Your Wealth in Equities is Melting [Report]

Equities cannot be a store of value for the long term. Cash out to Bitcoin.

I came across a beautiful report by Unchained Capital. I have to share this with you.

Here are some golden words from the report.

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In a time of rapidly advancing technology and exponential growth in productivity, saving for the future faces increasing uncertainty. The prevailing belief is that you can safely invest in the Magnificent Seven tech stocks or single family homes and expect substantial returns. This approach has indeed performed well for investors for many decades but will this trend continue into the future?

A reason that many instinctively say “yes” is the constant drumbeat of innovation. Swift technological progress over the last 200+ years has made humanity incredibly wealthy. Human ingenuity has significantly enhanced our ability to produce almost everything—from food to residential homes—and investing in this neverending march seems like common sense.

This innovation can be a double-edged sword, however. The traditional avenues of saving what we earn from this productivity are being relentlessly challenged, so even if one can make a lot of money in the short term, all asset classes are vulnerable to what we’ll call the “innovation trap”—innovation-driven market forces that erode your ability to save in the long run.

This report explores the changing relationship between production and saving, applying the economic theories and perspectives of Jeff Booth, Saifedean Ammous, Adam Smith, and Eugene Fama among others, to propose a framework for thinking about how humanity’s relationship with wealth is changing with the introduction of bitcoin—the only immutable scarce monetary tool.

We have not, until now, had an adequate asset to transfer our modern wealth through time without a leak. Humans have been depending on assets that can be perpetually produced or devalued with natural free market forces for far too long. Because bitcoin is a new tool that will reintroduce the ability for people to clearly distinguish between investing and saving, we propose that holding cold storage bitcoin may provide the highest long term risk-adjusted return for centuries to come. In this world, bitcoin raises the bar for what will be a profitable investment, making humanity’s pile of savings expand rapidly relative to productive enterprises and all other traditional assets.

Bitcoin may be the only asset that can stop from the free market from inevitably melting your wealth.

“You’re on a ship, the ship is sinking, there’s ten boats in front of you. One of the boats doesn’t have a hole in it. The other nine boats have holes in them. You have ten members of your family. Are you going to put one kid in each of the nine boats? Or are you going to put everybody in the boat that doesn’t have a hole in it? It’s not conviction, it’s just rational thinking.” - Michael Saylor

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Bitcoin’s certainty is a new economic reality

The discovery of bitcoin in January 2009 ultimately created a new economic reality. It’s a novel tool for savings, trade, and economic calculation. If you ignore it, and continue saving in inferior assets at high valuations, your economic competitors will adopt it and outcompete you.

The most famed example is someone like Michael Saylor, who has outcompeted the S&P 500, big tech, and other enterprise software companies just by adopting bitcoin. But a more subtle example might be a friend of yours—someone who adopted bitcoin as a savings vehicle 5 years ago, is now debt free, and can now take risks and build businesses they might not have otherwise been able to.

If you choose to ignore bitcoin, you should expect similar consequences to people who may have ignored the discovery of gunpowder. When civilizations first discovered gunpowder, adopting it was not optional. It was not a new consumer app when it comes to war and defending land and citizens. If you failed to adopt gun powder or you simply ignored it, your enemies adopted it and physically conquered you.

Bitcoin is no less optional than gunpowder. Bows and arrows will not protect you. Gunpowder is objectively better than bows and arrows. Bitcoin is objectively better than gold or the US dollar.

Failing to recognize this doesn’t make it less effective. It just means you will lose and others will win.

Like gunpowder, bitcoin has objective properties that one must contend with. The former is highly combustible, storable, energy dense, stable under normal conditions, but also sensitive to ignition.

The latter is immutably scarce, portable, durable, divisible, and fungible. We’re living through hyperbitcoinization, and you can already choose to start denominating your wealth in bitcoin—objectively superior money.

The core of the argument is not just speculation that we’ll eventually discover more efficient ways to mine gold, build homes, or manufacture and sell GPUs—although all of those are likely. It’s that unlike bitcoin savers, owners of these assets must face the possibility that their supply will continue to increase in the future or creative destruction will devalue the present value of their future cash flows.

As these asset holders begin to recognize these truths and begin to understand that bitcoin is a superior alternative because it certainly cannot be debased and touts the necessary properties of good money, then the price of these assets relative to bitcoin could begin to fall significantly even before any massive supply increase or creative destruction occurs, just from a few holders “cashing out” for bitcoin. Markets are forward looking.

If bitcoin is going to be more resistant to debasement compared to gold, real estate or other assets, even if it occurs very slowly, then you should still “cash out” to bitcoin sooner rather than later. That’s why bitcoin has a compound annual growth rate of 138% over the last 13 years.

The world is rushing out of inferior assets and funneling capital into the apex form of property. With this understanding, the only way to safely invest in innovation is by adopting bitcoin as your unit of account and measuring your opportunity cost against it. Currently, amidst vast global speculation and a hyperfinancialized economic system due to bad money, there aren't many clearly viable risk-adjusted opportunities outside of cold storage bitcoin.

There are early directional signals of what good risk-adjusted investments will look like in a world that has converged on bitcoin. Even as bitcoin itself is going through its monetization, bitcoin companies, miners, bitcoin development companies (MicroStrategy), world-changing innovations (Nvidia), and some early-stage startups all show bitcoin-denominated outperformance on various timelines. And perhaps most importantly, anything that’s profitable will of course still be valuable—you’ll just have to make sure you purchase profitable assets at the right valuation that incorporates an appropriate risk premium over holding cold storage bitcoin.

As this century unfolds with its remarkable technology advancements, the traditional methods of saving increasingly fall short. All assets can be perpetually produced or devalued with natural free market forces. Except bitcoin.

Bitcoin emerges not just as an alternative, but arguably as the best tool—a novel tool—for saving in this new era, because it is the best money. Its credibly fixed supply, coupled with its other superior monetary properties, positions it as a solution to the innovation trap humanity faces today, and the very fact that we’ve discovered the trap means we’re close to the economic singularity, where most wealth ends up in bitcoin. Bitcoin may be the only asset that can stop the free market from inevitably “melting” your wealth.

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Thanks to Unchained Capital for this report.