The Birth of Something Bigger

It’s not every day where you get to watch the birth of a brand-new asset class. 

Now, I’m not talking about a new sector or trend built off of something before. 

When I say asset class, I’m referring to something much more broad and all-encompassing. 

Asset classes in this context would be stocks, fixed income, real estate, commodities, and cash. 

We create these asset categories to simplify and categorize the recording, communicating, and transferring of value. These principles sit at the heart of our economy and markets. 

And, the list above contains the foundational categories that investments roll up into. You can invest in different types of stocks: dividend stocks, ETFs, tech stocks, manufacturing etc. 

Bonds have more flavors than a Baskin Robin: sovereign debt, corporate debt, municipal debt, AAA-rated, junk, and so forth. 

We can do the same for both real estate and commodities. My point being that it’s rare to witness an asset class being born. These are not common events in our history. 

And, what if this new asset class sits even higher up on the food chain than every other asset before it? 

This new asset can grow into the base layer from which all other assets are produced, recorded, and financialized. That’d be a pretty big deal, wouldn’t it? 

I’m making a very large bet that this is what’s happening in the crypto space. We’re watching the birth of an entire asset class that all other assets will roll up into.

In my opinion, that makes Crypto, and all of the innovations that it can birth, one of the biggest opportunities for capturing alpha (profits) that I could probably ever see in my lifetime. 

I say that (and stick my neck out on this) because I see many people who still have a belief hangover from the 2017-18 crypto bull run and crash. 

The belief is that this asset class is a bunch of imaginary, fake, and worthless technologies trading made up money between a small group of people. 

I couldn’t disagree more with that sentiment. From my perspective, we’re seeing some of the world’s brightest, most innovative, and motivated people experimenting with a brand-new way of recording, communicating, and transferring value. 

It’s the birth of a brand-new asset class. And, we’ve still barely left the station. Bitcoin turned 12 this year and achieved a total market value of over $1 trillion. To put things in perspective, I read an estimate that the sum of all the world’s wealth was $360 trillion in January of 2020. 

So, if I’m correct in believing that crypto as an asset class becomes the base layer of the entire global economy, then we still have a long way to go and a lot of alpha to capture in between! 

But, unlike many in the crypto space, I don’t see Bitcoin and crypto being contrary to the monetary system we have today. The idea that we need to burn it all down and crypto is what’s going to be leading the way is a dangerous narrative. 

I don’t think many of us want to live in a world where the US government doesn’t have the ability to “print money” during a global catastrophe and use that cash to help our country manage. But, it’s also fair to ask of our representatives and appointed officials to not spend with reckless abandon to secure votes and power (which is the fastest road to a banana republic). 

Crypto and Bitcoin actually work great as additions to our fiat-based global monetary system. Bitcoin adds the non-sovereign hard money asset that can absorb and offset egregious overspending by governments. Ethereum is a non-biased protocol for creating better incentive and accountability structures for individuals, businesses, and governments (one day!)

At its core, crypto and blockchain is about one thing: allowing humans to coordinate economic and decision-making activities in a trustless, secure, and transparent way. 

We can all feel something is off about how our world is governed and financialized today. We have career politicians who use their power to secure their own with great wealth and influence. We have massive corporations who make billions only from rent-seeking activities (meaning they don’t provide any real innovation or value).

Is crypto THE solution? No, not yet, but I think it will get us a hell of a lot closer to a more secure and fair world.