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Winter is coming

It’s Labour Day weekend in North America, which marks the end of summer and the beginning of the fall season. In Vancouver it is suddenly much cooler and we had the first rain in many weeks, which was somehow fitting. It also led me to reflect a bit on the sad state of the world and the direction that financial markets are headed.

The Fourth Turning

I am a believer in the Fourth Turning theory, that basically predicts that the world is heading into a major crisis over the next decade or so. This theory focuses specifically on the US, but because the world is so interconnected its impact will be felt everywhere. Everything seems to be coming together now, a perfect storm is brewing that I believe will lead to civil war in the US and potentially to a global war. In this article I will focus on why I believe things are moving in the wrong direction and on the worst possible outcome. However, I will also discuss how you can best prepare in case things really go wrong.

A Perfect Storm

What does this perfect storm consist of? It’s a number of things that all come together at the current moment. Polarization is worse than ever, the left and right in the US simply have no common ground left anymore. At the same time the world is divided over Ukraine, with most of the Western world condemning Putin, but with a large part of Asia continuing to do business with Russia. This will lead to huge energy problems in specifically Europe over the next couple of months, but this will also affect North America. Next to that the worldwide food supply is endangered if not enough grain can be shipped from Ukraine to Africa and the Middle East.

On top of that the world’s Central Banks pretend to be in control, but in reality they have lost control years ago by printing unlimited money. Suddenly double-digit inflation also appeared in the Western world. It will only make the growing divide between the rich and the poor even bigger. Trust in governments and institutions is at an all time low, in the US only 20% of the population still believes the government can be trusted to do the right thing. Finally the climate crisis is going from bad to worse in many parts of the world, leading to potentially widespread famine and hundreds of millions of refugees during this decade. How this will end nobody knows, but I am much more worried about the next couple of years than I was earlier this year.

How to prepare yourself?

The question is what you can do to prepare yourself for the fall out of all these problems. The book The Fourth Turning gives some good advice on this. The book advises for example to forge strong bonds in your community, be in good shape and to make sure you have a good reputation. But you also need to be financially prepared.

Assuming you still have a nest egg, where should you invest it? Honestly, there is no easy answer to this. I think diversification is key, but what should you diversify in? A few months ago I thought the stock market had seen its lowest point, but I am not so sure anymore. I believe the recession will be much worse than we are led to believe. Soon we will see widespread labour unrest because people can’t live a normal life anymore, so they simply need to get higher wages. Companies that already have much higher costs for raw materials can’t pay those wages, so profits will fall sharply and businesses may simply not survive. And that doesn’t even take higher energy prices into account.

At the same time the FED keeps on increasing interest rates, which will lead to even more problems for companies because it makes it more expensive to borrow. But it also leads to issues for governments because they will have to refinance their huge debts at higher rates. The question is how long that game can last. 

My point is that based on all of this the valuation of many companies might still be way too high. If people start to realize how big a recession could be and how it will affect every single company, don’t be surprised if stock markets can go down at least 50% from here, which would put the Dow Jones roughly at its value a decade ago. And if the world really starts to fall apart it could even go down a lot more than that.

The last Fourth Turning started in 1929…

Going back to the Fourth Turning theory, the last time a Fourth Turning started was in the fall of 1929. At that point we had seen a decade of huge growth in stock prices, not dissimilar from what we have seen in stock markets since 2009 (in the 1920s the Dow Jones index went up about 8 times, since 2009 it went up about 6 times). After Black Monday the Dow Jones kept on falling for 3(!) years, eventually ending down 89%. It took 25 years for the Dow Jones to get back to its 1929 levels. Although most people can’t imagine it, history tends to repeat itself. That doesn’t mean we’ll see such a large drop in company valuations, but you have to keep in mind that it’s certainly a non-zero possibility. 

What to invest in?

In times of crisis it’s important to have at least some liquidity, so keep part of your assets in cash. Yes, you will lose 10% or more per year because of inflation, but at least you have cash if you need it. And it gives you the opportunity to buy back into the market at much lower prices in case it crashes. Commodities like gold and silver have generally done well in times of high inflation and crisis, but it seems that’s not happening this time around yet. If you would have bought gold in 1929 and would have held it until the market stopped falling 3 years later you would actually have made a 30% return. Not long after that the government forced investors to sell their gold to the government thought, but that’s a different story.

If you have a longer time horizon (2-3 years) Bitcoin should be a good bet, long term my very bullish predictions have not changed. However, Bitcoin is extremely volatile and it may have not seen its lowest point yet. There is still a lot of leverage left in the Bitcoin market that could get flushed out. Long term it should outperform most asset classes though, so if you hold enough cash you could consider putting some of the rest of your assets into Bitcoin. As I discussed in a recent blog post, I am also a huge believer in voluntary carbon credits, so that is something you should look into, especially because it is a hedge against climate change. 

In terms of stocks I would stay away from index funds, but invest only in specific sectors that you believe might outperform the market. Energy stocks could be one sector to look at, but it’s hard to say what will happen when governments step into the market and set prices. Anything related to climate change will likely do well, so look at renewable energy related stocks or companies active in carbon reduction. Artificial Intelligence will be a game changer whether the world falls apart or not, so that’s something that I would include in a portfolio as well. And of course crypto related stocks, not just miners or exchanges, but also crypto Wall Street firms like Galaxy Digital.

Also make sure you diversify geographically. Having only investments in North America and Europe may not be the best strategy. I think Southeast Asia will be the least affected by effects of the Fourth Turning and may even benefit from it. So investing in companies or real estate there seems like a good idea.

Conclusion

Things are not looking good at all. But hopefully I am completely wrong and the FED will start lowering interest rates again soon and continue with quantitative easing. Then the stock market might stabilize or even go up again. But if you want to be prepared it may be a good idea to keep at least part of your portfolio in other instruments. The worst that could happen is that you miss out on some upside, but at least you are well protected if things don’t go as well as most people still seem to believe. 

Disclaimer: As always, these are my personal opinions and not meant as investment advice.

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The case for voluntary carbon credits

I am always looking for the next big thing, and although I am often too early I have been lucky to have been right a number of times. In 2018, after Bitcoin started going into a bear market and I was working full-time in the crypto space, I started looking at other investment classes that could have returns. I then stumbled upon carbon credits.

A carbon credit is the right to emit one metric ton of carbon dioxide (CO2) or an equivalent amount of other greenhouse gases. There are carbon credits issued by governments for the so called cap-and-trade market and there is the voluntary carbon market, a market that is overseen by standard setting bodies but that is not regulated by governments. When I first started investigating carbon credits I was only looking at the regulated markets, but I didn’t like the structure of it. The reason is that these cap-and-trade credits are created out of thin air by governments and given away or sold to companies that can use them to offset their emissions.

