How Bitcoin Could Be the Newest Investment for Billion-dollar Funds

Yesterday, I got an email I didn’t think I ever would. But I’m very grateful that I did.

You may have noticed I sign off almost everything I write as ‘Your friend’. Rather than an original idea, I saw another editor using it and liked it immediately.

I felt it created a personal touch, rather than the typical ‘Regards’ or ‘Best’.

This small change, I thought, was a step towards creating a community, a stronger relationship with readers. The editor was not some authoritative figure lording their knowledge over everyone else. He was a confidant to readers, sharing his thoughts and ideas for discussion.

However, an email I got from a reader yesterday is making me rethink the whole thing.

More on that later.

First let’s take a look at how bitcoin could be the newest investment for billion-dollar funds.

Another way to use bitcoin

When I think of big money two things come to mind, super funds and endowments. Because of their size, these multi-billion-dollar funds move markets whenever they do anything.

Among university endowments, Harvard is top dog. It’s the largest university endowment fund in the country, with US$37 bln in assets. And while some of that has come from investment returns, another chuck is from alumni gifts.

In 2017, Harvard received US$500 mln in gifts. They also received pledges (promises of a gift) of close to US$2 bln.

Most universities don’t have this luxury. The University of Puget Sound for example received US$58 mln in gifts, which is a ninth of what Harvard gets.

Some of the smart kids at Puget aren’t making donations in USD. They’re sending the small university donations that could rapidly appreciate over time.

I’m of course talking about bitcoin.

A recent graduate from Puget Sound hit the jackpot. He made an early investment that skyrocketed his wealth. Like anyone with too much money, he decided to give some of it away.

So in an effort to show his gratitude he sent Puget some bitcoins. From Bloomberg Businessweek:

Colleges have long wrestled with accepting atypical donations, such as art or shares in a family business, that can muddle their investment portfolios. The gift may raise accounting questions, complicate tax filings, or require special storage or security.

Bitcoin – unregulated, notoriously volatile, and sometimes stolen by hackers – raised every one of those concerns. But in 2014, the private liberal arts college in Tacoma, Wash., (Puget) happened to have a number of alumni pioneering cryptocurrencies and generating small fortunes.

So the school, with a $370 mln endowment, needed to do some research before reaching a decision on the offer. As far as anyone could tell, it became the first to accept cryptocurrency donations, thanks to a crash course it got from the donor, Nicolas Cary.

To accept the donation, Puget needed to change policies. Then it had to sign up to services like BitPay.

In total, Cary transferred 14.5 bitcoins to Puget in 2014. It would work out to be about US$10,000. Not the biggest gift Puget had received, but definitely the one that could pay off, given time.

Had Puget held Cary’s donation (they didn’t), then that US$10,000 would now be worth almost US$100,000. Right after Cary’s donation, Puget received several other crypto donations. Bloomberg Businessweek continues:

In contrast, the US$39 bln endowment of Harvard – which ranks among the most sophisticated investors in the world – has yet to accepted a cryptocurrency donation. That’s the norm at many of the other richest and tech-savviest schools, though some are edging towards it.

‘…A few others are dabbling with accepting crypto gifts: the University of California at Berkeley got its first this year. And MIT and Cornell have taken crypto, too, though neither would specify details including how much it’s received.

I’m not your friend!

Back to the reader’s email. Here’s a snippet of what of what he wrote me:

Secondly – and this is entirely personal and may not reflect the views of everyone, but I feel strongly about it, so I thought I’d let you know in case I’m not alone. I really hate the way you sign off the emails – Your friend. You’re not my friend! I’ve never met you. You’re a paid advisor through PPP. I feel it’s extremely presumptuous and to be honest, insincere and bollocks. It smacks of bullshit self-marketing. Kind of like something I’d expect if I bought it off Facebook. I think it cheapens what you do.

The more I think about it, the more I think maybe he’s right.

I haven’t met any of you. I actually don’t know anything about the readers of Money Morning. All I know is that you like reading opinions about opportunities within the stock market. And maybe that’s all you’re here for.

You’re not here to make friends. You’re here to read ideas that will make you more knowledgeable, and opportunities that could make you a whole lot richer.

The reader was kind enough to give me some signoff suggestions he’d be happy with:

Regards, yours sincerely or even cheers if you want to be informal is fine. Good luck, good gambling, may the force be with you if you want to be more humorous or flippant!!

I guess it’s anything but friend. And I kind of get it. It is presumptuous to assume we are friends, maybe even a bit weird. Or maybe it’s just the wrong phrase to use.

If you have any thoughts, comments, or opinions on this I want to hear them! You can write in to, make sure to include ‘Harje’s signoff’ in the subject line. That way customer service will know to forward all your emails straight to me.

Maybe you too have always hated my signoff. Maybe you’d just like me to stick to the typical ‘Regards’ or ‘Cheers’.

I’d even like to hear your favourite or what you think is the best Money Morning signoff. I’m interested to see what you come up with.

Now, back to bitcoin…

How 1% turns into hundreds of millions

Imagine a world in which these multi-billion-dollar endowments held a tiny portion of assets in crypto. Some estimate bitcoin could rise as high as US$150,000, which would turn Cary’s gift to Puget into a US$2.2 mln donation (or would have, if Puget hadn’t sold).

Even great investors like Bill Miller think it’s not such a bad idea. In a Wealth Track interview Miller said, bitcoin ‘is the first real technological innovation in money and in finance in thousands of years’.

He continued:

I think that bitcoin is in many ways less risky today, at wherever it is US$15,000, than it was at US$500…Japan made the big leap in this in last March, when the government declared bitcoin as legal tender. And then they announced they were going to licence exchanges and regulate them.

It took the market about a month to figure out that that was a huge deal. And if Japan was going to do it, probably other countries would do it…that’s part of my thesis on it. You have this path to respectability underway.

Miller goes on to say that even family offices (family controlled investment groups) should hold a small percentage of their assets in bitcoin. Say 1%.

The potential of bitcoin might be so large that even a small amount could turn into millions down the line.

The same goes for college endowment funds. Had Puget put 1% of their 2014 assets into bitcoin they would have bought 8,766 tokens.

That investment during the height of last year’s crypto mania would have been worth US$17 mln. It’s almost three times as much as Puget received in gifts for 2017.

Of course, this is all easy to say with hindsight. I have no idea if bitcoin will ever rise so quickly in such a short space of time again.

And according to Miller, misunderstanding still clouds the crypto industry. That’s why crypto expert Sam Volkering has written a crypto ‘bible’, which reveals the five things you must know to profit from crypto’s. Download it here for free.

Your investing confidant,

Harje Ronngard,
Editor, Money Morning

PS: How you could potentially pocket a small fortune just by laying down the tiny sum of $100 on this little-known cryptocurrency. Free report (download now).

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

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