Written by Eric Peters, Chief Investment Officer at One River Asset Management
Builders are the ones who earn the most money. The act of creating something new from scratch, going from zero to one, is incredibly challenging. This is why society rewards those who excel at it. There are various types of builders, but the highest earners are those who create things that were previously unimaginable or deemed impossible. They envision products or services that they believe will be in high demand once introduced to the market. Henry Ford envisioned the Model T, Steve Jobs conceived the iPhone, and Musk aims for Mars.
Investors typically earn less than builders because investing is seen as a less demanding task that provides less value to society. While there are different types of investors, the most highly compensated are usually those who build successful investment firms like Griffin, Schwartzman, and Dalio. Warren Buffet is an exception with his extreme wealth, having built Berkshire Hathaway since 1965 and compounding his success over many years. Investors often make money by investing in outcomes that were previously thought unattainable or by purchasing assets they believe will soon be in high demand.
Following the February 2022 Ukraine invasion, the West seized $300 billion worth of Russian assets. It was not difficult to foresee a scenario where countries would seek alternative options for storing their national wealth. Gold appeared to be a safe option, but the price declined by 20% after Powell initiated a historic rate hike cycle in March 2022. While investing may be simpler than building, it still presents challenges. However, those who persisted in buying gold eventually saw a 25% increase in its value post-invasion.
Alternatively, investors could have opted to purchase Bitcoin instead of gold. Despite initially dropping to $16,000, Bitcoin’s price has since soared to $100,000. The increasing prices in a reflexive bull market tend to attract more buyers. Bitcoin has emerged as a viable alternative to gold and has bolstered its position as the most secure network ever built by humans. Ethereum has also seen significant improvements, growing faster, cheaper, and more secure, thanks to the continuous efforts of crypto builders.
The recent US election indicated a shift in policy towards the crypto industry, moving away from previous hostility. It was foreseeable that more individuals and institutions would start recognizing cryptocurrencies as a legitimate asset class, leading to a repricing in the markets. The future now holds the potential for these technologies to scale further, with the adoption curve steepening.
It is now imperative for major global financial institutions to acknowledge that blockchain technology will likely reshape their trading, settlement, custody, and risk infrastructure in the coming decade. Every financial entity must envision a future where their operations will be rebuilt on a new platform, either by themselves, through a partnership, or risk losing out to competitors. The demand for crypto builders and infrastructure providers/partners is expected to be significant in this evolving landscape.
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