The problem with that is first of all that these carbon credits are not based on real emission reductions, which doesn’t make any sense to me. But more important, governments can unilaterally decide to issue more credits if they feel that’s needed, or they have the right to cap prices. As an entrepreneur or investor you don’t want to be active in a market that can be artificially manipulated by governments. So although I saw huge opportunities I decided to stay away from it.

In early 2021 I met up with 2 very experienced Dutch guys who had been active in the carbon credit space since 2005, among others trading credits and putting large international carbon projects together and executing on them. They are real veterans and have seen it all over the past 17 years. They told me about their business and I told them about my plans to build a sustainable business in the carbon space. I also explained that I didn’t like the regulated carbon space and they convinced me to take a look at the voluntary market. I had always dismissed voluntary carbon credits, simply because I did not believe you can build a real business on something that is voluntary. But after talking to them in more detail all of a sudden a light bulb went off in my head and I realized that the voluntary market will be the future of carbon credits instead of the regulated market.

Let me explain that: in the voluntary market a carbon credit is only issued once a project or a company takes one metric ton of CO2 (or equivalent) out of the air forever. It is a very strict system and it’s becoming stricter every year. The credits are bought by companies that want to offset their current or future emissions. That is voluntary, no government forces them to do this, and that’s why I dismissed it for a very long time. But what I suddenly realized last year is that the role of governments is not as important anymore as it used to be.

Nowadays consumers and investors are determining what companies should (or should not) do. What that means is that even though companies are not obliged to offset their emissions by government regulations, they are still setting net zero targets because their customer and investors demand it. If this is hard to believe (which it was for me for a while), look at what happened in Russia after they invaded Ukraine. Most Western brands decided to give up all their operations there, from Louis Vuitton to McDonalds, and from Starbucks to Apple. They were not told to do so by governments, but they did this because their other stakeholders wanted them to do so.

Virtually every big public company in the world now has emission reduction targets and many corporations have publicly said that they will have zero CO2 emissions by 2030 or 2040. There is no legislation telling them to do this, but they still do it. Customers demand it and capital markets now charge higher rates for companies that are not trying to reduce their emissions. 

So how will they get to net zero? Of course you can reduce your emissions, but getting to zero is almost impossible for any company. Not just for natural resources companies like oil or gas companies, but also for large Internet companies a net zero footprint is not possible without a way to offset emissions that you can’t reduce. And that’s where carbon credits come in: for every metric ton of CO2 that companies emit they will have to buy voluntary carbon credits to offset them. Because these carbon credits are actual reductions of CO2 (unlike the regulated carbon credits that are issued by governments) they allow companies to keep on emitting some greenhouse gasses as long as there is an offset for these gases somewhere else. 

Last year we started a company called Climate 8 to enter the voluntary carbon credit market. Climate 8 invests in very large reforestation projects on degraded land. These projects take CO2 out of the air and Climate 8 gets the carbon credits for these projects. It’s of course a bit more complicated than that, but that’s the core of the business. To us the co-benefits of our projects are important. They include for example ten of thousands of newly created jobs in areas with not many job opportunities. But we also use forestry models that preserve native species and enhance overall biodiversity.

We partially sell these carbon credits forward to pay for our costs, but we also aim to keep them on our balance sheet because I believe the price of carbon credits will explode over the next couple of years. Carbon credits in 2022 remind me of Bitcoin in 2012: most people haven’t really heard of them yet and most people don’t see why this new asset class will become very important in the future.

My Bitcoin thesis played out, but is just in the early stages. Governments and Central Banks simply printed too much money, which will eventually lead to a breakdown of the fiat financial system. My belief is that this will lead to cryptocurrencies taking over the role of the current fiat financial system, most likely before the end of this decade. There will be a huge demand for Bitcoin, but the supply will be very limited, leading to exploding prices. 

For carbon credits I see a similar future. The climate crisis is already quite visible and will get exponentially worse every year. The heat waves in 2021 were bad and broke many records, but 2022’s heat waves are even worse. Droughts are hitting large parts of the world and only seem to get worse. Even stubborn climate change deniers are starting to see that there is more going on than just a natural phenomenon. The worse the climate crisis gets the more people will demand governments and companies to do something about it. The problem is that governments have not been able to do anything over the past 25 years since the Kyoto protocol was signed. I figured out years ago that they were useless to solve the climate crisis, but only since last year I understood that we don’t need governments if we use voluntary carbon credits.

The worse the climate disasters get, there more people will force companies to do something about it. Companies will realize that they may be able to reduce their emissions by 30-40%, but if they want to reduce by more than that they will have to completely revamp their business models, which is impossible for many of them. So they will have to buy carbon credits in order to satisfy the wishes of the public, there is simply no other solution for them. That means a huge increase In demand, while it will be much harder or more expensive to increase supply.

Climate 8 currently creates new carbon credits for less than US$ 10 (our cost price), because reforestation is relatively cheap. However, there is a limit to how many carbon credits you can create by planting trees, there is simply not enough land to do it and certainly not land in areas where trees can easily grow. So in order to fulfill demand, technical solutions to take CO2 out of the air are needed. Luckily there are good solutions for carbon sequestrations, such as direct air capture, but they are very expensive. It depends a bit on the scale of companies and of the sequestrations technology that they are using, but generally a price of $300-500 per metric ton (=1 carbon credit) is not unheard of. 

If we start to use carbon credits at scale to fight climate change we will need to use the technical solutions, there is simply no way around it. That means that in order to make these technologies feasible, the price of carbon credits has to at least cover the cost to generate them. But because investments of billions or possibly trillions of dollars are needed to pull this of, the market will not just want to break even on these projects. So possibly prices of $300-500 per carbon credit will be on the low side, and prices could go to the thousands of dollars per carbon credit. Companies simply need ttem to survive and the world needs them to survive as well, then almost no price will be too expensive.

Current voluntary carbon credit prices for nature based solutions are about $10 per credit, but in the EU the regulated market pays almost $100 per credit already. When I started looking at carbon credits a few years ago these EU credits were at $15. My expectation is that both credits will eventually be interchangeable, so the voluntary credits will have a similar price to regulated market credits. Most likely the voluntary credits will go up fast over the next couple of years to catch up, and likely EU credits will keep going up fast as well.

A return of 10X is the least I expect over the next couple of years for voluntary nature based solutions, but it could very well be 50-100X. That may seem over the top, but it’s the same as it was with Bitcoin 10 years ago. Nobody would take you serious if you would tell them that Bitcoin could go to tens of thousands of dollars, just like most people still don’t see that Bitcoin could easily go to a million dollars or more if it becomes more accepted as a reserve currency. 

The point is that you have to be able to think out of the box if you want to understand where carbon credit prices could go. I think the downside risk is fairly limited unless we completely give up on the climate, but the upside is extremely high. Maybe it won’t be a 100X return once more people start creating credits or if the cost of creating technical solution credits would fall quickly, but I am pretty certain 10-20X will be on the lower side of the returns that we will see.

