Get Off Zero: The Case for Bitcoin and Why a 1-6% Portfolio Allocation Should be Considered

GET OFF ZERO:
THE CASE FOR
BITCOIN
AND WHY A PORTFOLIO ALLOCATION OF 1-6%
SHOULD BE CONSIDERED

WHAT IS BITCOIN
Bitcoin is peer to peer electronic cash AND gold 2.0.
Bitcoin has the transaction finality of cash AND is more scarce than gold
Bitcoin is a super commodity, minted from energy, the fundamental commodity of
the universe

WHAT IS BITCOIN (cont’d)
Bitcoin is a digital asset & form of money.
The supply is limited (21MM) & written into the open source code.
Miners and Nodes, not a central authority, verify what is true on the ledger.
This is done by nodes & mining blocks every 10 minutes. This is also the issuance & governance method

ORIGIN: BITCOIN’S LAUNCH DURING THE 08'
FINANCIAL CRISIS WAS NOT COINCIDENTAL
 Satoshi had been coding Bitcoin for the prior 2 years waiting for the perfect moment to launch it. Let’s look at
the sequence of events:
 Jan - July: Fed tries to stop the housing bust: Fed bails out Bear Sterns. Paulson explains the need to bail out Fannie
Mae, Freddie Mac the two agencies that held or guarantee 50% of the $12T in US mortgages.
 Aug 18: Satoshi registers http://Bitcoin.org
 Sept 15: Lehman Brothers files for bankruptcy, the largest in U.S. history ($600B)
 Sept 17: Investors withdrew a record $144B from their money market accounts. During a typical week, only about
$7B is withdrawn
 Oct 3: Bitcoin whitepaper PDF likely created
 Oct 13: Treasury Secretary Paulson talks with 9 major bank CEOs. The total bailout package ~$2.25T
 Oct 21: Fed lends $540B to bail out money market funds
 Oct 31: Satoshi publishes the Bitcoin whitepaper
 Jan 3, 2009: Satoshi’s whitepaper was quickly followed by code release and hashing of the Genesis Block with the
following comment “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”

LOST TRUST and ALTERNATIVE MONEY
 With the 2008 financial crisis, trust had
been lost in a world that ran on trust.
Bitcoin was launched on Jan 3, 2009 in a
time of absolute necessity, with Satoshi
planting the seed at precisely the right
moment. The world didn't need a new
VISA, they needed an alternative to banks.
 Since then, over $15 trillion printed after
the financial crisis by central banks,
including $2.7T this year alone. We're in for
a nasty awakening.

BITCOIN AS A STORE OF VALUE (SOV)
 Bitcoin was purpose-built to first be a Store of Value (SoV) by Satoshi Nakamoto
 How do we know this? In his first public comments following the release of his
whitepaper, he writes:
“The root problem with conventional currency is all the trust
that's required to make it work. The central bank must be trusted
not to debase the currency, but the history of fiat currencies is full
of breaches of that trust.”
– Satoshi

BITCOIN AS A STORE OF VALUE (SOV)
 At 0% yield, Bitcoin has a higher
yield than government bonds in
18 countries whose central
banks are trying to debase their
currencies and increase inflation.

SATOSHI’S IDEOLOGY
 How does Satoshi describe Bitcoin and why does it matter?? His forum posts after
releasing the Whitepaper provide insight through his consistent gold/metal analogy
 “[with Bitcoin] we can win a major battle in the arms race and gain a new territory
of freedom for several years.” -Satoshi
 “Bitcoin [is] more like a collectible or commodity.” -Satoshi
 "In this sense, it's more typical of a precious metal. Instead of the supply changing
to keep the value the same, the supply is predetermined and the value changes.
As the number of users grows, the value per coin increases” – Satoshi

