Anthony Pompliano’s Cryptocurrency Investment Strategy for 2020: A Deep Dive into Bitcoin and Beyond

The global financial landscape faces unprecedented uncertainty. Many investors seek dependable strategies amidst this volatility. Anthony Pompliano, a prominent investor and co-founder of Morgan Creek Digital, offers a robust Bitcoin investment strategy. His insights provide clarity in chaotic times. This accompanying article expands on his key perspectives discussed in the video above, delving into his strategic outlook for cryptocurrency investment strategy and the broader economy in 2020.

Bitcoin’s Unwavering Core Value

Bitcoin has performed as expected. It maintains two critical functions. First, Bitcoin is the world’s most secure computing network. This security only grows stronger over time.

Second, fundamental supply and demand economics apply. The recent Bitcoin halving event underscores its scarcity. This disinflationary monetary schedule remains unchanged. Bitcoin’s U.S. dollar exchange value will likely increase as demand rises.

The Post-Halving Cycle: A Shift in Perception for Bitcoin

The post-halving period ushers in a new cycle. Pompliano predicts significant shifts in financial discourse. He believes traditional media figures may struggle to grasp Bitcoin’s surge. This comes as quantitative easing and monetary stimulus continue.

The fiat system exhibits structural issues. These issues force central bankers into short-term decisions. Such decisions often prove detrimental long-term. Bitcoin, in contrast, offers a sound alternative.

Bitcoin’s dominance continues to grow. Its U.S. dollar exchange value consequently increases. If Bitcoin reaches valuations like $100,000 or $200,000, as some forecast, it will shock many. This potential growth highlights Bitcoin’s robust nature.

Deconstructing Bitcoin Valuation: Beyond Short-Term Fluctuations

Short-term Bitcoin price movements do not concern Pompliano. He focuses on a decade-plus outlook. For him, Bitcoin is a binary investment. It either becomes a global reserve currency or fails.

If Bitcoin succeeds, it will be the best investment of all time. This long-term view informs his entire cryptocurrency investment strategy. He identifies a unique advantage for Bitcoin investors.

The fair value of traditional assets like gold requires two variable inputs. These are supply and demand forecasts. Bitcoin, however, offers a simpler equation. We know its exact circulating supply. This includes lost or stolen coins.

We also know the precise daily influx of new Bitcoin. This certainty means only one variable remains: demand. Consequently, forecasting Bitcoin’s future price becomes more manageable. This explains the accuracy of models like stock-to-flow ratios and cointegration models.

Triple Entry Accounting: A Foundational Innovation

Pompliano views triple entry accounting as a profound breakthrough. He calls it “automated finance.” This innovation eclipses even double entry accounting. Double entry accounting, popularized by the Medicis, formed the base for the Industrial Revolution. It revolutionized business tracking but remained siloed.

Triple entry accounting connects balance sheets. It transforms them into a shared ledger. This allows multiple parties to transact securely and transparently. Bitcoin first implemented this system effectively. This capability is poised to disrupt industries globally. Its implications will extend far beyond Bitcoin investment strategy.

Morgan Creek Digital invests in companies applying this principle. For example, Figure Technologies uses triple entry accounting. They apply it to various debt products. These include home equity lines of credit and student loan refinancing. Other businesses build on platforms like Ethereum for similar benefits.

Pompliano maintains “maximalism” regarding currency. Bitcoin represents our singular chance to separate money from state control. If Bitcoin fails, this opportunity disappears. Trust is paramount for money. A failed state currency illustrates this point. Venezuela serves as a recent stark example.

People lose trust in state-backed alternatives. They seek options like U.S. dollars, gold, or Bitcoin. Therefore, one can be a currency maximalist for Bitcoin. Yet, they can still advocate for triple entry accounting applications across the economy.

Morgan Creek Digital’s Investment Framework

Morgan Creek Digital employs a clear fund strategy. They invest in two primary areas. First, direct cryptocurrency investments. Bitcoin comprises 15% to 20% of these allocations. This highlights their strong conviction in Bitcoin’s investment strategy.

Second, they invest in industry infrastructure. This includes exchanges, wallets, and mining operations. Historical data supports this focus. Over the long term, infrastructure and Bitcoin have consistently outperformed other digital assets. This venture capital approach targets maximum returns for limited partners over eight to ten years.

The firm also created a Digital Asset Index Fund. This passive fund mirrors the S&P 500 structure. It selects the top 10 digital assets by market capitalization. The fund applies market-weighted averaging. It rebalances monthly.

Crucially, it includes float requirements. This excludes certain assets, like XRP and Stellar. These assets had insufficient circulating supply. This disciplined approach reflects deep conviction.

Navigating the U.S. Economy: A Bubble Concern

The U.S. economy shows signs of an asset bubble. Recently, bankrupt companies like Hertz saw stock price surges. Hertz shares increased by 800% in a short period. One day, the stock rose over 100% post-bankruptcy filing.

Historically, every single stock has seen gains over some 10-day periods. The Federal Reserve’s actions fuel this. They systematically pump asset prices. This will continue until their policy changes. The dollar will likely devalue at some point. This will be a significant event.

Such market behavior appears irrational. However, it can persist for extended periods. The ability of bankrupt companies to sell more stock is particularly alarming. As a free market proponent, Pompliano acknowledges these dynamics. Yet, he advises caution, emphasizing the importance of a sound Bitcoin investment strategy in these times.