And that’s why I believe that Climate 8 is making a smart decision to keep as many of its credits on its balance sheet in the future, just like we did with Bitcoin mining company Hut 8. We may eventually tokenize some of these carbon credits, but for now the focus is on getting our first projects up and running and close the financing for these projects.

Climate 8 is a private company that is mainly funded by the management team. We are not raising funds for equity in the company, so there are currently no investment opportunities for outside investors. However, we do have a mailing list for people interested to invest once we open up to accredited investors or to the public.

Note: this is my personal opinion and not investment advice. I intentionally simplified some numbers, but the core is the same. Do your own research before you invest. 

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Bitcoin’s performance in 2021 and outlook for 2022

As 2021 is coming to a close it is clear that the Bitcoin market has not fulfilled the promises that the onchain data seemed to indicate. To say it in a different way, I was way too optimistic in my predictions of where Bitcoin would end this year. Even just 2 months ago I thought Bitcoin would hit at least $100K by the end of 2021, but that didn’t happen. When I don’t get my predictions right it’s important to look what assumptions were wrong and how they could impact the future, and that’s what I am doing in this post.


In case you are not into Bitcoin on a daily basis, Bitcoin still did quite well in 2021. It went up from around $28000 in late December 2020 to about $48,000 right now, so an increase of about 70%. Not bad compared to most other asset classes, but it’s lower than average for Bitcoin. During the year Bitcoin has been quite volatile, hitting $64,000 before going down to $29,000 before climbing up to $69,000 in October. But the volatility has actually been less than in other Bitcoin cycles.


So what happened and why did Bitcoin not follow its price trajectory from 2013 and 2017? I think I (and many Bitcoin analysts with me) underestimated how quickly Bitcoin matured over the past year. What I mean with that, is that the price is not only determined by mining supply and spot buying & selling like it was during the past 2 halving cycles.

A large part of the market now consists of institutional investors that mainly take derivative positions through futures and options. This means that each time the price overshoots (like when it hit $64K in April and $69K in November) they start shorting it, leading to long squeezes of other investors, which in turns leads to a Bitcoin price crash. The result of that is that you don’t see a real mania phase anymore, because the price starts to go down before FOMO (fear of missing out) sets in among retail investors. So without institutional shorting I believe we might have been over $100K now or potentially even a lot higher. 


Are institutions bad for the Bitcoin price? No, they may actually be a good thing because the other side of the equation is that they will also prevent Bitcoin from going down 80-90% like it did in the past after a blow off top. We will still see Bitcoin going down 50% in the future, but if it goes down much more than that institutions will step in to take long derivative positions. So I expect that shocks to the Bitcoin price will be a lot less going forward. The long term Bitcoin price will not change, just the way we will get there. Bitcoin will be less volatile, which may actually lead to even faster adoption.


It does mean that some of the short-term models that are purely based on onchain data may have to be revised. For example, Plan B’s floor model that had predicted prices of at least $100K in Q4 this year completely missed its mark. I believe that is because you don’t see derivate positions onchain, so you miss out on a large part of the action. You are literally comparing apples from 2017 to oranges from 2021. I don’t know how his model works, so this is of course speculation, but I do think focusing purely on onchain data might not be sufficient anymore. This will only get worse in the future, especially if more people flock into the US Bitcoin ETFs that only use futures. You simply don’t see those flows onchain, but they still drive the market. 


There are a number of other reasons why Bitcoin did not hit $100K yet. However, they seem less important to me and only have a short-term impact. Among them the fact that Chinese exchanges like Huobi informed their users that they can’t sell their Bitcoin anymore after Dec. 31, leading to many people selling their coins and depressing the price. Year-end balancing for institutions also plays a role, as does tax loss harvesting for investors that bought BTC at higher prices during the year. Although they all have an impact before the end of the year they should also lead to increasing prices in early 2022. 

Of course there are other things driving the price as well. One of them is that the Bitcoin mining market changed completely since the 2016 halving. When we started Hut 8 Mining in 2017 and took it public in early 2018, we were the first publicly traded Bitcoin mining company. We decided to HODL our Bitcoin instead of selling them and to simply raise money from capital markets to cover our expenses. Since then many other companies copied that strategy and because of that a large part of the mined Bitcoin do not hit the market anymore. This has big implications for the impact of the Bitcoin halving and on models that are based on this. Although the halving will still have some impact, it is significantly less than it would have been without the publicly listed Bitcoin miners.

The same is true for companies like MicroStrategy that keep on buying new Bitcoin and hold them on their balance sheets. It seems pretty straightforward to me that this could lead to even higher prices from PlanB’s S2F model. There are simply less coins hitting the market, so the resulting price should be higher. Because his model is currently at the lower end of its price band it means other things are keeping the price down for now. 


All in all I continue to be very bullish for Bitcoin. Fundamentally nothing has changed, the market structure is simply different from before. Unfortunately it makes onchain analysis less important, but it is still very valuable to understand what type of investor is buying and who is selling. I believe Bitcoin will keep on breaking new records in 2022, but likely with less volatility than in previous cycles. When we will hit $250K or $500K I don’t know. It might be faster because more coins are taken off the market. Or it may take longer because we see less FOMO because institutions prevent 10X returns within a year. However, if you have a long term horizon it should not really make much of a difference, so just keep on HODLing.

Disclaimer: As always, this is my own opinion and not meant as investment advice!

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How to make money in the current market

It looks like the world is heading into a period of high inflation, mainly because Central Banks keep on printing huge amounts of money. Although I see deflation as well, especially in high tech products, the inflationary effect caused by quantitive easing will likely be much larger than the deflation caused by innovation and more efficient production (Wright’s Law). Money simply has to go somewhere and right now most of it seems to be ending up in the stock market and in real estate. I have thought about these effects a lot and my investment strategy for the next couple of years is based on this. This post describes my thinking process and in which categories and companies I would invest if I would have cash laying around. Crypto is of course a large part of it, but there are several other asset classes and categories that will completely outperform the market.

Crypto
To start, I believe crypto is changing the world and will eventually replace the current financial system. This is partially because crypto is superior to traditional finance (cheaper, faster and less centralized), but also because Central Banks are not doing their job and inflating their currencies away. Most people still don’t understand crypto and don’t see what progress has been made over the years. However, I think that every serious investor should spend time to learn at least the basics of decentralized financial systems. Just dismissing it without doing your homework is intellectually lazy and will cost you a lot of money. Crypto is the best hedge against Central Bank spending and inflation over the long run. 