SATOSHI’S IDEOLOGY (cont’d)
 “As a thought experiment, imagine there was a base metal as scarce as gold but with
the following properties: [not useful/no utility]. And one special, magical property:
can be transported over a communications channel” – Satoshi
 “If there were nothing in the world with intrinsic value that could be used as money,
only scarce but no intrinsic value, I think people would still take up something. (I'm
using the word scarce here to only mean limited potential supply)” – Satoshi
 “It might make sense just to get some in case it catches on. If enough people think
the same way, that becomes a self fulfilling prophecy.” - Satoshi

SATOSHI’S IDEOLOGY WAS A SOV
 If Satoshi wanted Bitcoin to first be used as a medium of exchange to purchase
goods and services, he would have made it inflationary.
 People don't spend deflationary currencies when they can make the same
purchase in inflationary currencies. There's even a name for It, Gresham’s Law
 When perceived as a store of value, like gold, its value is not guaranteed by a
linked cash value. Bitcoin’s worth is based on supply and demand.
 As a reminder only 21mm Bitcoin will ever be issued (of which up to 4mm are said to be
lost)

BITCOIN SUPPLY CURVE vs DEMAND
 As of right now, over 17.5 million bitcoins have been
mined, but the maximum supply can only be 21
million—meaning there are only 3.5 million bitcoins
left to mine.
 Without getting overly technical, the algorithmic
schedule of mining is predetermined, public, and
final—the last bitcoin will be mined in 2140
 There are approximately 60 million millionaires
around the world. If we divided the maximum
supply, each millionaire would have 0.35 bitcoin.
 It’s this fixed supply that gives it such potential as a
store of value and opens up a world of opportunity.

IT’S TOO VOLATILE TO BE A SOV
 New money comes into existence through stages: Collectible, Store of Value (SoV),
Medium of Exchange (MoE), and Unit of Account(UoA).
 Some may balk at the SoV terminology for Bitcoin since the price fluctuates. However,
nothing in this life has a “stable” value, the longest running fiat currency, GBP, has lost
99% of its value since inception. Bitcoin has all the traits of a good SoV
 Bitcoin is stable. The protocol has a 99.99989% uptime which is higher than USD. The
“fluctuation” you see is the volatility of the world flowing into the stability of
Bitcoin in ebbs and flows

ATTRIBUTES OF A GOOD SOV
 Durable: the good must not be perishable or easily destroyed. Thus wheat is not an ideal store of value
 Portable: the good must be easy to transport and store, making it possible to secure it against loss or
theft and allowing it to facilitate long-distance trade. A cow is thus less ideal than a gold bracelet.
 Fungible: one specimen of the good should be interchangeable with another of equal quantity. Without
fungibility, the coincidence of wants problem remains unsolved. Thus gold is better than diamonds,
which are irregular in shape and quality.
 Verifiable: the good must be easy to quickly identify and verify as authentic. Easy verification increases
the confidence of its recipient in trade and increases the likelihood a trade will be consummated.
 Divisible: the good must be easy to subdivide. While this attribute was less important in early societies
where trade was infrequent, it became more important as trade flourished and the quantities exchanged
became smaller and more precise.

ATTRIBUTES OF A GOOD SOV (cont’d)
 Scarce: As Nick Szabo termed it, a monetary good must have “unforgeable costliness”. In other words, the
good must not be abundant or easy to either obtain or produce in quantity. Scarcity is perhaps the most
important attribute of a store of value as it taps into the innate human desire to collect that which is rare. It
is the source of the original value of the store of value.
 Established history: the longer the good is perceived to have been valuable by society, the greater its
appeal as a store of value. A long-established store of value will be hard to displace by a new upstart
except by force of conquest or if the arriviste is endowed with a significant advantage among the other
attributes listed above.
 Censorship-resistant: a new attribute, which has become increasingly important in our modern, digital
society with pervasive surveillance, is censorship-resistance. That is, how difficult is it for an external party
such as a corporation or state to prevent the owner of the good from keeping and using it. Goods that are
censorship-resistant are ideal to those living under regimes that are trying to enforce capital controls or to
outlaw various forms of peaceful trade.

