With inflation soaring to levels not seen for years, investors need to reconfigure their dashboards so their metrics efficiently capture what is happening in reality. Because earning 5% a year with 0% inflation is not the same as earning 5% with 10% inflation. Investor would be losing 5% a year.
In this sense, it is difficult to see in the market graphs that discount the inflation of the results, partly because the inflation goes by countries/sectors/products and the profitability goes by portfolios or indexes. That means that the direct rest cannot be done because we are mixing two metrics that do not have the same basis of calculation. In any case, it is a healthy exercise that, despite being imperfect, must be done from time to time:
When we apply it to the S&P500 index we find a big surprise: it is the worst result since 1872!! Neither World War I, nor World War II, nor the oil crisis,… we never had such a bad annual result.
This is the situation we have to deal with. But let’s look at our particular situation. One of the charts you can find on the Belobaba crypto fund website is the following, in which we compare our results with S&P500 and BTC.
Beyond demonstrating professionalism in management in really turbulent times, what this graph shows is that not everyone is equally affected by a global crisis. As always, there are winners and losers.
Those of us who believe that the profound and fundamental transformation that blockchain technology (and Bitcoin in particular) entails as a reserve of value that will replace a large part of traditional currencies (and a big part of the current financial system) should be congruent. Let’s stop putting our results in dollars. Hides hyperinflation like the one we saw in the chart above and we should do, even occasionally, the exercise of seeing our results in Bitcoin.
When we do it, our results looks like this:
How is that possible? The answer is very simple, if instead of taking the dollar as a reference for our investments we take Bitcoin, in the last month of June, BTC has fallen by 38% while our result has been 0.5% positive (in an extremely difficult context, it is an incredible result). For example, if in early June a Belobaba investor had the equivalent of a Bitcoin, today it has the equivalent of 1.61 Bitcoins.
Economic wealth is always relative.
For long-term investors who truly understand the new Bitcoin paradigm, who are willing to wait patiently for BTC to become a reference in the monetary system, they will understand the logic of what I am proposing.
For me, the money that goes to crypto, doesn’t go back to Fiat, it will be spent on crypto. That’s why despite the big drop in the crypto market this past month, for some players, are relatively good news. They have now more Bitcoins than ever.
Yours in crypto.