Within crypto I think Bitcoin has the best risk/return ratio, it will most likely go up another 20-50 times over the next couple of years and the downside risk is very limited. Yes, BTC is volatile and has seen huge drawdowns, but every single time it comes back stronger and makes new all time highs. See it as a long term investment and don’t sell if there is a sell off. If you don’t know how to invest in Bitcoin itself there are now many proxies, such as Bitcoin ETNs or ETFs (Canada has several ETFs, the US will likely get one soon), companies that hold large amounts of BTC on their balance sheet (MicroStrategy) or Bitcoin miners like Hut 8. 

DeFi and other tokens
Although I am a Bitcoin maximalist, I do recognize that altcoins have a place in the ecosystem as well. DeFi (decentralized finance) and NFTs will eventually take over the traditional financial system and most of it is built on other blockchains. Having some exposure there makes sense in my opinion. The easiest way for traditional investors is through investments in listed companies like Galaxy Digitaltokens.com (staking tokens) or decentralized finance platform Wonderfi. They all have research teams that invest in the best teams and tokens, so if you don’t have the time for a deep dive these are good alternatives.

Minimum return should be 15%
Outside crypto I would stay away from traditional manufacturing or from old business models. Even though many of these companies grow around 10% per year, that’s actually not enough to beat asset inflation. The way to look at this is to compare the growth to the increase in the money supply, which has been about 15% per year over the last couple of years for the USD and most other fiat currencies. In other words, if a company grows less than 15% per year it’s just the Central Bank that’s keeping it alive. Anybody who makes less than 15% per year is losing money, but for some reason many investors are still happy with 10% returns per year. 

Network effects
We are living in an exponential age, an age where a few companies will do extremely well (they will grow exponentially) but where most companies will end up as zombie companies. These businesses will survive but barely. Most of the surplus will end up with a few companies and if you want to do well you have to be an investor in them. What I look for when I try to find these companies are network effects: the more people use them the more valuable these companies become. That’s why for example Facebook, Google, Apple,Tesla and Amazon are outperforming most other companies. Even if we would get a stock market crash (unlikely in my opinion unless Central Banks will stop printing money) these companies will keep on doing well (they will go down a bit but will recover quickly).

There are a number of ETFs that are active in this space if you want to outsource the selection of the right companies to professionals. Personally I am a huge fan of Cathie Woods’ ARK ETFs. She understands network effects and the effect of communities and is using that herself. ARK announces every single trade they do and Cathie does regular podcasts in which she talks about her investment thesis and her vision for the future.

MRNA
New technologies that can change the world are also always on my radar. When COVID started it became quickly clear to me that MRNA vaccines could be a game changer, not just for the pandemic but for many other diseases as well. One company that has done extremely well is Moderna, now well-known because of the COVID vaccine. Because of this they now have a huge war chest, meaning they will likely be on the forefront of future vaccines for for example cancer or HIV. This is an example of a company that has the potential to outperform almost any other stock in the middle to long term. 

Metaverse
The Metaverse is another ‘technology’ that is not yet on the radar of most traditional investors. A metaverse is basically a virtual world in which you can live your life, one where you can work, play and communicate with others. A world where you can show off your wealth through for example NFTs or where you can simply hang out with friends. There are a number of metaverses out there already and my expectation is that they will all be interoperable, meaning that you can easily go from one metaverse to the other. It’s still very early days but a few early winners seem to be emerging already, such as Decentraland, CryptoVoxels, and Somnium Space. If you look at the ones that come from the pure-gameplay side there are among others Roblox, Fortnite and Minecraft. Some of these are listed companies, others offer tokens or you can invest in virtual real estate in these metaverses and potentially make a killing. High risk but also a potentially very high return. Facebook, Microsoft and Google are also becoming active in this space, so they are good proxies if you want some exposure here. And of course the chip makers that generate these worlds on normal screens, in virtual reality or augmented reality. 

AI
As I have argued before, artificial intelligence wil eventually lead to most people losing their jobs. That could be a good thing if they still can get paid (e.g. through a universal basic income) and if they can do something more meaningful with their lives. I am not optimistic though, the transformation to a low employment economy will be painful, especially for the older generations that have never learned to make their own money. However, for companies that use AI to replace human beings the advantages are huge: for a one time investment they will never have to pay wages anymore. This may sound harsh, but now that many people don’t want to work in restaurants or retail shops anymore (the signs for new staff are in shop fronts all over the world), employers can either opt to increase wages to attract people (leading to more inflation) or if possible look for AI solutions. Restaurants will be the first to implement robot waiters or chefs, and people will accept it knowing that otherwise the restaurant wouldn’t be able to find staff. But once they are replaced these jobs will never come back. The same for truck drivers, there is a huge shortage of them in the UK and in the EU that leads to all kinds of supply chain issues. We are pretty close to self-driving trucks and the supply chain problems will push governments to allow them. These jobs will be gone forever. 


Now the question is who will make money off of these robots. Most likely initially the retailers and restaurants, but I would not be surprised if robot makers will eventually start leasing them out. This means less investments for small companies and long term cash flow streams for the companies creating the AI and robots. These cash flows could be huge, they could be close to all the wages of the people that are being replaced – not just in the sectors that I just mentioned, but in almost any sector. The companies that will capture this surplus will be among the most powerful in the world. I think chip makers will be among the ones that will benefit most from this, but Tesla seems to also understand where the world is going and will try to capture a large share of it. Next to that I think Google, Facebook, Apple and Amazon will be big players in this field. They may seems overvalued based on classic financial metrics, but these metrics are based on a linearly growing world, not an exponential one in which the top 5% will get the vast majority of all future profits. 


Climate change
Another big opportunity for investors will be climate change. I have been worried about it for a long time because governments weren’t doing enough, but after COVID I realized that governments are pretty much clueless (or at the very least incompetent) about how to solve a big crisis. That means climate change will lead to huge disasters, but that will also lead to solutions created by entrepreneurs. COVID taught me that we won’t come together as humanity to solve climate change, we will fight among ourselves and many people will not believe that climate change is real, not even when their house is under water or on fire. We will not reduce our CO2 output, at least not sufficient to solve the problems we are facing.

That leaves carbon capture and sequestration combined with the emergence of new clean energy sources, and that’s where the biggest opportunities will be over the next decade. There is huge innovation and investments in renewables going on. But that won’t be enough, we need bigger sources of energy. I believe nuclear will solve this eventually, maybe through smaller and safer nuclear fission reactors, but more likely through a breakthrough in nuclear fusion. I think nuclear fusion, which generates no radiation and basically uses water as a the main ingredient for unlimited energy, is very close to becoming a reality. Of course I know all the stories about this being the case for 30 years already and that it’s always another decade off, but I think the investments that are needed to get there will become a reality because of climate change. Investments in renewable energy, but especially in nuclear fusion will have an incredible pay off for investors.


