The FCF Filter the Few Crypto Winners Destined for Greatness:
1) High Conviction
In a little over a decade, Bitcoin has become the single greatest performing asset of all time, with the returns on crypto assets having far outstripped anything else, including the high-tech laden Nasdaq and tech sector.
However it is also the most volatile - these gains were made in spite of dramatic, stomach churning pull backs and bearish cycles (called "crypto winters").
During these periods of turbulence, we need to be allocated to high conviction positions - businesses we know will continue executing on their plans during the downs, have the financial strength to do so, and even the ability to capitalize on the opportunities that appear during these periods (Company #3 was buying up distressed assets during the last crypto winter and made out like bandits).
2) Concentrated Focus:
Many newsletters are more like an endless stream of consciousness, spewing out all manner of trades, hoping something catches.
Or worse, they whipsaw you out of positions and profits by trying to time the intermediate ups and downs.
The The Bitcoin Capitalist Portfolio is a focused and concentrated, portfolio of the leading crypto stocks being owned for the long haul.
Like the value investing greats - we view ourselves as partial owners of a business, we are not daytraders or momentum chasers.
Most outsized gains in the stock market are derived from making concentrated investments on high conviction companies and then hanging on and holding - while monitoring for any changes to the underlying investment thesis.
Through profound understanding of our companies - we can also opportunistically capture shorter term windfalls via options plays and strategies:
#3) Compounders
Albert Einstein called compounding the eight wonder of the world:
"He who understands it, earns it. He who doesn't, pays it".
Because most cryptos - especially Bitcoin - are deflationary currencies - we compound across multiple dimensions:
1) The companies we seek are steadily gaining market share, users and expanding into new products and services.
2) Their finances are measured in terms of crypto currency units that gain purchasing power over time (instead of losing it, like all fiat currencies)
3) Network effects of user adaptation:
Back in telephone days Robert Metcalfe calculated that the value of a network is proportional to the square of the number of nodes in the system.
"Metcalfe's Law" means that as each additional user, project, business and investor joins the crypto economy - the entire system grows in value exponentially.
The increased value of the crypto assets on balance sheet, enables these businesses to reinvest into gaining market share (or network share in the case of Bitcoin miners), all the while contributing to the increased value of the crypto economy as a whole.
This in turn makes the more sucessful companies in the space even more valuable within it - rinse, lather, repeat.
#4) Crypto Collectors
Industrial era businesses are constantly trying to fight a battle on two fronts:
#1) They have the competitive landscape in a world where most goods and services are increasingly commodified - leading to zero-sum dynamics where one company can only gain at the expense of the others.
#2) What meagre profits they can generate they earn in rapidly deteriorating fiat currency units ( that's if they earn anything - the majority of all publicly traded companies are actually operating at a loss).
Our companies earn their revenues in crypto, which are deflationary currencies that gain purchasing power over time - contrast with industrial era companies that are valued in terms of their earnings, crypto companies are balance sheet plays. They are valued by their assets.
Where industrial era companies will lever up and destroy their balance sheets to artificially goose their "earnings", our companies are constantly, steadily building their asset base.
#5) Crypto Creators
"One of the best ways to predict the future, is to invent it" -- Smoking Man from X-files
The companies we identify through our FCF method provide "picks and shovels" to the crypto gold rush; they facilitate the infrastructure and services that all other digital assets, market participants and platforms require in order to operate.
Many of them create protocols, specifications and techniques that define the cryptocurrency space itself.
The FCF portfolio companies are by and large builders ...not rentiers.
Company #1 has created a Layer 2 blockchain that stands poised to take a chunk out of Ethereum itself.
Company #2 stands to usher in micropayments to the world.
Company #3 has invested in, or built in-house, over 200 ecosystems that power the crypto economy.
These are only a partial overview of the companies we hold in The Bitcoin Capitalist.