Crypto is going moon again.
Maybe you’re aware already, but Hedgeye has been bullish on Digital Assets, specifically Bitcoin, for some time now. After being Bearish on Bitcoin for more than 2 years, we finally flipped Bullish again on October 23, 2023. In other words...
- When we were bearish, from November 2021 to October 2023, Bitcoin went down as much as -75%
- Since we flipped back to Bullish on Bitcoin on October 23, 2023, Bitcoin is up +192%
Pay attention here!
In the past year, Crypto assets have added $1.5 trillion (yes, trillion with a “T”) in market cap. In just the last 7-days…
- Second-largest token Ethereum is +34%
- Smart contract token Cardano is +71%
- Memecoin Dogecoin is +111%
If you want to ride this money-making wave, we’ve got you covered.
Our Digital Assets team just hosted a 146-slide presentation on Friday, November 8th outlining their Best Idea Long thesis on Bitcoin. The team has 3 other Best Idea Long Ideas right now, plus 11 buy/sell quantitative level on major crypto-related assets.
We want to get you set up for investing success on your Crypto trading journey.
That’s why we’ve transcribed for you a CRITICAL section of our Digital Assets team’s Bitcoin Best Idea Long presentation. This will set the stage for why Digital Assets, specifically Bitcoin, are a compelling long given fundamental trends at the macro and micro level.
The below is just the tip of the iceberg. If you want more Digital Asset trading ideas, subscribe to Digital Assets Pro to watch the entire 70-minute Bitcoin presentation and access to all our Crypto-related long ideas.
(Shhh… keep this between us, but we’re currently running a limited-time Crypto Flash Sale that gets you 63% off Digital Assets Pro.)
Enjoy the complimentary insights from our Digital Assets team below.
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Josh Steiner: If you look at the last 25 years in the U.S., you can track M2, which is a pretty decent measure of the money supply.
Money supply at the end of 1999 was $4.7 trillion. As of the late September update, M2 had risen from $4.7 trillion to $21.2 trillion. When you do the math on that, it works out to $1 being worth 77.8% less today versus where it was at the end of 1999, simply because the number of dollars in circulation has increased by 450%.
Steiner: The other way to think about that is the pace at which you’re devaluing the dollar over time. In the last 25 years, the annualize rate of debasement is 6.26%. It’s obviously not in a straight line, although up until 2020 it was fairly consistent. The M2 growth rate ranged from 5% to a high of 10% during periods of recession.
We got into a very aggressive period of monetary expansion during the pandemic where the growth in M2 was north of 25% year-over-year.
Even using the BLS’s more forgiving CPI measure, the Dollar has lost about 53% of its purchasing power since 1999.
Now let’s look at the hedges out there. Gold, since 1999, is up +10.4% on a compound annual growth rate basis. That’s quite a bit better when compared with M2’s +6.26% compound annual growth rate for debasing the U.S. Dollar. This is obviously a fortuitous time to be getting into Gold.
The next slide is equities. A somewhat inauspicious time to get into equities, in 1999, but nevertheless equities are up +5.6% on a compound annual growth rate basis. Again, that compares to M2’s +6.26% debasement.
What about Real Estate, a big hard asset class? Single family residential property is up +4.9% per year compounded since the end of 1999. Again, relative to that +6.26% monetary debasement.
So what we did next was go back even further, to when the U.S. came off the Gold Standard in 1968, and indexing these different asset classes to 100 in 1968.
Steiner: The black dash line is money supply or M2. Using round numbers, it has risen 40-fold. So, there is 40 times as much money in the system today relative to when we came off the Gold Standard in 1968.
The gold line represents Gold. How about that asset? Gold has risen 66-fold over that time.
The S&P 500 has risen 58-fold as the increase there.
And finally, the green line is property, up 19-fold.
What I would have you take away from this is that financial assets and hard assets don’t outperform inflation, not when you regard inflation as the money supply. They simply track it over time. They can dislocate to the upside and downside. You can see that in Gold in 1980. If you bought Gold in 1980, for instance, you had a really lousy investment for the next two decades. If you bought equities in 1999, you had a really lousy investment for quite a while as well.
The point is, over time however, these things just track the amount of money in the system. So as the money supply grows, in order to avoid debasement in your purchasing power, you need to own hard assets or financial assets, so things like Real Estate, Gold or Equities…
Steiner: Why does this matter today?
Well, from 2008 to 2023, we went from 35% debt-to-GDP to 100%. The projection over the next 35 years is that we’re going to go from 100% to 170%.
These projections from the CBO have a really good track record of being wrong. Wrong in the sense that they underestimate what debt-to-GDP ratios end up being. We’re obviously on a really unsustainable path. If we don’t fix this, we’re going to have to print an extraordinary amount of money in order to be able to monetize the debt that’s going to need to be issued and sold in order to fund all these obligations.
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BOTTOM LINE: The fundamental and Macro backdrop could not be more positive for Bitcoin. Our Digital Assets team calls Bitcoin the “hardest money on the planet”!
If you want more Digital Asset trading ideas, subscribe to Digital Assets Pro to watch the entire 70-minute Bitcoin presentation and access to all our Crypto-related long ideas.
FWIW, the current 63% off Digital Assets Pro is the best deal we offer all year.