HOW DOES
BITCOIN
GRADE AS
A SOV?

ESTABLISHED HISTORY: TRUST vs. TIME
 the Lindy effect suggests that the longer Bitcoin
remains in existence the greater society’s
confidence that it will continue to exist long into the
future. In other words, the societal trust of a new
monetary good is asymptotic in nature, as is
illustrated in the graph below:

WHERE ARE WE WITH BITCOIN (*hint very early)
 When applying “The Szaboian Theory of
Money Origins” to Bitcoin, it is reasonable to
conclude we just barely left the "collectible
phase" and are now witnessing it’s first steps
into "Proto-money”
 This phase, which is characterized by its
primordial exploration of the SoV properties
of the commodity, can easily take decades to
properly mature. Volatility is part of this
maturing process

THE S-CURVE OF TECHNOLOGICAL ADOPTION
 The growth of adoption of Bitcoin and therefore bitcoin
price is following an S-Curve of Technological Adoption,
which is itself characterized by fractally repeating,
exponentially increasing Gartner Hype Cycles.
 The parabolic curve represents and exponential increase in
adoption up until median saturation, then a logarithmic decline
in adoption until the whole potential population has adopted.
Assuming near-universal adoption, Bitcoin is still likely in the
“Innovator” phase, or just barely into the “Early Adopter” phase
 If you make the bell curve cumulative to represent the total
adoptive population at a given time, you get the S-curve of
Adoption as characterized by the yellow line below

GARTNER HYPE CYCLES
 Technology Trigger: $0–$1 (2009–March 2011): The first hype cycle in the Bitcoin market was
dominated by cryptographers, computer scientists and cypherpunks who were already primed
to understand the importance of Satoshi Nakamoto’s groundbreaking invention and who were
pioneers in establishing that the Bitcoin protocol was free of technical flaws.
 Peak of Inflated Expectations: $1–$30 (2009–July 2011): The second cycle attracted both
early adopters of new technology and a steady stream of ideologically motivated investors
who were dazzled by the potential of a stateless money.
 Trough of Disillusionment: $250–$1100 (April 2013–December 2013): The third hype cycle
saw the entrance of early retail and institutional investors who were willing to brave the
horrendously complicated and risky liquidity channels from which bitcoins could be bought.

CURRENT GARTNER HYPE CYCLE
 Slope of Enlightenment: $1100–$19600? (2014– ?): Bitcoin is currently undergoing its
fourth major hype cycle with participation being dominated by what Michael Casey
described as the “early majority” of retail and institutional investors.
 sources of liquidity have deepened and matured, major institutional investors now have the
opportunity to participate through regulated futures markets.
 Late cycle should usher in the “late majority” and “laggards”
 It would be reasonable conjecture to see this cycle reach its zenith with price between $20,000 and
$50,000 ( much higher than this and Bitcoin would command a significant fraction of gold’s market
cap – Gold <> Bitcoin equivalent market caps would see Bitcoin at $380,000 per Bitcoin)

Final Gartner Hype Cycle
 Plateau of Productivity: (? to ?). The Entrance of Nation States, private sector and
mainstream adoption
 Bitcoin’s final Gartner hype cycle will begin when nation-states start accumulating it as a part of their
foreign currency reserves
 The market capitalization of Bitcoin is currently too small for it to be considered a viable addition to
reserves for most countries (although states with strongest executive power(North Korea, China, Russia
will likely be fastest in accumulating while Western nations like the Unites States are laggards in
accumulation)
 as private sector interest increases and the capitalization of Bitcoin approaches 1 trillion dollars it will
become liquid enough for most states to enter the market.
 The entrance of the first state to officially add bitcoins to their reserves will likely trigger a stampede
for others to do so
 The US risks the greatest downside to its geopolitical position if Bitcoin were to supplant the dollar as
the world’s reserve currency