At the same time I believe carbon credits or carbon removals might be a solution to steer the world into a carbon-free future. I won’t go into the technical details here, but in short companies that reduce carbon emissions or remove carbons from the air will get paid for this with credits. This means that you can pay people not to cut down forests for example, but it also will make projects feasible that are currently not profitable. Companies like Carbon Engineering will depend on these credits and more investments will flow into the space because of these credits. At the same time most companies will have to get to net zero emissions in their operations, but in reality most can never do that. That means they will have to buy these credits or removal rights in order to keep operating or to keep their shareholders happy. I think investing in these credits could lead to returns similar to those of Bitcoin. There is a risk that governments will step in to keep prices artificially low at first, but eventually the climate change pressure will be too high and the market will take over. Over the past 12 months EU carbon credits have gone from about EUR 22 to over EUR 60 and even though ‘experts’ don’t see them going up much more (just like they said with Bitcoin at $100 in 2013), it think this is still very cheap. It’s simply supply and demand (just like with BTC) and with demand going sky high in this decade while supply is lagging behind, prices will have to go up much further. I think an investment in carbon credits or in carbon removals has the potential to outperform almost any other investment.

Conclusion
Investors will need to make at least 15% per year to offset the inflation effects of quantitative easing. I think the sectors, companies and investment instruments that I outlined in this post will likely lead to much higher returns than just 15% per year. I personally believe now might be the best time ever to create wealth for many investors, if you are willing to take risks you should be able to make much higher returns in several of the sectors. 


Disclaimer: this is my personal opinion and no investment advice. I do have positions in many of these sectors or am looking at deploying capital in them. Do your own research and never put more money in than you are willing to lose.

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Travel in times of COVID

After not traveling much for the past year or so (my last trip was a 6-week trip to China, exactly a year ago with 2 weeks quarantine in China and 2 weeks upon my return to Canada) I decided to do some serious ‘revenge travel’. We spent most of the summer in Canada on boats and at my summer home, and started traveling internationally again about 6 weeks ago. Since then we have been to the Bahamas, New York City (twice), The Netherlands, Belgium, Luxembourg, France and Monaco. It was an interesting experience because every single country has different regulations and sometimes it’s not clear when you arrive what these regulations are.


In Europe most countries don’t require COVID tests anymore, and if they do we decided to skip those countries (sorry Italy!). But in North America you need them each time you travel. Canada requires PCR tests every time you return, which is a bit of a hassle. The US and the Bahamas are fine with antigen tests, which only take a few minutes and are not as uncomfortable as the PCR tests. The good thing is that you can get these tests anywhere in N America: in New York City you can even get them for free in mobile vans that are parked on the main streets in Manhattan, and in the Bahamas they can come to your home or hotel to do the COVID test for you. Face masks are required everywhere (even outside) in the Bahamas and Monaco, but most other countries are more relaxed and only require them indoors. In The Netherlands you can now even go indoors without masks, it’s the only country where I have seen this so far (Canada had this over the summer, but they changed back to indoor masks after the delta variant hit). 


In the Bahamas we stayed at our own place instead of a resort, but in order to enter hotels, resorts or restaurants you had to provide your COVID test results. What we didn’t realize until after a few days, is that there was a 10 pm curfew in effect. We had not seen it announced anywhere, not even at the airport, and resorts seem to have been exempted from it, because we spent several nights at restaurants at the Atlantis until after 10 pm. However, when we went to a local beach side restaurant around 8 pm they told us they were closed already because of the 10 pm curfew. We literally had no idea, but we suddenly understood why Michi had been stopped by police after 10 pm one night after visiting a friend in a nearby resort. The police just asked where she was going and when they realized she was not a local they let her go, without even telling here about the curfew.


We also made a road trip through Europe, which was very enjoyable. Because of COVID it wasn’t very busy on the roads and we never had to book hotels in advance, so we could just decide to take a hotel without planning ahead. Hotels were quite affordable as well, at least cheaper than before, simply because they are competing for less travellers. Restaurant reservations were not needed, except for some of the top restaurants in Monaco during the yacht show, which means you can decide last minute what, where and when you want to eat. 


Quarantine is not required anymore as long as you are fully vaccinated. You do need to show your vaccination proof in every European country we visited if you want to have dinner or even just a coffee in a bar or restaurant (just like in Canada, the US and the Bahamas). Europe has its own QR code system that is incompatible with the Canadian vaccine passport, but we never had any issues with our vaccine cards. The countries that have had the system for a couple of weeks already seem to have fully integrated it into their way of life, nobody complains about it and even at McDonalds people simply scan their code before entering. However in Holland where the QR code system was only introduced a few days ago a vocal minority is still strongly against it and some restaurants are even threatened with closure because the owners don’t want to scan QR codes. 


Personally I don’t think governments should force people to take vaccines if they do not want to take them (I am pro-vaccine, but think it’s an overreach of government power). I wish everyone would take the vaccine, but if they don’t I am against forcing them and it simply means they will get COVID within the next year anyway. After seeing how well the system works all over the world I don’t think it makes a lot of sense to fight against it, it’s simply not a hill that’s worth to die on. There are much worse things going on in society that people seem to take for granted. I don’t believe in conspiracy theories about governments using vaccine passports to get more power, in my opinion governments are just incompetent. I have seen it with Ivermectin, about which I wrote on this blog back in January this year. I thought governments would be able to understand how well it works (the data is there for all to see), but they are simply too busy and seem to follow the mainstream media. And indeed since then the media turned it into a ‘animal deworming medicine’, instead of an almost-free pharmaceutical that has been used by billions of people with hardly any side effects since the 1970s. Again, not a hill to die on, and I have had my own supply for months already.  


Anyway, I don’t really want to turn this blog post into a discussion about vaccines or medicine, but just want to point out that things are similar all over the Europe and N America. Of course most of Asia, Australia and NZ are still very different (let alone Africa and S America), but they will get there as well. I am glad I can travel again, intercontinental planes between Europa and N America are full and most good restaurants seem to have survived. It will take another year before things are fully back to normal, but at least with some small inconveniences we can pretend that COVID is over. If you want to enjoy travel without too many other tourists around now is the time to go.

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My favorite podcasts

In the summer of 2004 podcasting was invented and I was lucky to witness it first hand as a subscriber to Adam Curry’s blog (Adam invented podcasting with Dave Winer). I still remember downloading iPodder, which was the first app to automatically download new podcasts episodes from my laptop to my iPad. Podcasting actually led to the start of Tudou.com (and even Twitter!) and in 2014 I wrote a blog post about it: https://www.marc.cn/2014/08/10-years-of-podcasting-adam-curry-and-the-beginning-of-tudou-and-twitter.html.  Interesting is that in the last paragraph of that post I wrote that podcasting never really became mainstream. Well guess what, it finally became mainstream about 15 years after it was invented. Almost everyone I know now listens to podcasts regularly and the best way to keep up with most subjects is to listen to podcasts.


