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Investing In Bitcoin Infrastructure For The Future – Bitcoin Magazine

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Investing in Bitcoin companies is a viable path for generating BTC and will lead to heavier emphasis on sats flowing back to investors.
In my 2021 end-of-year essay, I shared my path to Bitcoin, the vision for Ten31, and my views about investing in Bitcoin infrastructure. Despite Bitcoin irrefutably being the most secure network with the longest history, the most decentralization, largest “market cap,” and best brand (among other factors) there is very clearly an imbalance in capital disproportionately allocated to “crypto” and underweight in the Bitcoin ecosystem. This creates tremendous asymmetry for investing in Bitcoin companies, which has not yet been appreciated by most and remains one of the most overlooked and best-kept secrets in the industry at present. Following my previous essay, I wanted to share further thoughts on the opportunity I see in investing in Bitcoin infrastructure and how a Bitcoin-oriented world will impact investing going forward.
To see value, you need to think differently …
What is the key to being a great investor? Is sound investment judgment an innate capability, or can you learn it? In my 15 years as a professional investor, I’ve found that investment judgment develops over time. You must have personal honesty and discipline. You must know when you should say “no” and be willing to do it. You should learn not just from the deals you do but also from those you don’t. But above all else, what I have found key to investing well is independent thought. That is, being yourself and challenging the norm, and seeing value where others do not. In my experience this usually comes from one of three sources:
Ten31’s strategy is to invest in and support great Bitcoin companies, and we have the benefit of all three sources of alpha above. As it stands, most professional investors aren’t yet thinking about investing in Bitcoin companies because the broader market (even those interested in “crypto” or “blockchain”) generally still does not understand bitcoin. That’s what creates the huge upside in the BTC/USD price (which will ultimately be captured as information, and general understanding of bitcoin becomes more distributed), but this pricing upside also often underlies the impulse to only hold the asset and not consider investing in the “picks and shovels” around it. I’ve found the hesitation among bitcoin believers to invest in Bitcoin equities most often stems from (i) a desire to wait until future price gains on bitcoin are realized (in a sense, a future FOMO), (ii) a disbelief that investing in Bitcoin equities can outperform bitcoin, or (iii) risk aversion.
Bitcoin is the safest asset and most pristine collateral on the planet (1 BTC = 1 BTC), so I understand the third group above who may prefer to only hold bitcoin out of risk aversion (every individual should decide their risk tolerance and orient their asset portfolio accordingly). I have less sympathy for the first two perspectives, (i) those waiting for a higher bitcoin price (i.e. future FOMO) and (ii) those who don’t think investing in Bitcoin companies can outperform bitcoin (i.e., Bitcoin equity skeptics), for several reasons.
First, both of these points of view implicitly suggest that an allocation to Bitcoin infrastructure is an “either/or” relative to holding bitcoin. Unless you have 100% exposure to bitcoin and hold no other assets or investments (in which case, well done), those arguments are misplaced, as an investment in Bitcoin infrastructure should be evaluated in context to all other allocations within a portfolio, including traditional markets (public markets, real estate, PE/VC, etc.). The measuring stick shouldn’t strictly be against bitcoin.
My second argument is that investments in Bitcoin companies can in fact outperform bitcoin. If deployed carefully and selectively, successful investments in early-stage Bitcoin companies have 100x-plus return potential over a shorter time frame, unlikely to be matched by bitcoin over the same horizon (even if we all believe the appreciation potential for holding bitcoin remains hugely significant over the longer term). Investments in Bitcoin companies that earn and build bitcoin on their balance sheet (at effectively below market prices) also offer the opportunity to outperform bitcoin (for example, think of a bitcoin miner). As more companies successfully offer products and services desired by holders of bitcoin, these companies will eventually be paid in bitcoin, and bitcoin will accrue to their bottom line and strengthen their balance sheet (indirectly becoming “bitcoin miners” … more on this below). In this way Bitcoin companies can in effect become leveraged plays on bitcoin.
Thirdly, and perhaps just as powerful and very much overlooked, investing in Bitcoin companies can enhance your bitcoin portfolio by offering returns which are disentangled from near-term price swings of bitcoin, balancing out the underlying volatility of the asset. An early-stage Bitcoin company with product market fit and/or customer traction might be achieving significant equity growth over a period when the bitcoin price temporarily stagnates or even declines due to broader market factors. Given the significant secular tailwinds expected over the coming decade as adoption continues, investing in early-stage Bitcoin companies can capture these benefits, regardless of shorter-term bitcoin price volatility. For example, BTC/USD is up roughly 35% over the last six months, 15% over the last 12 months, 350% over the last 18 months, and 400% over the last 24 months. In Ten31’s Low Time Preference Funds, we have investments in Bitcoin companies that have outperformed each of these metrics over the same shorter-term time frames. While in many cases the value of private, illiquid company stock doesn’t move over these shorter periods (updated mark-to-markets are typically done in conjunction with subsequent fundraising activity), the point is that once valuations are updated upon such an event, it can crystallize returns in excess of bitcoin over the same period.
And finally, as I described in my last essay, there is also a flywheel from investing in Bitcoin infrastructure. Investments in the Bitcoin ecosystem strengthen the network, driving increased adoption and value of the asset, which in turn attracts additional capital and supports further investment in infrastructure in a virtuous circle. There are natural synergies from holding bitcoin and investing in the network, and the result is an overall improved risk/return profile versus holding bitcoin on a standalone basis. Therefore, rather than an “either/or” with holding bitcoin and investing in Bitcoin infrastructure, the conclusion is that one should both hold bitcoin AND invest in Bitcoin companies. We were all convinced at one point to own bitcoin, and the next logical step should be to “get off zero” in terms of allocating capital to Bitcoin equities.
