“Too big to fail, too important to ban.” How a former skeptic became a Bitcoin advocate
This week, in place of our usual weekly crypto roundup, we bring you a special post. On Thursday May 11, we published an extremely interesting webinar “Finding Value in Bitcoin.” eToro’s Simon Peters chats with Pedro de Noronha, the founder of Noster Capital Hedge fund.
How it all began
Pedro de Noronha began his career in Mergers and Acquisition at Merrill Lynch in London, moving to JPMorgan after a couple of years, where he learned how to invest in the markets and started to develop his philosophy.
In 2007, he established Noster Capital, his own hedge fund, having recognized a gap in the market for hedge funds that focused on value investments, and were equipped with macro overlays which could safeguard against market downturns.
Why Bitcoin?
When asked about why he only invests in Bitcoin, rather than other cryptoassets, such as Ethereum or XRP, de Noronha explained that his story with Bitcoin differs significantly from that of most other Bitcoin enthusiasts.
He first heard about Bitcoin sometime between 2013-2014, and initially dismissed it as merely a tool for money laundering and buying drugs. In 2017, when Bitcoin was being talked about everywhere and people were making a lot of money with it, de Noronha still considered Bitcoin a bubble, and shorted it at its peak of $20,000.
Falling down the Bitcoin rabbit hole
He started to change his mind upon meeting people who had moved to Europe to take advantage of tax-free Bitcoin in certain jurisdictions, and when he read “The Bitcoin Standard.” It was at this point that de Noronha fell deeply down the Bitcoin rabbit hole. De Noronha appreciated the value of gold as a protection against currency debasement, and realized that money printing was not a temporary solution, but a permanent one. This led him to understand why value investing had been suffering since 2008: a heady combination of low interest rates, continued money printing, and the rise of passive investing.
According to de Noronha’s perspective, the consistent growth of the S&P 500 index since 2009 cannot be solely attributed to the performance of companies – rather, a significant factor contributing to this trend is the monetary expansion (“money printing”) facilitated by the government.
A deep value investment opportunity
de Noronha perceives that Bitcoin is a deep value opportunity, partly because of its finite 21 million coin supply, and partly since it is the only digital asset that is both truly decentralized, and non-confiscatable. He believes that Bitcoin is a better store of value than gold because it is more portable, divisible, and verifiable.
He also thinks that Bitcoin is a hedge against inflation and the debasement of fiat currencies, especially in emerging markets.
He argues that Bitcoin has already become too big to fail and too important to ban, as more institutional investors and corporations, such as Tesla and MicroStrategy, are buying it as a reserve asset. He predicts that Bitcoin’s market cap will eventually surpass that of gold’s $11 trillion, and that Bitcoin will become a global reserve currency. However, he acknowledges that Bitcoin is still volatile and risky, and suggests that investors only allocate a small percentage of their portfolio to it.
Conclusions
Pedro de Noronha’s perspective on Bitcoin as a deep value investment opportunity, offers a unique and interesting insight into the world of cryptoassets, particularly in contrast with the views of such traditional value investors as Warren Buffet, among others. His background as a value investor and his journey of discovering Bitcoin make his arguments compelling and persuasive. While it’s true that Bitcoin’s future is uncertain and even risky, de Noronha’s bullish outlook on its potential as a store of value and a hedge against inflation is worthy consideration for any investor looking to diversify their portfolio.