From the Desk of Arthur Hayes
(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
One of the most destructive mental constructs to the health of your financial portfolio is measuring yearly arithmetic returns. The goal, as always, is to maintain or increase the purchasing power of your assets relative to the cost of energy. Human civilisation essentially converts the potential energy of the Sun and Earth into kinetic energy that supports our bodily functions and modern lifestyle. Making money is not the goal, because money is just an energy abstraction. The correct – and admittedly difficult to track – means of measuring your financial success is determining how many barrels of oil your lifestyle costs now and how many it will cost in the future. Then you must ensure the value of your financial savings increases faster than your expected energy consumption.
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The markets don’t stop just because the clock ticked 12:01 AM on 1 January 2022. Returns are compound and path-dependent in nature. Unfortunately, there are only a few trading days that actually matter. A simple example will illustrate this point.
Travel back to 1 January 2020, when the world was a simpler place and the global coronavirus madness had not yet taken hold. Bitcoin fetched $7,216. The last day of that fine year, Bitcoin commanded a price of $28,996. The YoY arithmetic return was 302%. Who made more, Bitcoin investors or Pfizer?
– Arthur Hayes, Co-Founder of BitMEX (@CryptoHayes)