There is so much good content out there that it’s impossible to listen to all podcasts that I want to listen to. I now probably listen at least 1-2 hours per day to podcasts every single day. I do that while running, while walking, while skiing, while driving, or simply when I am doing the dishes or when I am cooking. Every single moment where I don’t have to think about something I put on a podcast. I normally listen at 1.5-1.75 times the normal speed, but depending on the topic and the podcast I also listen to some at twice the normal speed.  But despite that I still miss a lot of great content. I have not figured out how to solve that yet. I actually considered hiring someone to listen to podcasts for me and make summaries with time stamps. Maybe it might even be a business idea to do this for the top 100 blogs and sell subscriptions?


I have a list of favorite podcasts that I try to listen to each time they are published and several that I only listen to when I think the content is interesting. Below is the list of the main podcasts that I try to listen to every week:


What Bitcoin Did

Peter McCormack’s podcast in which he interviews experts in the Bitcoin field (note: only Bitcoin, no altcoins or non-Bitcoin projects). If you want to really understand Bitcoin and want to keep up with the latest news in the space this is one of the very best podcasts out there. I listen to almost every episode.


We Study Billionaires

Originally I ignored it because of the cheesy title, but once I checked out a few episodes I was hooked. This podcast is more about investing in general, but I tend to only listen to their crypto-related episodes. There are some real gems in this feed. I now probably listen to about half the episodes.


The Tim Ferriss show

One of the first podcasts that I listened to religiously. However because there is so much good other content now I started listening to it more selectively. I now maybe catch only about 1 out of every 4 episodes and often stop listening after 15 minutes if the interview is not what I had expected. That being said, I learned a ton from Tim over the years. Without him I would have not gotten into psychedelics (his podcasts changed my mind on it and because of that I started reading Michael Pollan’s book). The same for intermittent fasting and many health related topics.


The Peter Attia Drive

I first learned about Peter Attia through the Time Ferriss show, and if I remember it correctly Peter actually started podcasting because of  Tim. I actually pay $15 per month to listen to Peter’s podcast, it’s an ultra-deep dive into maximizing health, longevity, fasting etc. Fascinating topics that I would normally not learn a lot about. Peter is a great interviewer. I listen to about half the episodes, but if I would have more time I would listen to all of them. Some are hard to understand at first but by doing a bit of research on the side you can gain incredible insights into health and healthcare.


a16z Podcast

This is the podcast of VC firm Andreessen Horowitz and it has the occasional brilliant podcast, but most I now tend to skip. They now also start posting some Clubhouse recordings (despite the fact that Clubhouse does not allow recording their sessions, but I guess if you are the biggest investor you have special privileges). Check out their feed, there are probably a few older episodes that might interest you.


Exponential View with Azeem Azhar

Azeem has an excellent weekly (paid) newsletter that I subscribe to and I also listen to his podcasts regularly. Not all of the subjects interest me, but I always check them when a new one comes out. Wide ranging topics from AI to longevity, and from COVID to deep dives on some of the leading companies in the world.


The Pomp Podcast

Anthony Pompliano built a huge audience over the past couple of years and he is not only a good sales man, but also a decent interviewer. I don’t listen to most of his podcasts, but 2-3 times a month he has an interesting guest or topic and then I put it on my playlist. Topics are very wide ranging, so not just about crypto and decentralization.


The “What is Money” Show

This one should get a special mention, because it is an incredible 9-episode interview with Michael Saylor. This is a must-listen-to series if you really want to understand Bitcoin and why it will completely change the world. Michael is the CEO of Microstrategy and he went through the Bitcoin rabbit hole last year and his company is now one of the largest BTC holders in the world (close to 100,000 Bitcoin, so about $6 billion at current prices). He uses history to weave an incredible story about money, economics and Bitcoin. It’s quite a journey, but it’s well worth listening to (total time investment about 12 hours).

Others
I used to listen to Joe Rogan as well regularly, but since he moved to Spotify last November I have no heard any of his podcasts anymore. It’s a pity he sold out (I understand it of course), but I don’t like switching to a different podcast player so I likely won’t hear his podcasts anymore.


I do listen to some YouTube videocasts as well, I actually started to pay for YouTube Premium specifically for that (no ads and you can keep listening even if you close the screen). And I listen to (or watch) RealVision videos regularly. RealVision is a paid subscription, but their crypto videos are free to watch.


Next to that I listen to a number of sailing podcasts (The Quarterdeck, On The Wind Sailing, Out The Gate Sailing), but more during the summer than during winter. To keep up with what’s happening in psychedelics I listen to Psychedelics Today. And of course there are a number of Dutch podcasts that I listen to, mostly about Bitcoin (Cryptocast, Satoshi Radio, De Bitcoin Show and Hup Bitcoin).


Podcasts have changed my life, if you don’t listen to them yet you should give it a try. There is so much good content out there, you can also just listen to the news or find some drama series to follow. There are many good ‘best of’ podcasts articles out there. Check out this one from Esquire for example, or this one from Forbes. If you have suggestion for podcasts that I should not miss, please let me know in the comments or on Twitter.

Enjoy the show(s)!

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Ivermectin, the bridge to the COVID-19 vaccine?

It’s great that COVID vaccinations started last month in many countries, but in most developed countries the general population will only get the vaccine by Q3 or Q4 this year. In developing countries that may be in 2022 at the earliest. At the same time the virus is mutating and getting more contagious, leading governments to continue lockdowns or even tightening them. As many of you know I am a huge proponent of doing a full lockdown for a couple of weeks followed by ubiquitous testing, so that the economy can open again completely (like in China), but most Western countries don’t seem to be able to wrap their heads around this simple solution

So I started actively looking for other ways to open up the economy faster. I asked myself the question whether there are any drugs out there that can sharply reduce infection rates or that can sharply reduce symptoms or mortality. It turns out that there is a cheap, widely available drug out there without many side effects that can not only reduce getting infected by up to 90%, but that also can make symptoms much less severe if you get it, and it can reduce mortality for ICU patients by up to 50%. Its name is Ivermectin and in my opinion it is a literally a miracle drug. But governments, the WHO and the NIH are actively ignoring the results of clinical trials or just simply dismissing them.

To be honest, when I first heard about Ivermectin I was highly skeptical, just like I was with hydroxychloroquine drugs and some other therapies that were pushed early on in the epidemic. Ivermectin seemed to be highly politicized, so my assumption was that this was a typical Trump drug: something some Republicans could earn a lot of money from if they promoted it, but a drug that in reality would not work. So I dismissed it after a Senate hearing about it in December during which all Democrats walked out, and in hindsight that was a mistake.

The medical doctor that did the Senate hearing is a lung specialist and ICU doctor, Dr. Pierre Kory. Over the past days I started reading all materials that Dr. Pierre Kory has published on Ivermectin and I changed my mind 100%. My conclusion: this drug can help people to return to a normal life while waiting for the vaccine. By just taking one small dose every 2 weeks economies can open up and people can stop worrying too much about COVID-19.

