Understanding the “Bitcoin Effect”

Mark Jeftovic, Grey Swan Investment Fraternity

The “Bitcoin Effect” is what happens when individuals and corporations start to adopt bitcoin onto their balance sheet. You don’t have to go all-in. You can start with a small allocation.

But over time, bitcoin’s hard-capped nature should allow it to rise indefinitely against any fiat currency.

This bitcoin effect is what Michael Saylor is doing with MicroStrategy (MSTR). He’s turned it into an art form.

In essence, the Bitcoin effect is just publicly traded companies saying, we’re going to take our balance sheet cash and we’re going to hold it in Bitcoin instead of cash.

When companies do that, they get rewarded by the market with multiple expansion and share price boosts just by changing their allocation of their dry powder from fiat cash to Bitcoin.

Currently, 52 publicly traded companies now doing that. And many more privately-held ones. My company isn’t publicly traded, but we did something similar.

However, we didn’t just take our cash and put it in the Bitcoin. We were taking Bitcoin as a payment method. We were the first domain registrar to do that back in 2013, and we just kept stacking it.

That’s how we built our stack, and I think we’re going to see more companies using bitcoin payments to build their position as well.

Bitcoin Vs. Bonds: The Superior Savings Method

It’s the Bitcoin standard at the corporate level, swapping out fiat currencies for bitcoin. If you look at the market value of bonds or the market cap of bonds versus the market cap of bitcoin, because it’s a joke now that bonds were supposed to be the risk-free instrument. And now they call ’em return free risk.

It’s return-free risk and there’s 300 trillion of it of this return free risk. And then during the craziest days of the post GFC and the pandemic, there was even 20 trillion of negative yielding bonds out there.

Investors were paying governments to slowly lose money over and above the impact of inflation!

I don’t know how much there is today, but I think that will come back in the future.

So you’ve got all these bonds that are just losing money either nominally either negative interest rates or in real terms. Then you’ve got, roughly, $300 trillion of this stuff that you can’t use for savings anymore.

What’s going to happen to it? I mean, it’s not going to go to zero, but allocators are going to be looking at this and saying, we can’t keep this. We have to get at least some of it out and we have to get it off of this escalator treadmill going this direction.

We have to get it onto an escalator going the other direction. And that’s where bitcoin comes in. That’s where gold comes in. So even if they put, okay, we’re going to cash out 5% of our bond allocation and we’re going to put 4% of it in gold and 1% of it in bitcoin, I mean, that does amazing things for your return over time.

It’s insane what that does to the numbers, especially with bitcoin at a total market cap of about 1.2 trillion right now. Gold’s at about $15 trillion, but half of that is jewelry, so it’s like seven and a half trillion.

It’s just so asymmetrical that it just blows my mind. But what is interesting is to see publicly traded companies and institutional allocators wake up to this and articulate it and say, yeah, we’re kind of starting to park our allocations over here.

We’re just in the early stages of this “Bitcoin Effect” in action, and it’s an amazing thing to see … and any company or person can do it. The sooner you start, the sooner you’ll see a benefit, and the larger the overall benefit will be to you over time. ~~ Mark Jeftovic, Grey Swan Investment Fraternity

Understanding the “Bitcoin Effect”

Mark Jeftovic, Grey Swan Investment Fraternity

The “Bitcoin Effect” is what happens when individuals and corporations start to adopt bitcoin onto their balance sheet. You don’t have to go all-in. You can start with a small allocation.

But over time, bitcoin’s hard-capped nature should allow it to rise indefinitely against any fiat currency.

This bitcoin effect is what Michael Saylor is doing with MicroStrategy (MSTR). He’s turned it into an art form.

In essence, the Bitcoin effect is just publicly traded companies saying, we’re going to take our balance sheet cash and we’re going to hold it in Bitcoin instead of cash.

When companies do that, they get rewarded by the market with multiple expansion and share price boosts just by changing their allocation of their dry powder from fiat cash to Bitcoin.

Currently, 52 publicly traded companies now doing that. And many more privately-held ones. My company isn’t publicly traded, but we did something similar.

That’s how we built our stack, and I think we’re going to see more companies using bitcoin payments to build their position as well.

Bitcoin Vs. Bonds: The Superior Savings Method

Investors were paying governments to slowly lose money over and above the impact of inflation!

I don’t know how much there is today, but I think that will come back in the future.

Mining stocks amplify everything. First Majestic went from losing money to 45% margins without building anything new. They just held the line on costs while silver did the heavy lifting.

That cuts both ways. If silver drops hard, margins compress just as fast. Same leverage, opposite direction.

The miners with the lowest costs and cleanest balance sheets will hold up best in a pullback and capture the most upside if the deficit keeps grinding.

Economists at Goldman Sachs said this morning they expect core inflation to finish the year around 2% even while GDP rises at a “surprisingly strong” 2.5% clip.

In our view, their inflation forecast is optimistic. Their GDP call? Modest.

The last time we pumped this much liquidity into the system — 2020 through 2022—the result was a manic asset bubble, runaway inflation, and an epic hangover at the Fed.

Goldman’s optimism has triggered a fresh round of bullish bets: cyclical stocks are rallying, “dispersion” in the S&P 500 is spiking, and the Fed is expected to cut interest rates twice before Jerome Powell gets kicked out of Washington at the end of his term on May 15.

Anecdotally, we’re hearing stories of warehouses full of GPUs sitting unused for lack of energy to power them. It’s a natural feature of the heavy capital investment in new machines. The grid has to catch up!

While Trump’s great reset rolls on in 2026, keep an eye on modular nuclear reactors and increased demand for uranium, natural gas and related resources.

These PM producers are literally printing the most ‘hard money’ that they ever have at these metals prices and record margins here at the midway point in Q4.

If there ever was a time for this sector to get overheated and frothy, this would be it… only that isn’t what we’ve seen playing out.

PM producers are still insanely profitable at even at current metals prices and should be far more valuable based on their margins, revenue generating potential, and their resources still in the ground.