Tying back my concepts of independent thought to investing in the Bitcoin ecosystem, I believe Ten31 captures all three sources of alpha previously mentioned:
As we’ve seen over the last couple of decades under a fiat standard, very often the profile for a venture investment has been to burn cash and pursue growth at all costs, with no need or ambition to consider profitability or cash flow (the profitability dial can theoretically be turned later, or perhaps an exit can be realized before ever reaching profitability). A world of infinite liquidity can prime the pump with fresh capital to rinse and repeat this process over and over again.
As we transition to a more Bitcoin-oriented world, the importance of profitability and sound business models will increase, and there will be a greater emphasis on returns on invested capital (measured in bitcoin terms). That is not to say that venture-backed Bitcoin companies won’t also burn cash initially while experiencing hyper growth; likely most will initially, but the drive to achieve profitability more quickly will be greater and the allocation of scarce capital resources based on those ambitions will be more disciplined than before. That’s because Bitcoin companies are backed by Bitcoiners, and the common goal among every Bitcoiner is to obtain more bitcoin. Under a Bitcoin standard, earning bitcoin today will generally require less work than earning the equivalent amount of bitcoin in the future. Said another way, for the same amount of work you will earn less bitcoin in the future. This will emphasize the opportunity cost of foregoing bitcoin today for the prospect of bitcoin tomorrow (which will be harder to earn). When the objective is to accumulate as much of the 21 million fixed supply as possible, this will become a forcing function on a company's mindset for evaluating investments in growth. Return on investment ("ROI")-based analyses will become more common, even in the earlier-stage venture world (e.g., "what is the expected bitcoin yield we could expect in profits from this investment?").
Not only will entrepreneurs start to think in terms of how much bitcoin can be generated from allocation of its resources, but investors will also begin to think more in bitcoin terms when evaluating the risk/return of investment opportunities. Let’s take a look at some simple corporate finance and valuation concepts, applied to bitcoin.
If an investor is making the economic decision of holding bitcoin today versus investing in the equity of a Bitcoin company, the investor should only do this if he/she has conviction the investment will yield more bitcoin, with some premium required based on the risk being taken and the cost of capital (i.e., the investment generates excess returns). Simplistically, an investor could value a business using a multiple-based approach (e.g., revenue- or earnings-based valuation) as a proxy for the bitcoin it can ultimately deliver to shareholders over the longer term. Alternatively, a business could be valued directly based on how much bitcoin it is estimated to produce in the future, discounted by its cost of capital in bitcoin (“discounted sats flow”).
These are familiar concepts to anyone who has taken corporate finance, but under a Bitcoin standard the relative level of importance of the different value drivers may shift. In an inflationary system, holders of assets win. With deflation, holders of money win. Under the simplistic multiple-based valuation approach above, equity value creation is driven by:
If future financial performance measured in sats (in the diagram above, KPIn) is harder to achieve in bitcoin terms in an absolute sense due to its deflationary nature (i.e., KPIn may grow less, if at all), it follows that the components (A) and (C) of equity value creation will also become more challenging in an absolute sense, and therefore component (B), the ability to generate sats flow, will become more important. Equity value creation, and by consequence investment success, will be more rooted in profitably generating sats.
In turn, this may lead to an increased emphasis on discounted sats flow (DSF) analysis. Following the same logic as above, if the amount of bitcoin earned in the future (₿t) is harder to achieve (and possibly declining over time), then the value of a company’s discounted sats flow will be more heavily weighted towards the present than in the previous paradigm, incentivizing the pursuit of a sound, sustainable and profitable business model more quickly, as compared to the growth-at-all-costs model incentivized by the fiat standard. Another likelihood under this line of thinking is that profitable Bitcoin companies which accrue bitcoin on their balance sheets will benefit from a lower cost of capital than those who don’t, further incentivizing sound business behavior. In calculating a company’s cost of capital, investors using DSF models will likely estimate a risk-free rate in bitcoin using an emerging bitcoin yield curve (see Nik Bhatia’s writing).
Qualitatively, it should seem obvious that Bitcoin will usher in a shift towards sats flow investing. In a fiat world of money printing, cash is not valued; artificially reduced interest rates mathematically favor growth investing, and cash flow investing has taken a back seat as a result. In a bitcoin world, if people start to value the monetary base unit more (sats), people will start to increasingly value the businesses that produce it. Ownership of sound money leads to ownership of sound equities and creation of sound business models.
As one last thought experiment, imagine a company that denominates its income statement in bitcoin, is profitable, and accrues bitcoin on its balance sheet. That sounds a lot like a bitcoin mining company. However, bitcoin mining companies are extremely capital intensive and fiercely competitive (anyone can plug in a miner and compete). In an open monetary network like Bitcoin, it is plausible that certain Bitcoin technology companies could establish early leadership positions in their respective fields with sustainable competitive advantages (sticky business models, technology infrastructure, network effect businesses, brand loyalty, etc.). Those companies would implicitly look a lot like bitcoin miners (generating a consistent stream of sats flows), except with a less capital-intensive business model (no constant replenishment of equipment) and with less competition than bitcoin miners. This is a very compelling financial profile and an underappreciated aspect of investing in the future leaders of the Bitcoin ecosystem, and we are pursuing these types of investments at Ten31. I have provided below a snapshot of the investment areas we are targeting, and we’ll provide more detail about how we view the investable landscape in a future piece.
This is a guest post by Grant Gilliam. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Bitcoin Is '100 Times Better Than Gold,' Michael Saylor Says – Here's Why | Bitcoinist.com – Bitcoinist

