That’s right. I’m doubling down on my last week’s article.
Why? Well, number one, it’s a great article (IMO) and it may very well be that bitcoin is the 80’s silver, and number two, it’s the middle of August, summer and I’ve got no ‘fresh’ thoughts this week.
A couple things are going on, though – the Fed’s annual Jackson Hole meeting and the DNC (Democratic National Convention) political convention. Observing from “poolside,” the DNC is really interesting. A current sitting president has been relegated to a first night, late night, speech and then turns out the lights and sweeps up the floor. Meanwhile, the VP, who was deemed a total liability a month or so ago, is now a superhero heroine that is going to slay the always evil villain ex-president Trump. Scratch my head and watch. Fun.
I feel like a traitor.
I have been a bitcoin bull and investor since 2016. First buy in August 2016 at $575. It’s been good. Real good. But after the past several months, bitcoin’s price action has triggered a nagging doubt in my mind. What if bitcoin is today’s 1970’s silver? Damn.
What an I talking about? If you are much younger than myself and other “experienced” financial traders/investors, let me shed some light. Beginning in the early 1970’s, a couple of brothers, sons of a Texas oil billionaire, began buying silver. Price? $2.00-$4.00. When their father died a few years later they inherited around $5B (yup, huge then….well even now) and the brothers stepped up their buying. Big time. Eventually they had accumulated over one third of the worlds’ supply of silver. By the end of 1979 the price had risen to…..$6.00.
Their buying was done using silver futures on the Chicago Board of Trade, and when the futures expired, they took delivery. Kind of ‘stealthy.’ I had a front row seat with one of my closest friends (and college buddy) handling the “deck” order flow at the CBOT of the now famous Hunt brothers. By January 1980, the price of silver peaked at just under $50. Gasp. Crazy.
Nelson Bunker Hunt and William Herbert Hunt began buying silver for many of the same reasons people today have bought bitcoin.
Inflation, distrust of government, no confidence in fiat currencies, etc. They considered it a safe store of value. However, when you get “too big” for a market, it turns to talk of manipulation. Right or wrong, the CBOT changed a few margin requirements and precipitated a fall in silver’s price which in turn triggered the Hunt’s getting margin calls. It did not end well for the Hunts.
Sounds a lot like bitcoin. Starting at ‘pennies’, BTC peaked at roughly $75K. Several “whales” have accumulated huge, significant amounts of bitcoin (yes, I know this time is different and in some cases it is). Since bitcoin is on the blockchain, specific investors are hard to identify unlike the Hunt boys. So the most visible name to come up is Michael Saylor, the Founder and Executive Chairman of MicroStrategy.
Is Michael today’s Hunt brothers? Is bitcoin today’s silver? Now, to be sure, Michael is infinitely wealthier than me, certainly smarter and more ‘tuned in’ to bitcoin’s workings than myself (More handsome? Nah, I’ll go with me). However, it nags me to know that MicroStrategy’s huge holdings may be subject to a bitcoin price meltdown. MicroStrategy is one of many with huge gains that may suffer the same potential meltdown. It’s been on my mind.
I get that bitcoin may get to unforeseen price levels……sometime. But it might be a lot longer than anyone realizes. Silver still has not seen all time highs after 40+ years. Will it?
Will BTC share the same fate? It nags me.
