The window for acquiring generational wealth is closing.

It is a strange experience to be breathlessly excited about something and feel a strong urge to tell people about it, but also wary that I will almost certainly sound like a lunatic, and worse, may have become one.

Recently, this feeling has washed over me again as yet another unique and profound feature of bitcoin has dawned on me. This one has some urgency, so I’ll get straight to it.

Bitcoin is a new type of asset, which means Big Money doesn’t have the means to buy it, so we haven’t seen the price affected.

Imagine if the idea of buying real estate as an investment (ie as an asset) suddenly emerged in 2008 (the year Satoshi published the bitcoin white paper.) You and I could go out and buy a house, but it would take a long time for investment firms to create the mechanisms for their clients to, say, purchase shares. Questions like “Who owns the property?” “Who verifies it?” “How is it insured?” “How do we know that a share is backed up by an actual building?” would all have to be answered with amazing confidence, including that of the federal government.

Imagine how long it would take for a regular person to be offered to purchase a share of real estate that could be bought and sold on the market? The time required is an indication of the mechanisms, the structures, the processes that must be built in order for an asset to have access to the capital that is managed by financial institutions. Once these are in place, truly massive amounts of money can flow in, but only AFTER they are in place.

Bitcoin was brand spanking new in 2008, and wasn’t even traded for dollars until 2010. Thirteen years later, it is still so new that there is, as of now, no way for someone to exchange Apple stock for bitcoin in the same way they can swap Apple stock for Google.

All of that is about to change, and it appears that change will happen soon and suddenly, with the approval of a bitcoin Exchange Traded Fund, or ETF.

Imagine a wall separating bitcoin from trillions of dollars of capital, and that the creation of an ETF IS the mechanism that removes that wall. How much of those trillions of dollars of capital will flow into bitcoin?

Why would capital flow into bitcoin via an ETF?

Because the institutions that create the ETF want to make money. They do this via fees, both for selling/redeeming shares, and also performance fees if the value of the underlying bitcoin goes up. If Blackrock has a bitcoin ETF, it will want its clients to buy shares, and its thousands of financial advisors and its massive marketing budget will push it.

Think about it. Blackrock will START advertising bitcoin. So will Fidelity. Fidelity and Blackrock will engage in an advertising war to get their clients to buy bitcoin. As a bitcoin holder, I am going to take great satisfaction watching Blackrock and Fidelity go to work for me, without me lifting a finger or paying a fee.

This means that we are in an interesting place in the history of finance - we are able to buy an asset that has not yet been financialized, has not yet been packaged by institutions to be exchanged on the open market, and most importantly, has not yet seen the massive inflows of capital that comes with that financialization.

This is the calm before the storm, and it feels odd - if this is such good news, why isn’t the price of bitcoin skyrocketing in anticipation? The answer is because the big institutional money can’t front run (ie make buys ahead of time) this news, because the structures to buy bitcoin aren’t in place. The ability for big money to buy bitcoin IS the news.

Another reason is because this is new - there is no precedent to work from.

How do you see this playing out?

1- On January 8, 9 or 10, ~ten firms are awarded approval for a bitcoin ETF. This isn’t guaranteed, but the SEC (the decider) has been meeting with several firms, including Blackrock, repeatedly throughout the year, each time amending their paperwork in accordance with SEC requirements, a process that hasn’t happened with prior application rounds. The SEC lost a lawsuit which declared that the SEC’s prior refusal was frivolous and arbitrary, and it declined to appeal this ruling. These dudes at Bloomberg think a 90% chance of approval on Jan 10.

2- On January 10, the bitcoin price spikes 10%. However, this may be transient, as a lot of speculators may be planning to simply cash in on this news event and sell as soon as they’ve locked in a certain percentage point gain. Bitcoin might end the next week or two down, and boy, imagine the schadenfreude field day that would ensue.

3- The ETFs start trading, could be as early as the end of January. By now we see the price rising as a result of ETF funds buying up available bitcoin in order fill their shares.

At this point, it’s anybody’s guess.

A few points to keep in mind:

A- The price of bitcoin could spike suddenly and dramatically. Put another way, small amounts of incoming capital can cause a massive jump in the value of bitcoin. This is because the supply of available bitcoin is actually quite a bit smaller than it seems, as most holders are ideological and expect bitcoin to surpass $1 million, $5 million and more. Imagine thinking you are pouring water into a swimming pool, but in fact it’s going into a puddle. The level of that puddle will rise much faster than that of the pool, potentially shockingly fast. Check out this 8 minute explainer.

B- There are no circuit breakers for the bitcoin price, unlike stocks. When the GameStop price spiked, trading was paused several times. And of course, trading halts at night and on weekends. Since bitcoin is an open network that no one controls, there is nothing to constrain wild price spikes.

C- This may be the last time bitcoin is available at five figures. That means the door to owning a whole bitcoin will close for most people. What is the significance of one bitcoin? There are 60 million millionaires in the world, and only 21 million bitcoin. That means that owning one bitcoin will place you among the minority of millionaires who have one bitcoin.

D- Many people have a story about owning or potentially owning some bitcoin back in 2012 and regret missing the opportunity. But given how well bitcoin has withstood the test of time (and many other challenges, such as the blocksize war), how much mining infrastructure has developed, how much the user interface has improved for wallets and exchanges, the promise of the Lightning network for fast, ~free settlement, and now - the entry of giants like Blackrock and Fidelity - the risk to reward of bitcoin is better than back in 2012.

E- Happy New Year! 2024 might be bitcoin’s most exciting year yet.