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Bitcoin and gold are both valuable assets that can be used to protect against inflation; nevertheless, there are important differences between the two in terms of their history, accessibility, and other sources of demand.
Gold, undoubtedly, has a lengthy history and solid basis, while Bitcoin has barely more than a decade of existence to prove its worth as an inflation hedge.
In November of last year, the price of a single BTC soared beyond $65,000, setting a new record high. This increase was related to the introduction of a Bitcoin exchange traded fund in the United States; while others during the year were due to events involving Tesla and Coinbase, respectively.
As of this writing, BTC is trading at $$19,058.84, down 5.5% in the last seven days, data from Coingecko show, Sunday.
Despite the fact that BTC has lost over 73% of its value since its all-time high in 2021, crypto bull and MicroStrategy co-founder and CEO Michael Saylor is unfazed.
Not only does he think the digital coin will regain its former glory, but he also thinks the cryptocurrency has a lot of room to grow beyond its current high point.
While the value of the most popular cryptocurrency in the world has been falling in recent weeks, MicroStrategy has been buying the dip. With 130,000 BTCs in its vault, it is sitting on nearly $4 billion of the crypto.
“I think that the next logical stop for Bitcoin is to replace gold as a non-sovereign store of value asset and gold is a $10 trillion asset as we speak. Bitcoin is digital gold, it’s 100x better than gold,” Saylor said during the Money Festival hosted by MarketWatch on Wednesday.
Bitcoin has a market cap of around $365 billion, according to data by TradingView on Sunday.
And during the festival’s Best New Ideas segment, Saylor didn’t hold back when he predicted the crypto’s price tag may reach $500,000 within the next decade.
“The half-life of money in crypto is forever. You can move it on billions of computers at the speed of light. So if Bitcoin goes to the value of the yellow metal, it’s going to $500,000 per coin, and I think that happens this decade,” Saylor pointed out.
According to MarketWatch, Saylor has around 17,732 Bitcoins that he purchased for around $9,500. Meanwhile, MicroStrategy’s stock price has fallen almost 65% this year, just like Bitcoin.

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Freelance writing is Jet’s other cup of tea. When not on his computer, he unwinds with a cold bottle of beer and laughs with his son over cartoons. Other than that, he’s just like everybody else who wants to be happy with their life.
Bitcoin news portal providing breaking news, guides, price analysis about decentralized digital money & blockchain technology.
© 2021 Bitcoinist. All Rights Reserved.

