Hedge Funds, you know those evil money people that manipulate our stocks, are just made up of pools of money from mostly wealthy people. If you wanted to be part of a hedge fund all you have to do is have a $1 million net worth and make over $200,000 a year, yup that’s all! Needless to say, these types of funds are for the well-off amongst us. That money is then pulled together and invested by someone called a fund manager.
Hedge funds have access to a TON of money. In 2020 alone it was reported that they have access to some $3.8 trillion. I, therefore, think it’s safe to assume that in 2021 they have well over $4 trillion. This begs the question; why haven’t they got into bitcoin yet? some have but most haven’t and a lot of them have a ton of cash sitting on the sidelines waiting to be invested.
Well, the reason why most have not jumped into bitcoin is because of something called ESG. ESG stands for:
Environmental
Social and
Governance
It’s a way of rating investments based on how ethical and sustainable they are, or not. I‘m a big believer in this way of thinking as investors should know exactly the impact that our money is having on the environment. The whole ESG thing has been around for a while and it wasn’t until recently that it’s become all the rage on Wall Street and the reason for that is because these hedge fund managers don’t want to lose clients because they’re toxic. None of them wants to have the finger pointed at them and accuse them of not being good for the environment and lose clients as a result.
Another reason is that all of these groups – from hedge funds, pension funds, corporations and sovereign money funds have these committees or groups of people that use things like ESG as a basic filter to list which investments could even be considered for their money. If those investments don’t meet those compliance standards then those don’t get bought.
So how is this related to Bitcoin?
They’re related because as soon as the miners of Bitcoin come together to formulate some kind of a green energy sustainable mining plan. They’ll come to realize just how much this shift in the narrative, to be more positive, will impact the price of Bitcoin. It’ll be the unlocking of a new corporate asset class.
It brings me joy to say that Elon, and his tweetish behaviour, highlighted the problem of Bitcoin’s mining because I think it’s going to help us get that kick in the butt to get things moving, sustainably. Perhaps in the future Tesla will find their solution in the form of a solar panel that we can put inside our home where we can become – sustainable clean energy miners – for Bitcoin. I’m not saying that’s going to happen but I can see how Elon can pull the ace out of his sleeve.
All of these paths individually can take us to the multiple trillions of dollars or several hundred thousand dollars per Bitcoin but together easily over a whopping $1 million per Bitcoin. The best way to think about it is like this; there are 42 million millionaires out there in this world and there’s not enough Bitcoin for each of them to own one so if having a $1m net worth is something that you’re into then I think it’s pretty obvious that Bitcoin will outpace stocks, bonds, real estate and everything in between.
So, when do you start?
A key question around the cryptocurrency markets is: When do I buy bitcoin?
It could be at $50,000 today even though yesterday it was at $37,000. A week from now it may be at $30,000.
The answer to that question is it doesn’t matter as long as you dollar cost average into it to reduce your stress in the long term. While it may seem like it’s a lot of money today in the long term, in relation to where we’re going, it’s very little.
Does that mean I will invest all my money into Bitcoin?
No of course not
There are lots of things I don’t know, there’s a lot of risks that we may not even be thinking about today. Either way, if becoming a millionaire is something that you want to do then I think becoming a millionaire is pretty much inevitable if you hold some Bitcoin.