BSV Series: Part V
Disclosure: The New Economy Fund holds all major implementations of Bitcoin: BTC, BCH, and BSV. The author of this essay series is not a financial advisor and this is not financial advice. Do not invest in speculative assets with money you cannot afford to lose.
If you are arriving at this essay without first reading parts I, II, III, and IV, all the necessary context will be lost. The following links to each individual essay, several of which build off their predecessor.
Table of Contents
- “What” is going on?: Fractals and Contrarian Consensus
- “Where” is the problem?: BTC, Small Blocks, and Lightning Network
- “Why” BSV?: Darwinian Fitness and Irrational Markets
- “Who” is Craig Steven Wright?: Satoshi? Does it Matter?
- “How” did we elect thought leaders?: Complexity’s Preference for Genius over Excellence
- “When” to make an investment: A Conclusion (this essay)
“When” to make an investment: A Conclusion
Many in the crypto currency space have dropped the time tested and old fashioned tools of Benjamin Graham-esque value investing and traded them for sexy and new technical analysis, algorithmic trading, and crypto native conventional wisdom like the inevitability of the halving price pump. Perhaps some of this novelty is rooted in the intangibility of crypto assets or the Ponzi-adjacent notion of a “store of value.” Admittedly, the value potential of the assets on the market are often abstract and hard to grasp and these burgeoning frameworks for trading them have appeared somewhat predictive over the past several years of this immature market. However, we think the fundamental rationale behind value investing is appropriate even for this new asset class and its wisdom will prevail over time.
The dream of any good value investor is to find a fundamentally valuable asset that is universally ignored and maligned such that market sentiment artificially lowers its price below its value. With BSV, we believe we have found one, with the added benefit of unusually asymmetrical upside.
Given this framework, BSV is an attractive investment not in spite of, but because of, its universal condemnation as an obvious scam and fraud. After doing the due diligence for yourself, upon observing the behavior of those shouting and the arguments they are voicing, it’s clear that they haven’t looked into it deeply. Reassured by the depth of their contrarian disposition (and its implication that they would never fall for the musings of the mob), crypto currency contrarian consensus doctrine seems to be blinding itself to the arguments made by those actually working to build and improve the value of BSV. In other words, ignorance and emotional vitriol are already baked in and thus we are able to identify the existence of an artificially lowered price without much effort.
To determine if this artificial price suppression falls below the investments fundamental value requires more effort. However, the justification required for a positive expected value investment in BSV does not need to rely on the specific claims of a controversial individual like Craig Wright or even on the lofty ambitions of the project itself. While Craig’s claim about being the inventor of bitcoin would certainly bode well for BSV’s future value and price, it’s not necessary to make it a good investment at these prices. If BSV’s vision of an enterprise friendly public blockchain that is mindful of legal compliance and remains pragmatically stable to achieve these ends is realized, what is the future value of the investment? The larger the market one can realistically capture, the more asymmetric the bet is.
Alternatively, does the inclusion of BSV into what was previously understood as an investment in bitcoin stand to reason? What is a bitcoin? Putting aside the value investor’s approach to BSV as an investment in and of itself, one can take advantage of the asymmetry of a hedge for BTC the species by diversifying into all of bitcoin’s Order level variations. In so doing, one can also hedge against the potential failure of lightning network and other unproven scaling solutions as bitcoin ownership and use grows over time. As for when this hedge could be essential for a successful bitcoin investment, Nassim Taleb stated in a recent interview with Bloomberg (in reference to non crypto asset financial markets) “I’d rather be very poor at the timing and very good at the hedging”, adding “I engage in financial markets if and only if I have tail hedge protection and it’s done right. Otherwise, don’t engage in financial markets.”
Crypto currency contrarian consensus has emerged to tell us that these concerns are unwarranted FUD (fear, uncertainty, doubt) that do not require further investigation. As first principle oriented free thinkers, we have heard this before at each level of fractal contrarianism and ignored the warning opting to “not trust, but verify” for ourselves. Perhaps this series can serve as a catalyst for that process for yourself with regard to BSV.
For an entry point for further research beyond the sources linked in this essay we have compiled a list as follows: