“I was initially drawn to investing because it gives us a chance to earn large sums of money by studying the world and making rational decisions about it.”
“Everyone is born. Everyone dies. Not everyone is resurrected. And resurrection is where believers are made.”
1. Bitcoin will surpass $100k in 2024, on it’s way to $250k in 2025
Let’s get right to it then, shall we?
2024 is the year Bitcoin rises from the ashes…for the third time.
Not everyone knows its already risen from the ashes twice though. Every cycle, when people see it with their own eyes for the first time, a new cohort of believers is born.
I will elaborate below with some macro predictions, but this one is simple: as I have written | about | ad | naseum over the past year, I believe the Fed and other global central banks will resume balance sheet expansion in 2024, and bitcoin has been highly correlated with global liquidity conditions.
Why $100k and $250k? Well, the 2021 peak was 2.5x the 2017 peak, 2.5x the 2021 peak gets us close to $250k, and $100k feels like a reasonable one year target along the way:
$100k BTC puts us at a market cap of ~$2 trillion; $250k BTC puts us at ~$5 trillion.
Gold is currently at $13.8 trillion.
Call me crazy, and fade this chart if you must…
2. DePIN becomes the crypto acronym du jour in 2024
“The meta purpose of blockchain is to be a decentralized internet. And the only way you do that is by replacing the cloud”
2020 gave us DeFi.
2021 gave us NFTs.
2024 will give us DePIN.
Prediction: an equal-weighted basket of the below 6 Decentralized Physical Infrastructure tokens outperform Bitcoin in 2024 (HNT, FIL, AR, AKT, RNDR, ICP).
A number of projects have matured enough to provide real world utility, and there time has come.
Helium Network ($HNT: disclosure long) launched a nationwide $20/month unlimited data phone plan in December and already has >30k customers. Helium parent Nova Labs is attempting to bootstrap a decentralized nationwide wireless network by giving customers the incentive/opportunity to purchase and run their own hotspots, and wireless subscribers to share their location data (so the network knows where more coverage is needed), and earn tokens. At December 2023 prices, users were earning $6/month in $MOBILE tokens on a $20/month phone plan.
Filecoin ($FIL: disclosure long) is a decentralized data storage and retrieval network. Think of it as a decentralized competitor to the centralized cloud storage solutions like Dropbox or Google Cloud. As year end 2023 it has 9 EiB1 in storage capacity and 1.8 EiB in utilization. It’s already a cheaper option than centralized cloud storage.
To put numbers to it, according to CoinGecko:
In order to store a copy of all the existing YouTube videos for the next 100 years, it would cost between $7.42 billion to $8.55 billion more on enterprise-grade centralized cloud storage than on decentralized storage.
Another way to think of Filecoin is “Airbnb for storage space.” Providers can rent excess storage capacity for FIL, and users spend FIL to purchase storage.
Arweave ($AR) is similar to Filecoin.
Akash Network ($AKT) is a decentralized cloud computing marketplace. It's designed to provide a more efficient, cost-effective, and decentralized alternative to traditional cloud service providers like AWS, Azure, and GCP.
Decentralized clouds eliminate single points of failure, such as your cloud provider suddenly deciding to discontinue service. This may become even more important in an increasingly politicized world where even entire nation-states can get rugged and governments can create new legal theories to justify the rugging ex-post.
Render Network ($RNDR) is a distributed rendering system that aims to connect artists and studios in need of rendering power with those who have idle GPU capabilities.
Internet Computer ($ICP) is designed to host complex web services and applications, directly on the blockchain, without the need for traditional web servers. It aims to create a new kind of decentralized internet and global computing system with independent data centers all over the world.
3. Nvidia Becomes The Most Valuable Company In The World
This one may be a little premature, but let’s run with it.
I made the case for Nvidia becoming the most valuable company in the world during the coming AI supercycle here.
So what would have to happen for it to happen this year?
Here are the current market caps of the MAG7:
So NVDA needs to close the gap on AAPL (and MSFT) by ~118%. A stretch, but seemingly achievable if you just consider what the stock did in 2023, when it outperformed AAPL by 200% and MSFT by 175%:
Past performance is not indicative of future results, and NVDA could totally take a breather/consolidate after a monster 2023.