POSITIVE CATALYSTS FOR BITCOIN
 QE Infinity and out of control government debt
 MMT (Modern Monopoly Money Theory – government spending boosts
prosperity)
 10k Boomers retiring daily (entitlements skyrocketing)
 US interest expense > tax receipts by 2022
 Trade Wars with China/Mexico, Russia, pushing alternative to USD
 BTC Halving in 2020
 Endowments, SWF’s and Institutional investments increasing
 Institutional grade custody

1-6% IS THE PROPER ALLOCATION TO BITCOIN
 According to the study by Yale economist Aleh Tsyvinski, BTC should occupy about 6% of
every portfolio in order to achieve optimal construction.
 Even those who are strong bitcoin skeptics should maintain at least 4% BTC allocation,
said the study.
 The study indicates that even the staunchest opponents of the cryptocurrency world are
best off investing 1% of their assets in this space, if only for diversification purposes.
 Tsyvinski demonstrated that cryptocurrencies enjoy higher potential return than
other asset types despite their higher volatility while concluding that returns have low
exposures to traditional asset classes – stocks, currencies and commodities.
 At the same time, the returns of cryptocurrency can be predicted by two factors specific to
its markets – momentum and investors attention

5% Bitcoin + 95% Cash Beats the S&P500
 5% #Bitcoin + 95% cash beats
S&P500: more return and less risk ..
every year, 6 years in a row. Note
that max yearly loss (risk) of 5%
Bitcoin + 95% cash is -5% .. S&P did
-6% in 2018 (and -38% in 2008!!)

Bitcoin Has A Higher Risk/Return Ratio
Than Most Traditional Assets (cont’d)

Bitcoin Has A Higher Risk/Return Ratio
Than Most Traditional Assets

SUMMARY
1. GET OFF ZERO when it comes to Bitcoin. Owning ZERO is riskier than owning something
2. We recommend 1% of your overall portfolio and upwards to 6%
 Join the 21mm Club and own 1 Bitcoin. Due to scarcity, there isn’t enough Bitcoin for everyone to own 1. In
fact if every millionaire in the world wanted Bitcoin, they could only purchase <0.35 BTC
3. Bitcoin is in the early stages of the technological adoption curve. REMINDER: It’s still early
4. Institutional Custodial services to safely store Bitcoin with insurance are widely available
1. You can own Bitcoin securely without worrying about losing keys, 2fa codes or getting hacked
5. Despite its volatility, Bitcoin offers a better risk/reward than most traditional assets and offers
excellent non correlated diversification to a modern portfolio

INVESTING in BITCOIN w/ DAiM
DAiM is the first Licensed Registered Investment Advisor for Bitcoin and Digital Assets. We are the only firm that
has passed a Field Audit for Operation, Compliance and Procedures by the Financial Advisors Board
DAiM specializes in managing and advising clients with Bitcoin and Digital Asset investments in cash accounts,
401k’s and IRA’s. Our fees are for management/custody. We do not charge for performance
Our flat 3% management fee includes dedicated full service advisory, trading, educational resources,
research and cold storage custody of assets w/ insurance. Our fees are lower all-in then all other options
With DAiM, your assets sit with a qualified custodian. Your coins are never at risk on an exchange, you wont
have to worry about losing your private keys, 2FA passcodes or getting hacked.
DAiM has NO authority over deposits and withdrawals on your account. As a manager and adviser, we keep you
in control of your assets and only have discretion to make investment directions on your behalf.

