🌶️ Hot But Cooler… For Now

What’s on the Menu 🍴

This has been one of the wildest months in bitcoin’s history.

With record ETF trading volumes in ANY new asset class…

And the biggest gains ever in a month for bitcoin.

But will the trend continue?

We dive into that and more in today’s newsletter!

  • 📈 A Tale of Two Stocks 📉

  • Hot But Cooler… For Now 🌶️

  • Bitcoin’s Returns Over Time Might Be Signaling A More Mature Asset ₿

  • 📺 Video of the Day: How Bitcoin Is Eating The World
    (And Other 10x Plays) 📺

Today’s newsletter is a 5 minute read.

📈 A Tale of Two Stocks 📉

Two different companies, both focused on AI, reported earnings this week…

Company A is up nearly 40% and Company B is down almost 10% in the past five sessions:

One of these companies is extremely profitable, while the other has never turned an annual profit in its history.

One of them has an LLM product that is used by 100+ million people, and the other gets 40% of its revenue from just two customers.

One trades for 14X this year’s revenues and the other trades at just 1.8X expected 2024 revenue.

Do you think you can guess which stock mooned and which one fell?

The two companies are Baidu (ticker: BIDU) and C3 AI (ticker: AI).

C3 is the stock that gapped up this week, while Baidu is the one that floundered.

Here are some of the comparison points:

Baidu has often been called the “Google” of China given its dominant search engine market share of ~70% and its deep expertise in artificial intelligence.

While it doesn’t get as much press as OpenAI’s chatGPT, Baidu’s competing chatbot named Ernie has over 100 million users (#1 in China).

Baidu’s autonomous ridesharing service, Apollo, has also completed more than 5 million rides across various cities in China without any human driver.

Yet none of this seems to matter to Mr. Market because Baidu is a Chinese company…

And we know that investor sentiment towards Chinese stocks right now is terrible.

Baidu trades at a paltry 11X cash flow, or just 3.3X excluding its net cash on the balance sheet.

In comparison, C3 is relatively unknown, not growing very fast, and unprofitable.

But it has a cool ticker symbol and the CEO talks a big game…

So of course the stock is up 30% this year and more than 60% in the past year! 😂

We see contradictions like this one in the stock market all the time.

Some of these contradictions turn into amazing investing opportunities for investors with patience or the right timing.

Even so, we have to be careful not to get too obsessed about what should happen in markets.

Markets can stay irrational for a long time, so our risk management should reflect that.

Will investors eventually embrace Baidu and/or shun C3?

Time will tell…

Hot But Cooler… For Now 🌶️

The headlines across financial media have been dominated by the record-breaking trading volumes and inflows from Bitcoin ETFs.

And we’ve been talking about it non-stop since January.

Why?

Because this is the fastest adoption curve from Wall Street we’ve seen of any new asset… ever.

On Wednesday, we saw over $5B in trading volumes, followed by a pullback in price yesterday on slightly lower volume.

Trading slowdowns and pullbacks in price are to be expected.

But did you know bitcoin broke to a new all time high on over 30 fiat currencies?

And it’s testing all-time highs in Canadian Dollar, Euro, and British Pound.

The other day I tweeted about the BTC/JPY chart, and how I think it’s a bellwether for what’s to come with the last holdout - The United States Dollar.

What do you think?

Will bitcoin break to a new all-time high on the biggest fiat currencies in the world?

Watch this week’s We Talk Money episode to hear our predictions for the halving.

Bitcoin’s Returns Over Time Might Be Signaling A More Mature Asset ₿

Bitcoin might be growing up!

It has been known as a high stakes, high return, high risk asset. Sort of the wild wild west if you will.

It’s still the riskiest asset to own by the measure of standard deviation.

This chart below showing the percentage moves from highs says it all:

Historically, the downside moves in Bitcoin have been as large as 80% from the highs. Said another way, it’s having 80% of your investment going bye-bye (unrealized)!

To put this into context, you can see the S&P 500’s moves from its highs, represented above by the orange line, are much smaller (aka: less volatility and “risk”).

Although high volatility still exists with Bitcoin, an interesting trend has formed in Bitcoin’s compound annual growth rate (CAGR).

The CAGR metric is used to measure annualized returns over a specific time period.

This chart measures CAGR over 4 years.

The over 100% CAGR that we’ve been touting for years? It’s shrinking.

The 9 year CAGR has matured to more around 85% (still very impressive compared to the S&P 500’s roughly 11%.)

We’ve been talking about how the crazy volatility and high returns of Bitcoin could possibly become more tame over time. This has been expected to happen as the asset matures into one invested by the masses (and institutions).

Granted, Bitcoin returns are still plenty to get excited about, and even a small allocation to an asset like Bitcoin can help improve risk-adjusted returns.

It’s also possible for the CAGR to easily rise again if Bitcoin sees a run higher past new all-time-highs.

Many are expecting a move into the $100,000 zone. If this happens quickly, returns could easily shift.

Since Bitcoin is such a new asset, there’s still a lot to uncover about returns and how it will perform in a portfolio long-term, but, so far, it’s been resilient and seems to be maturing well.

📺 Video of the Day:
How Bitcoin Is Eating The World
(And Other 10x Plays)

For the first time in two years, the average investor is waking up to the fact that bitcoin is sucking up capital from all around the world… And we’ve been beating the drum since the lows last year.

So today we’re exploding what’s happening and what we think will happen next.

You’ll also learn:

  • Why Nikki is up 10X on several stock plays

  • How bitcoin ETF is surprising Wall Street

  • How to manage risk in this market

  • And we answer a bunch of questions!

Food For Thought 🧠

"The reasonable man adapts himself to the world:
the unreasonable one persists in trying to adapt the world to himself.
Therefore all progress depends on the unreasonable man.”
- George Bernard Shaw

How did you like today's newsletter?

Let us know how we can deliver value.

Login or Subscribe to participate in polls.

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.