But new technology “bubbles” (supercycles) can last longer and reach higher than you think, and the chart is telling you the stock is breaking out after consolidating for the last 6 months.
The Biden Administration’s chip ban, which forces Nvidia to sell China lower-powered chips which they reportedly aren’t interested in buying, could be a snag to the thesis, although the company is launching a new China-focused AI chip in Q2.
Meanwhile, Apple is reportedly facing a sweeping DOJ antitrust lawsuit and Micrsoft is reportedly facing a “full-blown EU merger probe” in connection with its investment in OpenAI.
I think some combination of the top coming down and the bottom coming up closes the jaws between NVDA and the pack this year.
4. Banking Mini-Crisis Not Over: Regional Bank Stocks Crater Again in Q1, Forcing Fed’s Hand Into Cutting Rates, Ending Quantitative Tightening and Extending the Bank Term Funding Program
This one is also simple: the reason banks got sick in Q1 2023 was the inverted yield curve.
The yield curve is still inverted.
Banks are still sick.
The basic business model of a bank is borrow short, lend long, earn the spread.
Borrow short: demand deposits, e.g. your checking & savings account.
Lend long: mortgages, business loans, commercial real estate loans, government bonds.
The problem is when you’re paying more to borrow short (5.5% fed funds) than you’re earning lending long (4% 30-year US treasury), the model doesn’t work.
I continue to believe that the banking sector needs to recapitalize and will only be back on solid footing once that happens and the yield curve un-inverts.
With the one-year anniversary and expiration date of the BTFP coming on March 12, I think the market is going to start looking ahead and testing bank stocks unless and until the Treasury announces an extension of the lending facility…which they ultimately will, in conjunction with the Fed cutting rates and ending QT.
Indeed, the Fed is already floating the trial balloon of bringing an end to QT as the RRP gets low. From Nick Timiraos, courtesy of Le Shrub:
5. CPI Prints a Blutarsky
Housing is 34% of CPI (consumer price inflation).
CPI measures housing inflation with a ~12 month lag2.
Taking rent inflation data from Apartment List, the latest CPI reading of 3.1% (for November 2023) is incorporating ~4.05% year-over-year rent inflation.
Looking “ahead” to the next 12 month’s housing inflation data, we can see that it bottoms at -1.4% in September 2023 — a reading that will be captured in official CPI sometime around summer 2024.
So we’re currently printing a 3.1% CPI with housing accounting for 1.4% of that (34% weight * 4.05% inflation = 1.38%).
By summer of this year, housing is going to go from contributing 1.4% to headline CPI inflation to contributing -0.5% (34% * -1.4%).
So leaving everything else unchanged, CPI falls from current 3.1% to 1.2%.
Truflation has tended to lead CPI by about 3 months, meaning November’s reading is incorporating August Truflation data of ~3%.
Since peaking at 3.4% in September, Truflation has hovered between 2.5% - 3.0% during Q4 ‘23, before plummeting in the new year to a current reading of 2.18%.
So, guestimate that the “other” 66% of the CPI falls from 3% to 2.2%, and you have:
0.34 * -1.4% + 0.66 * 2.2% = 0.98%
A whiff of anything else — stock market crash, oil sells off, recession fears — and we’re blowing a 0.00.
Which, importantly, will give the Fed cover to begin their pre-election pump.
Bonus Predictions
We have H2 2024 NFT resurgence, to the chagrin of many
Bitcoin becomes a political statement around the world, as voters “vote with their wallet”
Prediction markets enter the mainstream, fueled by election speculation
Grayscale’s other digital asset trusts jump to the fore for crypto traders (many currently trade at multiples of NAV)
Office real estate finally bites the dust, and a major developer goes bust/restructures
Tesla full self-driving has a “ChatGPT” moment, and Tesla’s are allowed to operate driverless in select areas by the end of the year
Good luck to all in the New Year!
"EiB" stands for "Exbibyte," which is a unit of digital information storage. It is part of the binary system of data measurement, commonly used in computing.
1 Exbibyte (EiB) is equal to 260260 bytes, or 1,152,921,504,606,846,976 bytes to be exact. This is different from an Exabyte (EB) in the decimal system, where 1 Exabyte equals 10181018 bytes. The binary system (using EiB) is often used in computer science because it aligns more closely with the binary nature of computing, where data is processed in powers of 2.