Matein Khalid
In retrospect, the news that China had banned Bitcoin mining/trading in July and the subsequent sell-off to BTC in the early $30,000s was an ideal opportunity to accumulate the world’s most credible digital currency. Beijing fulmination against crypto is routine and BTC has always recovered from PRC inspired sell-offs.
The euphoria now is mainly due to the fact that the SEC has agreed to the launch of a Bitcoin exchange traded fund (ETF), which will only increase its appeal to a rapidly growing private clients and institutional investor base. With 68 million registered users, I always believe that Coinbase (COIN) was the ideal proxy to position for the institutionalisation of crypto trading+banking+asset management and custody worldwide. So I picked up COIN in the 240s and have thus ridden the euphoria on the ETF launch.
However, now that BTC has more than doubled to $66,500 in a mere three months, I am selling some of my stake in COIN at 305 to 310. Why?
History teaches us that speculative bullish moves in Bitcoin ignited by news of capital markets invariably end in tears. This is what happened with the launch of the Bitcoin futures contract, the news that Square and PayPal had begun crypto brokerage and the IPO of Coinbase itself. So, my call is that this time will be no different and I have no desire to end up as a victim of global finance’s ultimate “greater fool theory”. Even though I was hugely bullish on Coinbase’s role as the world’s pre-eminent crypto exchange, I only bought its shares after it fell 200 points from its post IPO Euphoric high at 230.
I see COIN as fully valued at current prices or a market cap of $66 billion even though I know I am exiting the train a bit early. It is always prudent to let some genius have the last 10 to 20% in a parabolic move whose inevitable endgame is heartbreak. While I can intellectually justify the path to BTC 100,000 long term, I cannot justify holding it at 66,500 now as the risk/reward calculus no longer compensates me for the sharp downside risk that is imminent.
Matein Khalid is Chief Investment Officer at Asas Capital
