Social Capital CEO: Bitcoin is uncorrelated to financial markets so people should invest 1% of their wealth in it
Chamath Palihapitiya, Virgin Galactic Chairman, and Social Capital CEO, recently doubled his advice that people should allocate at least 1% of their portfolio to Bitcoin for protection. He believes that if assets soar in value, it will be caused by damaging world events and the lack of appropriate countermeasures by governments.
Chamath Palihapitiya, Virgin Galactic Chairman, and Social Capital CEO
The lack of an underlying correlation of Bitcoin is positive
In a recent podcast, the former Facebook executive noted that the US Fed and Treasury had made some sort of decision to change short-term windows consecutively since the COVID-19 pandemic. By doing so, they have massively increased the country’s credit and debt.
The extent of these actions are so severe that the US government is now “responsible for more than 50% of the GDP,” which has changed the nation’s fundamentals:
“This essentially makes us a quasi-communist country, a socialist country at a minimum, except without any of the benefits. You still have sky-high health care and exorbitantly high useless education. So, it’s like the worst form of socialism – dummy socialism.”
Therefore, these latest events could lead to devastating consequences for regular people, he warned. If they have worked hard with their minds, they will have the opportunity to ensure that they will not be wiped out if the government continues to make a series of bad decisions.
To fight these potential consequences, Palihapitiya outlined Bitcoin and its fundamentally uncorrelated nature to that “decision-making process and decision-making body.”
“At the end of the day, any other asset class – equities, debt, real estate, commodities – they are all tightly-tightly coupled to a legislative framework and an interconnectedness in the financial markets that bring together many of the governments that behave in this way.”
As such, buying Bitcoin is the necessary insurance to protect you against adverse government decisions, he explained. It is worth noting that well-known hedge fund manager Paul Tudor Jones III also recently said that he bought BTC as insurance against growing inflation.
What happened to BTC’s success?
The venture capitalist reaffirmed his previous stance that people should invest at least 1% of their portfolio in the primary cryptocurrency. This time, however, he elaborated more on why and how this insurance can be protective:
“Hope for that 1% goes to zero. Then you have the 99% left. But in the case that 99% goes to zero, that 1% would probably be worth 120%, and you will feel like a genius.”
However, Palihapitiya does not consider the COVID-19 pandemic a critical event that will turn people into Bitcoin. He added that those who wait for such a semifinal event, actually create a lot of speculation and increase unnecessary expectations, which is not conducive to wealth.
Instead, he noted that:
“A parade of terrible – a bunch of small things that eventually will add together to bring down the entire way we think the financial infrastructure of the world works. Historians will try to pinpoint an event, but I think it won’t be worth the time.”
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