Bitcoin is coming of age: make sure you own some

Bitcoin has consistently been underestimated by its critics. Yet now it’s on the verge of being adopted by institutional investors and corporations. Dominic Frisby explains why you should have a little in your portfolio.

MoneyWeek bitcoin cover story illustration
(Image credit: MoneyWeek bitcoin cover story illustration)

After the 2008 financial crisis, money printing by central banks (in the form of quantitative easing) went from being an unthinkable emergency intervention to a bog-standard policy tool. So when the coronavirus outbreak went global in spring, the authorities simply turned on the taps again, flooding markets with money. As much as a quarter of all US dollars in existence today were printed in 2020. As a result share prices are rocketing, real estate prices are rocketing, and commodities prices are rocketing. It’s the stuff of what Austrian school economists call a “crack-up boom” – where the price of most assets soars due to the devaluation of the currency.

Michael Saylor, chief executive of US-listed Microstrategy (Nasdaq: MSTR) looked long and hard at the reaction of the Federal Reserve, the US central bank, to the crisis. He looked at his company’s balance sheet: $500m in cash. “I have a mega, mega, mega problem,” he thought. Consumer price inflation might be low. However, as Saylor puts it, “consumer goods hide the true inflation rate. Asset price inflation is through the roof. You aren’t getting inflation on YouTube and Netflix streaming videos, and candy bars manufactured by robots in factories – but on an Ivy League education, an apartment in New York, a beachfront house. If I want a bond that yields $50,000, it used to cost $1m. Now it costs $10m… My costs are going up and my cash is yielding zero. If I have $500m in cash and it’s losing 10% [a year], and I have $50m in operating income each year, we are running just to stand still.” In short, “the mega problem is this: I have a lot of cash and I’m watching it melt away.” Saylor had “a fiduciary obligation” to his shareholders to do something about it. But what?

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Dominic Frisby

Dominic Frisby (“mercurially witty” – the Spectator) is as far as we know the world’s only financial writer and comedian. He is the author of the popular newsletter the Flying Frisby and is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. He has also taken several of his shows to the Edinburgh Festival Fringe.

His books are Daylight Robbery - How Tax Changed our Past and Will Shape our Future; Bitcoin: the Future of Money? and Life After the State - Why We Don't Need Government

Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art. You can follow him on X @dominicfrisby