Ivermectin has been around for over 40 years and is mainly used as an anti-parasitic drug. The drug has been safely used by 3.7 billion (!) people worldwide, and the discovery of the drug was awarded a Nobel Prize in 2015. It’s on the WHO list of essential medicines. So this is not a new drug or a drug that has not been tested. Side effects are limited, although there are always some, and the drug is cheap. Despite all this the NIH gave a very negative advice about using the drug in August last year, although after reviewing many more clinical trials they finally changed to a more neutral position just last week.

There have been 27 controlled clinical trials for the usage of Ivermectin to prevent or to treat COVID so far, with a total of over 6500 patients. These trials overwhelmingly show that Ivermectin simply works, but the WHO and NIH keep on trying to find reasons why these results are not good enough. Their arguments are among others that the majority of studies are observational, uncontrolled trials. This is simply false, because all the observational trials actually have control groups. They also state that the majority of studies have not been published in peer-reviewed journals. This is not only false (half of the studies have been published in peer reviewed journals) but also irrelevant because every other drug used for COVID-19 was adopted from pre-print data (for example Remdesivir, corticosteroid, or monoclonal antibodies). Finally they state that the majority of the trials were not randomized controlled trials. This again is incorrect, because 15 of the 24 controlled trials were actually randomized.

The FLCCC Alliance is the Frontline COVID-19 Critical Care Alliance, an organization of physicians trying to prevent of find treatments for the virus, and Dr. Pierry Kory is the president of the FLCCC. For some reason the FLCCC Alliance has been blocked in attempts to disseminate scientific information about Ivermectin on Facebook and other social media with the FLCCC’s pages repeatedly being shut down. Furthermore, after a FLCCC press conference in Houston, no major U.S. media outlets reported the FLCCC’s pleas for help from the federal government to act in order to bring this pandemic to an end. Nor did any representative from the CDC, the NIH or the World Health organization contact them. To make matters worse, Dr. Kory lost his job at the University of Wisconsin because of speaking out about his fight to find alternative solutions to the COVID crisis, and in December he lost his new job at Aurora Health after he testified before the US Senate.

What is happening here? I don’t know, but I can speculate. Maybe because of the failures with the other therapeutics the WHO and NIH have become more cautious. That’s the most likely scenario for me. However, if you are in the middle of a pandemic that is destroying economies all over the world, you have the duty to look for alternative solutions. They are simply not doing it. Maybe Big Pharma plays a role here as well? Maybe if the medecine was expensive and patented they would more readily agree to use it? Or maybe it is a typical US political partisan thing where Democrats actively boycot anything the Republicans say? I really don’t know, but I feel I need to spread the word about this because I am now convinced it can literally save people and can open up economies again.

Let me give some anecdotal evidence to show what happens when Ivermectin is distributed among the general population of a city or country. I know of course that anecdotal evidence is not scientific, but it gives you an idea of how well Ivermectin works against COVID. In Brazil some cities started distributing Ivermectin to the population in July. A month later the case count was down by 50-80% in these cities, while in similar cities nearby without the distribution program COVID cases were down by just 20-40%. Something even more impressive happened in the state of Alto Parana in Paraguay, where the governor and his brother both got COVID and quickly recovered after they were given Ivermectin. They were so impressed that they started to give everyone in the state Ivermectin. The result? Six weeks later there was no COVID case in the hospitals anymore and the governor claimed it eradicated COVID completely in the state, while in the rest of the country the numbers remained high. There are several more examples of this from among others Mexico and Bangladesh, and all these studies show that with Ivermectin you can reduce or beat COVID, at least until everybody has access to the vaccine.

If you have an hour to spare, this interview with Dr. Kory is very insightful and gives a lot more details than just this post. The presentation is meant for physicians but it’s not too hard to understand. Start at about 11:00 to see Dr. Kory’s whole presentation.

I want to spread the word about this and wake up governments and decision makers. If you know anybody in your state, province or country who has any decision making power for COVID drugs please share this post with them. Show them my background, I have a reputation to lose so I have done tons of research before even considering to write this post. I believe we need to create awareness about this miracle drug and start distributing it as soon as possible, it can literally make the difference between life and death for many people and it can help to open up economies.

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Bitcoin: The Herd is here!

For at least 3 years I have been talking about the fact that the herd is coming. What I meant with that, is that I have been observing for years that institutional investors were getting ready to get into Bitcoin and that the cryptocurrency would shoot through the roof once they would enter the market. And this year it finally happened! The herd is here, the professional investors are now entering the market and the price has started to climb up fast.

In early February this year I wrote a blog post when Bitcoin broke through $10,000 and why I thought that this could be the beginning of a new bull market. I touched upon COVID-19 in this post as well (long before most people paid any attention to the virus), but I did not realize that COVID would slow down the bull market by about 6 months.

Right after global lockdowns started in March Bitcoin actually crashed hard (together with the stock market), but it also recovered quickly. By early October the real new bull run really started and since then the Bitcoin price went up almost 3 times. I think this is the beginning of an epic bull run that could lead to Bitcoin prices that hardly anybody can imagine right now. If you are not in Bitcoin yet because you thought it was too risky, now may be a good time to get in (not investment advice though!). In my opinion Bitcoin is de-risked with professional investors buying up all the newly mined coins and Bitcoin at $28,000 might be a safer investment long term than Bitcoin at $6000 at the beginning of the year.

What changed? I believe the most important factor is that some well known investors paved the way for others to invest and make it less risky to do so. At the beginning of the year investing in Bitcoin may have cost a professional investor his or her job, right now not investing in Bitcoin may get you fired. It’s a completely different investment environment. Over the past couple of weeks there was another announcement of a new large fund investing in Bitcoin almost every day.

It all started in the spring of this year with Paul Tudor Jones announcing that he put a small percentage of his net worth into Bitcoin. That opened people’s eyes, because PTD is highly regarded. Not long after that Microstrategy’s Michael Saylor announced that his firm had invested $450 million of its reserve assets into Bitcoin. This was huge news, MicroStrategy was the first publicly listed company that did this and the public markets liked it: its stock price almost tripled in 4 months time after the announcement. Not only that, MicroStrategy doubled its reserves during that time because the Bitcoin price doubled. They basically made in 6 months what the company would have normally made in 10 years. Michael Saylor became a hero in the Bitcoin world and started doing almost daily podcasts and video interviews, in which he convinced a lof others that having Bitcoin as a reserve asset is less risky than keeping it in dollars.

