love, and Blessings to all of you,
JB

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TL;DR: Historical halvening data + ETF data suggests to me that we will likely peak around $130-180k in this cycle. Start systematically taking profits now at regular intervals, follow a clear plan, and protect your downside in order to succeed long-term. View my conservative profit-taking strategy here. Master yourself, and become very aware of how self-delusion and mass-psychology work. Always look honestly at the many factors that can impact the future price of BTC. Admit that no one knows for sure what will happen and create an investing strategy that can thrive in many possible futures. Be kind to each other. Peace.

Note: Typical disclaimers: Not financial advice. Do your own research. Take care.