A special bonus edition of the Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Mike Alfred, founding CEO at BrightScope Digital Assets Data, and a board member at Eaglebrook.
Among the topics discussed:
Yes it’s nice that the current price action in bitcoin (BTC-USD) is bullish, but Alfred urges focus on the long-term. The size of the network will continue to grow, more institutions are buying in (but haven’t yet publicly announced), even more institutions are going to have to buy in, and there’s no end in sight to federal deficits and central bank money printing. Bitcoin is likely going to seven figures within the next decade, so it doesn’t matter too much whether one buys at $60K or $30K, or anywhere in between.
Move over FAANG and make room for CHARM. China’s banning of bitcoin mining has led to an even greater opportunity for North America-based miners. This so-called CHARM group: Core Scientific (XPDI), Hut 8 (HUT), Argo Blockchain (ARBK), Riot Blockchain (RIOT), Marathon Digital (MARA) now has a larger opening to scale up and build market share. Alfred notes the miners are the only players who can create their own bitcoin, they’re hodling onto to all the bitcoin they mine, and their cost of capital is rapidly trending towards zero.
Alfred also owns ethereum (ETH-USD), but says it’s a very modest amount vs. his allocation to bitcoin. He considers ethereum as more of a venture capital play on some possibly interesting utility uses. Bitcoin, on the other hand, is a truly decentralized, organically-growing monetary network that is continually becoming more valuable. If Bitcoin is successful with potentially billions holding and using it, it doesn’t require a whole lot of imagination to see what one of 21M coins might be worth at some point. Could Bitcoin fail? There’s a non-zero chance, says Alfred, but as the network grows, the chance of this happening continues to slide.
Turning to brokerages, Coinbase’s (COIN) stock has had a modestly rough run of it since its IPO, but the action reminds Alfred of Facebook’s initial rough post-IPO trade. As Bitcoin grows, and crypto grows, a well-run Coinbase figures to scale right alongside, even if it faces competition on fees from any number of peers. Look at Schwab ... It’s doing better than ever, even with $0 commissions.
After dithering for years, what is the first Bitcoin ETF that the SEC finally approves? It’s a futures-based ETF offered by ProShares which may make for a nice short-term trading vehicle, but is about the last thing any Sats stacker should be interested in. More interesting to Alfred is the Grayscale Bitcoin Trust (GBTC), which has begun the work to convert to an ETF. It’s trading at a 15%-18% discount that will disappear once the ETF conversion takes place - a pretty decent return should that happen in the next 6-12 months.
The train has left the station, says Alfred, speaking of questions about whether the U.S. could somehow ban or halt Bitcoin. There are too many states that have encouraged and are receiving Bitcoin-based investment for any national ban. There is a minor risk, concedes Alfred, that a cabal of powerful governments - think U.S., EU, China, India - get together to severely restrict Bitcoin. Alfred puts the chances at about 1%, but even a move like this would only curtail the size of the network, not kill the crypto.
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