10 sats \ 4 replies \ @andyleroy 1 Jul 2022 \ on: 🌊⚡️ The Bitcoin Ecosystem Moment (pt. 1) bitcoin
Thanks for this great article. How do you see the investment opportunities in Bitcoin/Lightning playing out?
A question I've been trying to understand lately, is 'why invest in a Bitcoin/Lightning/L2 company instead of Hodling'?
IMO for 2 reasons:
- If you are a large hodler of Bitcoin, you have a huge incentive to do a relatively small (philanthropic) investment to ensure that adoption will continue & development goes in the right directions (trustless/-minimized, non-custodial, etc.)
- At this stage in bitcoin's monetization, we maybe have another 100x in the next 30 years, with most of the growth being in the next 5-10 years, obviously. The more mature bitcoin becomes, the more attractive equity bitcoin infrastructure companies will get.
Don't get me wrong, hodling is still the best for most people. But if you own 1000+ Bitcoin, you have an immense incentive to invest 0.1-1% of your bitcoin into infrastructure projects, and accelerate adoption, while also making great risk-adjusted returns.
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Thanks, and I agree, the investments in a BTC/LN first company accelerates the investment return on any hodling/BTC savings.
Given your numbers here of a 100x return over 30 years type prospect however, it seems that any other venture backed investment return in the space would pale in comparison to simply holding bitcoin, especially given the risk correlation and the possible initial capital outlays that could accumulate more btc short term?
Does this imply that any level of venture funding in the bitcoin/lightning space almost necessitates a prior large level of bitcoin holding - in essence making the investment worth it?
Does long term capital into the space require 1 of:
- Investment from a firm/nation state/prior business model with large btc accumulation
- Contribution from not-strictly-monetarily motivated companies/individuals who want to push forward the adoption/mission of bitcoin?
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While answering the question "VC investment vs. stacking BTC", I'd say it's certainly a function of how much net worth you have.
However, once there's more market proof demonstrating that BTC infrastructure & lightning companies can actually have profitable business models, we'll see more traditional VCs entering the space.
Their LPs are often large insurance funds, pension funds, & other systematic long-term capital that diversify into VCs for better risk-adjusted returns.
Most of those might indirectly invest in bitcoin infrastructure companies years before investing in bitcoin itself.
To recap; the chances of "old/systematic money" investing in Bitcoin startups first (instead of bitcoin), are much higher than you'd think.
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Thanks for all your insight here, I appreciate it
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