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Cryptocurrency prices today under pressure: Bitcoin falls 3%, ether 6%; Uniswap gains | Mint – Mint

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  • The global cryptocurrency market cap today remained below the $1 trillion mark

Cryptocurrency prices today came under pressure after the US Federal Reserve delivered another big interest-rate hike and warned of economic pain from the aggressive policy tightening still to come. The Fed’s determination to raise rates to levels that hammer inflation at the cost of sliding asset prices sent a chill across global markets.
Bitcoin, the world’s largest and most popular cryptocurrency, was trading more than 2% lower at $18,627, came close to dropping below $18,000 level. The global crypto market cap today remained below the $1 trillion mark, as it was down over 2% in the last 24 hours at $943 billion, as per CoinGecko. On the other hand, Ether, the coin linked to the ethereum blockchain and the second largest cryptocurrency, continued to underperform and fell more than 6% at $1,260.
“Bitcoin, Ethereum, and most cryptocurrencies traded lower on late Wednesday after the Federal Reserve raised interest rates by 75 basis points marking the third consecutive time this year. BTC continues to struggle below the $19,000 since bears are more powerful than bulls in the market. The second largest crypto, Ethereum was seen changing hands above the $1,200 level. The price of ETH has been dipping since the Merge took place as miners continued to dump their ETH in the market coupled with macroeconomic factors. If the selling pressure from miners increases, ETH is likely to fall below the $1,000 level,” said Edul Patel, CEO and Co-founder of Mudrex.
Meanwhile, dogecoin price today was also trading about 3% lower at $0.05 whereas Shiba Inu slipped more than a per cent to $0.000011. Other crypto prices’ today performance also declined as XRP, Stellar, Solana, Polygon, Avalanche, Binance USD, Polkadot, Litecoin, Apecoin, Cardano, Chainlink, Tron, Tether prices were trading with cuts over the last 24 hours, whereas Uniswap gained.
Such a backdrop offers little respite for crypto markets. They were already reeling from a $2 trillion plunge from a 2021 record high, an unraveling pockmarked with blowups such as the Three Arrows Capital hedge fund and the Terraform Labs project — whose co-founder Do Kwon is wanted by authorities.
(With inputs from agencies)
 
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Bitcoin's Accumulated Momentum Is Going To Be Hard To Stop – Bitcoin Magazine

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While "the smartest people in the room" scan the horizon, bitcoiners are out there actually building the future they want to live in.
The below is a direct excerpt of Marty's Bent Issue #1259: "Bitcoin is action. The accumulated momentum is going to be hard to stop." Sign up for the newsletter here.
This morning I listened to a recent Macro Voices podcast with Brent Johnson from Santiago Capital. It was a very good conversation about the state of the global economy, particularly focused on the dollar's relative strength against other currencies and how things may play out as the dollar continues to strengthen as prophesied by the "Dollar Milkshake" theory. Here's a link to the episode for those interested.
Toward the end of their discussion Erik (the host) and Brent make it clear without saying anything explicitly that it is insane that global markets are essentially beholden to the whims of a very select few people, central bankers, out of the billions who are alive on this planet. The fact that the world hinges on the cryptic language of people who are completely disconnected from reality and do not suffer the consequences of their actions is a bit baffling. With that being said, what I'd like to focus on is the fact the Erik and Brent ended their conversation with a brief detour to discuss the next world reserve currency. Both gentlemen acknowledged that it would likely be a cryptocurrency – likely produced by one of the governments or a coalition of governments – and will certainly not be bitcoin.
To your Uncle Marty, this is an incredibly hilarious line of thinking from a couple of individuals who seem to "get it" in regards to the fact that the fiat system is doomed for failure and it's failure is being driven by incompetent central planners. To think that the solution to bad central planning from an incompetent group will be better central planning from the same group via a fresh slate a CBDC or something like it would provide. Even funnier is the fact that they emphatically proclaim that bitcoin most certainly will not become the dominant money in the world while deriding "bitcoin maximalists". This is our edge, freaks.
While "the smartest people in the room" scan the horizon waiting to place their bets on something that hasn't materialized yet and is sure to end in failure if it ever does because it will suffer from the same centralized attributes that doomed the dollar, bitcoiners are out there actually building the future they want to live in. The macro mensches of the world can continue to sit on the sideline and pontificate about what they think will come to market. Bitcoiners will continue to act and bring their distributed, censorship resistant, sound money to market. And the headstart bitcoin has amassed is approaching insurmountable. It is a step-function improvement on the incumbent monetary system in every way.
It's provably scarce and extremely hard to change.
You can send it over the internet.
You can divide more granularly.
It is extremely hard to prevent someone from receiving or sending bitcoin if used correctly.
And, what might be the most underappreciated aspect, it is beginning to become an integral part of the energy sector. And as we're finding out now energy is pretty damn important. Arguably the most important asset on the planet. Bitcoin becoming an essential for energy producers makes it significantly harder to kill from a logistical and political perspective.
We are so early.

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