At the beginning of 2023, I bet fellow Cabot analyst Tyler Laundon that Bitcoin would outperform Microsoft (MSFT). The stakes: the loser would buy the winner a bottle of WhistlePig Bourbon, an area favorite that’s produced not far from where Tyler lives.
Well, 2023 is in the bag, and so is the bet.
The final tally: MSFT put up an impressive 56.8% total return for the year, while Bitcoin nearly tripled it with a full-year return of 154.4%.
A 50%+ return is nothing to shake a stick at, and the company seems to be firing on all cylinders. I’ve no doubt his subscribers have been happy with his pick of the stock and its performance for the year.
It was, after all, one of the Magnificent Seven stocks that was (partially) responsible for dragging us out of the bear market and then fueling us towards new highs.
However, a 57% gain in MSFT is peanuts compared to the monster 154% rise in the price of Bitcoin.
So why was I a believer in Bitcoin vs. MSFT?
To be truthful, I’m not a full crypto believer. I don’t truly understand it, and for all I know this speculative asset will go to zero in the future. However …
This time last year the news couldn’t possibly get worse in the crypto space. Seemingly every day another crypto exchange or project was being uncovered as a fraud, with the culmination of the bad news coming when Sam Bankman-Fried, who was once considered the JPMorgan of crypto, turned out to be a fraud himself. (Speaking of JPMorgan and fraud, Jamie Dimon, CEO of JPMorgan, recently had this to say about crypto: “If I was the government I’d close it down… The only true use case for it is criminals, drug traffickers, money laundering, tax avoidance.”)
This all transpired in November and December of 2022 culminating in Bankman-Fried being arrested on December 12th and FTX, the company he ran, going through the bankruptcy process.
So how did Bitcoin react to that news in late November/early December? After a brutal stretch leading into the “crypto winter,” the price of Bitcoin stopped falling, and actually stabilized even as the news was horrific, as seen below:
This price action, or lack of further declines even as the news couldn’t get worse in the crypto space was in my mind very bullish for Bitcoin and is why I theorized that Bitcoin could potentially be bottoming.
This reaction to bad news for crypto is something similar to what I use for Cabot Options Traders as well. For example, if stock XYZ reported a bad earnings report, yet the stock didn’t fall, or even traded higher after posting results, I become very intrigued … essentially maybe all the bad news is priced into the stock.
Finally, where Bitcoin goes from here, I have no clue. That being said, I can promise you that first sip of Whistle Pig, purchased by Tyler Laundon, will taste extra sweet this winter.
