Bitcoin and a SELL
"The stock market is where the impatient give their money to the patient" — Warren Buffet
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The Institutionalization of Bitcoin
I'm adding the Grayscale Mini Bitcoin Trust ETF (BTC) to the bullpen in our portfolio. A bullpen position simply means I'm continuing to do my research but I've identified a near-term price range where I'm comfortable making an initial buy. This ETF is a way to own Bitcoin in an ETF that tracks the spot price with a reduced expense ratio of only 0.15%. If you owned the original Grayscale Bitcoin Trust (GBTC) before July 31, 2024, you received free shares in the mini-trust. Bitcoin is now at its 50-day moving average and below its mean. Ideally, I'd like to see Bitcoin decline to a range of $70K to $90K to make an initial buy.
Several factors have contributed to the recent rise in Bitcoin. Trump’s association with the Bitcoin community, his cryptocurrency, the suggestion that Trump will create a Strategic Bitcoin stockpile, the upcoming resignation of SEC chair Gary Gensler, and several other Biden administration officials who worked to prevent a well-regulated cryptocurrency marketplace. All the factors aside, I think there's a more important reason for the rise in Bitcoin, it's the institutionalization of Bitcoin and cryptocurrency in general. Governments are using Bitcoin, whole countries have adopted pricing in Bitcoin and local currency at all retail establishments. Corporations are adding Bitcoin to their balance sheets. A couple of catalysts should help Bitcoin continue to rise in the new year. First, there is a good chance that Coinbase (COIN) will be added to the S&P 500 in the first half of 2025. As one of the leading cryptocurrency exchanges, I think this is meaningful to the price of Bitcoin. Second, Bitcoin is highly volatile. I think the price of Bitcoin could easily decline to $65,000 before it rises to $150,000. The volatility knocks many investors out of the market but also encourages buying by the steadiest of hands.
While much of the recent rise in Bitcoin’s price can be attributed to hype over the perception that the Trump administration will establish easier policy and work to advance Bitcoin, there are fundamental and technical reasons to add Bitcoin to this portfolio.
Bitcoin has had an average annual return of approximately 156.4% over the last ten years. Its historical mean annual return is around 560.8%, showcasing its potential for high returns despite significant volatility. A total of 21 million bitcoins can ever exist, with approximately 19.5 million currently in circulation as of 2024. The remaining bitcoins are expected to be mined gradually, with the last one anticipated to be mined around 2140. We also know that some quantity of bitcoin has been lost forever, further reducing the supply. Demand is growing, and the supply is fixed, never to be increased. As I look forward, I use a conservative estimate of roughly 50% growth annually out to 2030 to arrive at the chart below.
Year | Bitcoin Price |
2024 | $100,000 |
2025 | $150,000 |
2026 | $225,000 |
2027 | $337,500 |
2028 | $506,250 |
2029 | $759,375 |
2030 | $1,139,062 |
Selling United Healthcare
At the close today I will be selling the entire position in United Healthcare. My decision to sell has nothing to do with the recent tragic events. I simply think the stock is overvalued and we have another insurance company in our Berkshire Hathaway holding, GEICO. United Healthcare boasts a gross margin of nearly 22% but only manages to hold on to a meager 3.68%. That's a very thin margin and the trend has been declining over the past 5 years. Looking at the broader health insurance industry I'm finding this trend permeates every insurer. Higher costs have eaten into the NET and Operating margins of these companies. I expect that investments in AI will deliver some important efficiencies, but until the two highest healthcare costs come down; hospitals and doctors; I don't see significant growth in these companies for investors.
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As I consider whether to continue writing this blog in 2025, I’m thinking about two major themes for the blog:
I want to spend more time explaining my research process and how I select companies to invest in and less about commenting on the markets. It’s a ‘learn to fish’ approach versus ‘here’s a fish.’
I would also love to respond to my subscribers' stock picks. Use the Contact page to send your stock ideas. Include any thesis you have, and I’ll write a blog post about my view of the company and prospects for the stock. I’ll keep your name confidential in my posts.
"Markets don't go to zero; portfolios do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't; Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your homework.
RULE #10: Don't expect a company's stock to perform according to your timeline; be patient.
Rule #11: Investing is easy. Waiting is hard; waiting is the hardest part.
Rule #12: It's hard to be incredibly intelligent. Not being stupid is pretty easy.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security.
I am invested short in these securities mentioned in this post:
None mentioned
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or be interpreted as providing a personal recommendation. This and all articles on this website are provided for entertainment purposes only. Investing involves risk and risk of loss of part or all of your capital. Invest wisely, make your own decisions, seek advice from multiple sources.
I like your your idea of discussing your research approach. I would also be interested in hearing your reasons for adding crypto to a portfolio.