I really enjoyed reading several of John Street Capital’s essays and wanted to save / share some excerpts from them. The two that stood out the most during my reading binge were Bitcoin & The Macro Environment, and FinTech: The 2020’s.
Excerpts:
We said QE turned your checking account into cash, your savings account into your checking account, the bond market into your savings account, the equity market into the bond market, the venture market into the equity market, and gave birth to the crypto market as a replacement for venture market risk.
The Fed established a number of novel facilities including the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, the Money Market Mutual Fund Liquidity Facility, The Primary Market Corporate Credit Facility, The Secondary Market Corporate Credit Facility, and The Term Asset-Backed Securities Loan Facility
If we look at Gold the Gold ETF’s raised $10.0bn in their first 3 years; and given the electronification of fund distribution coupled with the headline buzz around BTC we would envision a BTC ETF if approved outpacing that over a comparable time period
If we look over history some researchers will point to an average life expectancy of fiat currency of 27 years, while others will note an average lifetime of 40 years with a median lifespan of 25 years. Either way Bitcoin has crossed the 10-year market while the Euro has now been around for ~18 years.
Another way to think about BTC is “un-confiscatable wealth.” Offshore banking is a strong proxy for this market demand and it is estimated that $13-$20 trillion is held in offshore accounts. Using these numbers is how you can approach ~$1.0mn/BTC, although this market won’t gain much market share unless and until we see a sovereign nation attempt to confiscate wealth held in BTC and fail
The Diamond industry is a $90bn/year market that’s illiquid, opaque, with high friction, a high requirement of trust, and surprisingly limited “financialization” to date.
In our view you will continue to see Growth outperform Value as investors are discounting future cash flows at lower interest rates, while going out the risk curve even within the equity asset class itself chasing returns. We think tech stocks particularly those with high recurring revenue will continue to do well
One of the most attractive parts of Seed-Series A venture is regardless of macro environment they can only be bid up so much; and if a company goes on to IPO or sell in a meaningful way those differences are negligible