INVESTING in BITCOIN w/ DAiM
 DAiM is the first Licensed Registered Investment Advisor for Bitcoin and Digital Assets. We are the
only firm that has passed a Field Audit for Operation, Compliance and Procedures by the Financial
Advisors Board.
 DAiM specializes in managing and advising clients with Bitcoin and Digital Asset investments in 401k’s,
IRA’s and traditional Brokerage accounts. Our goal is to be your co-pilot on a path to self-sovereignty.
Our fees are for management/custody. We do not charge for performance.
 Our FLAT 3% management fee includes dedicated full service advisory, trading, educational
resources, research and cold storage custody of assets w/ insurance. Our fees are lower all-in then
the hidden fees and high premiums charged at Coinbase and Greyscale Trust.
 With DAiM, your assets sit with a qualified custodian and are insured. You’re coins are never at risk on an
exchange, you’ll never have to worry about losing your private keys, 2FA passcodes, or having your
phone number ported and accounts hacked.
 DAiM has ABSOLUTELY NO authority over deposits and withdrawals on your account. As a manager
and adviser, we structure your accounts so only YOU have control of your assets. We only have discretion
to make investment directions on your behalf.

Advantages of
Bitcoin in 401k or
IRA
 Most people don’t know they can add
Bitcoin to their tax advantaged retirement
accounts. These accounts unlock massive
short term and long term benefits
 Invest in Bitcoin tax-free today
 Avoid short term capital gains and losses
reporting
 Avoid long term capital gains and losses
reporting
 For a Roth IRA all gains are tax free
 For a Traditional IRA your gains could be
taxed at a lower level at time of retirement

DAiM FEES &
FEATURE
COMPARISON

MEET THE TEAM
Bryan Courchesne Adam Pokornicky
The founder of Newport Beach-based Digital Asset
Investment Management, is no stranger to managing risk
and being on the forefront of innovation as we head into a
new digital era and the 21st Century financial landscape.
Impacted by the housing meltdown during the Great
Recession, the Florida entrepreneur relocated to New York
City to trade options in the pit of the exchange. Within a
few years, he was managing a group of eight brokers and
turned pre-existing negative returns into healthy positive
profit margins. During that time he became an Options
Principal and General Securities Principal and holds the
Series 4,7,24,55,63, and 65.
As the former Head Trader of Scottwood Capital Management, an
event driven credit fund, Adam has been invested and trading in
public and private markets since 2002. After successfully
navigating the financial crisis by purchasing CDS on Subprime
CDO’s, Mortgage Insurers and Banks, and observing the
unprecedented bailouts, money printing and extraordinary levels
of QE Central Banks employed to reinflate the banking system, his
understanding of money, debt and the financial system changed
forever.
These events led to the discovery of the Bitcoin whitepaper in late
2012 followed by his first purchases in 2013. As a startup founder
and Bitcoin early adopter, Adam’s been a long term advocate and
champion of Bitcoin for its technological breakthrough,
commitment to sound money and potential building blocks of an
alternative financial system.

GET OFF ZERO
with BITCOIN
and Invest w/
DAiM
 Get started and GET OFF ZERO with
BITCOIN by getting in touch with us and
scheduling an introductory consultation:
 Fill out our new investor contact form
HERE
 Email us at hq@daim.io
 Check out our website www.daim.io and
chat with us live -or-
 Call us at 929.298.7582

Appendix
 Acknowledgement to Dan Held, for his series “Planting Bitcoin”
 Acknowledgement to Vijay Boyapati “The Bullish Case for Bitcoin”
 Acknowledgement to Michael Casey “Speculative Bitcoin Adoption/Price Theory”
 Acknowledgement to Yale Economist Aleh Tsyvinski
 Acknowledgement to Nick Szabo “The Origins of Money”
 Acknowledgment to Satoshi Nakamoto “The Bitcoin Whitepaper”

Get Off Zero: The Case for Bitcoin and Why a 1-6% Portfolio Allocation Should be Considered

Recommended

Recommended

More Related Content

What's hot

What's hot (7)

Similar to Get Off Zero: The Case for Bitcoin and Why a 1-6% Portfolio Allocation Should be Considered

Similar to Get Off Zero: The Case for Bitcoin and Why a 1-6% Portfolio Allocation Should be Considered (20)

Recently uploaded

Recently uploaded (20)

Get Off Zero: The Case for Bitcoin and Why a 1-6% Portfolio Allocation Should be Considered