Ep21: The Conservative Investor’s Case for Bitcoin

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One of the favorite words in crypto-Twitter these days is “Institutional”. What does that even mean? What is the big deal about these institutional investors coming in and why in the world do we care?

There has been big money in the crypto markets for a while in the form of hedge funds, family offices, and wealthy individuals—all of which tend to have a greater appetite for risk than say a pension fund or a University endowment. The latter are more conservative because their primary objective is to not lose money. Crypto certainly is a good place to do that as we have seen in the past few weeks.

So why would Yale University’s endowment lead the charge into diversifying into blockchain? Why are other Universities following suit?

Well, the issue is that there is risk in participating in this technology but there is also risk in not participating. Say for example an endowment put 1 percent of its assets into blockchain (still a lot). If that one percent went down to zero, which is highly unlikely, the overall effect on the portfolio would be negligible.

On the flip side, if that one percent returned 1000 percent over two or three years, which absolutely could happen, that small risk would lead to noticeable improvements in the overall yield of a fund. This is what you call an asymmetric risk profile and cryptocurrency is the quintessential example of that.

Frankly, as an individual, I have small investments in dozens of projects for the very same reason. Certainly, there are some that I have greater conviction in that I consider less risky, such as bitcoin, that I am willing to buy a little bit more of, but the vast majority of alternative coins out there are still quite risky in my humble opinion.

This week’s podcast features an interview with Kim Snider. Kim comes from the traditional financial world where she was an expert in options trading. After a successful career, she retired. However, seeing this asymmetric risk profile opportunity was enough to get her back in the game. In this interview, she will tell you why you should invest in bitcoin even if you have no clue how it works.

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