Then in October all of a sudden the announcements started. Just a few examples of financial news headlines since then:
– Billionaire Hedge Fund Investor Druckenmiller Says He Owns Bitcoin
JP Morgan saying that investors are selling gold for BTC
PayPal Enables Users to Buy, Hold and Sell Cryptocurrency
Citibank Analyst Says Bitcoin Could Pass $300K by December 2021
BlackRock’s Chief Investment Officer Says Bitcoin Could Replace Gold
Guggenheim Fund Reserves Right to Put Up to 10% in Bitcoin Trust
MassMutual announces a $100 Million Purchase
Ruffer investing $740M in BTC – and selling Gold for that
Jim Cramer buying BTC and talking about it on TV
Fidelity CEO saying that there is a pipeline of institutional investors looking to get into Bitcoin custody
An avalanche of positive news for Bitcoin is coming from some of the top financial institutions in the world. I personally think the MassMutual purchase of $100 million of Bitcoin may turn out to be the most important one. Not because of the amount, that is actually quite modest, but because this is the first life insurance company getting into this new asset class. They would have to get SEC approval for this, which is quite an effort in itself, and now others will follow. Moreover, once you invest $100 million and that investment is going up 50% in 3 weeks you will likely start to invest more.

The herd is here and these investors won’t go away anymore. Right now Bitcoin is at about $530 billion in market cap, it just flipped Visa and is now the same size as Berkshire Hathaway. It still about 20 times smaller than Gold, but I believe that within 5 years (=after the next Bitcoin halving) Bitcoin might flip Gold as well. The higher Bitcoin goes, the more institutions will invest. Look at BlackRock for example, their Chief Investment Officer publicly said that Bitcoin could replace Gold, but the firm does not buy Bitcoin yet for its funds. Why? Simply because Bitcoin is still too small for them. But not long anymore!

I am happy that my predictions are coming true. I spent years studying Bitcoin on a daily basis and saw the writing on the wall for years, but it was hard to predict exactly when it would happen. In 2017 I predicted that Bitcoin would hit $150,000 in 2021 and I still stand by that prediction. It could be a few months later of course, but it could also happen by next summer already. It all depends on the speed at which new investors enter the market. The nice thing about having the Bitcoin blockchain is that you can calculate how long it might take to get to this price (because all transactions are visible on the blockchain).

At this moment the market cap of BTC goes up by about $3.50 for every $1 that is invested in the market (and this ratio is going up). At a $150K Bitcoin price the market cap would be around $2.2 trillion, so assuming that the ratio remains stable we would need about $500 billion in new money inflows. Last week about $10 billion of new money was invested into Bitcoin, so you can do the math: even at this speed we’ll hit $150,000 at the latest by December 2021. If the speed increases we could be above $200,000 by this time next year. Not many liquid assets will give you a 6-8X return in 12 months.

And after that? Looking at what is happening in the markets now I am extremely bullish and think we’ll likely see $400-500,000 prices when more institutional investors come in, simply because there is so much demand and very limited supply. In case Central Banks would put part of their reserves into Bitcoin we will even get much higher prices (in the millions of dollar per coin), but for now that is not happening yet. I am glad that after the 2017 retail rally this new bull market is led by institutions. They won’t panic sell like retail investors did in 2017-18, so likely the dips will be smaller as well. Don’t get me wrong, we will still see a lot of volatility with the price going down 20-30% every now and then. But likely not the 50%+ drawdowns like we saw in the last bear market, where BTC was actually down more than 80% at one point. The sky is the limit right now!

Disclaimer: As always, do not take this as investment advice and never put more in than you are willing to lose. Do your own research!

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Psychedelics stocks are outperforming Bitcoin!

It may seem like just another clickbait headline, but it’s actually true: over the past couple of weeks Bitcoin has done extremely well, but publicly listed shares in psychedelics companies are doing even better. I am not really surprised, because that expectation is the exact reason that earlier this year we started a psychedelics venture fund, Synaptic Ventures. I wrote a post in July about this, with my expectations for the sector and with a description of the companies we planned to invest in. You can find the post here: https://www.marc.cn/2020/07/psychedelics-the-next-big-thing.html

Just now I sent out an email to our limited partners (=the investors in the fund) with an update on our investments and our returns. Because it gives a good overview of what is happening in the sector I decided to share it here as well (slightly redacted). As you can see over the past 8 months we made an average 120% return on our investments that are publicly listed. I don’t see this ending any time soon and we have some interesting new investments in the pipeline. It’s great to be part of this sector, to help advise some of the leading companies in the space and of course to also make nice returns for our investors.

Dear Synaptic Ventures investors,

I would like to give you an update on the investments we did with Synaptic Ventures this year and the performance of our portfolio companies. It’s been quite a year for psychedelics and the financial markets: the first psychedelics company only went public in March this year and since then many have followed. We looked at many different companies this year and only invested in the ones that we feel have the best long term potential. Our thesis is that we only want to invest in high quality companies, not in potential pump and dumps.

 

Since we started investing in June this year we have made a number of investments:

 

– Entheon Biomedical 

Entheon Biomedical is a biotech company focussed on the development of psychedelic medicines for addiction disorders. The Company’s research and development pipeline revolves around DMT. The company went public in November 2020. We bought the shares at $0.40, the current share price is $1.03 (+157%)

– Sansero Life Sciences
Sansero Life Sciences is a Canadian-based bioscience company developing novel medications based on psilocybin.
The company merged with Cannaglobal and Rise this summer, and is now called Cannaglobal Wellness. The valuation of Sansero in the merger was double the valuation from when we invested, so on paper we made a 100% profit.

 

– Cannaglobal Canada
We invested in Cannaglobal Canada right before their merger with Sansero. They are now called Cannaglobal Wellness. They are a global psychedelics leader focused on psilocybin and other natural compounds to promote emotional, mental, and physical wellness. The company is still private.

 

– Field Trip
is a mental wellness company that focuses on psychedelics and psychedelic-enhanced psychotherapy. 
The company listed in October 2020. We bought our shares at $2.00 and sold them at $2.64 shortly after the listing (+32%)

 

– Eleusis
Eleusis is one of the early movers in the psychedelic medicine space (the company started in 2013 already), they are looking at using psychedelics for both anti-inflammatory and mental health applications. The company is still private.

 

– Cybin
Cybin’s aim is to become the first life sciences company to bring a psilocybin drug to market targeting Major Depressive Disorder (MDD). They raised a $45 million round in October 2020 (a record for a Canadian psychedelics company) and listed a month later. We invested at a $0.75 share price, the current price is $2.25 (+200%).
 
– Psybio Therapeutics
Our latest investment is Psybio Therapeutics, we completed this investment earlier this month. PsyBio Therapeutics is developing biosynthetic psychoactive compounds which offer a new paradigm of treatment to reverse the course of mental health issues.

As always, if you have any questions or remarks feel free to get in touch any time. Easiest is to email me or to add me on WhatsApp or WeChat.

 

Happy holidays!
Marc