Where Can Bitcoin Go From Here?

Bitcoin (BITCOMP) is a hot topic! We had the pleasure of discussing the investment thesis for bitcoin on our Behind the Markets podcast with Ari Paul, the co-founder of BlockTower Capital, a crypto asset-focused asset management firm.

Prior to entering crypto, Paul worked as an options and commodity trader at Susquehanna and then as a portfolio manager for the University of Chicago’s endowment. His endowment looked for new markets in which professionals still were largely absent. When he entered crypto in 2017, Paul says that was the case. He would even argue today that “investment professionals” are still not meaningfully involved.

Paul sees tremendous risk in crypto assets, yet he sees these risks as idiosyncratic, uncorrelated risk that diversifies a portfolio and provides alpha potential.

Have Endowments Allocated Yet?

Paul believes 2 of the 10 largest endowments in the U.S. have direct holdings and 2–3 have invested into crypto funds. Paul hasn’t pitched endowments because he thinks that it’s such a fast-moving space, endowments will take a long time to come around. This could be a further catalyst of new demand for crypto assets.

History of Economic and Technology Cycles

Paul draws parallels from the railroads in the 1800s, early computers in the 1960s and the Internet in the 1990s—and how adoption trends follow similar patterns. There is a cycle known as the Gartner Hype Cycle, in which everyone views a technology as world-changing but gets the speed of adoption wrong.

In 1999, everyone thought everything would be bought over the Internet and all our interactions would occur online—which was correct, but it would take 20 years (and a pandemic) for this view to become reality. There was no infrastructure in ’99. We were all on dial-up modems, while less than 2% of the world had Internet access, and online credit card payments were difficult and not trusted.

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