Bitcoin Letters (2020)
This report was written in early 2020, during a period when Bitcoin’s price action was still largely driven by retail and before Bitcoin began to be evaluated seriously within institutional portfolio frameworks. Rather than attempting to forecast short-term price action, this report focused on understanding Bitcoin from a risk-management perspective, emphasizing diminishing returns, volatility compression, and changes in market structure across different phases of the market.
A core observation throughout the report is that, as Bitcoin has matured, returns have diminished and volatility has declined, requiring a different approach to risk management over time. While absolute returns remained large relative to other investments, the marginal return per unit of risk declined, and volatility began to compress relative to earlier phases. These trends suggest that Bitcoin should not be evaluated through narratives, but rather by how its risk-adjusted returns shift across different liquidity and risk environments.
The framework introduced in this report deliberately omits price targets. Instead, it focuses on identifying risk regimes—periods when risk-adjusted returns appear more favorable versus periods when downside risk dominates expected outcomes. Time-based returns, logarithmic growth trends, and volatility measures are used to contextualize where Bitcoin sits within broader market dynamics, rather than to predict precise market tops or bottoms.
Importantly, the analysis challenges rigid cycle narratives by emphasizing probabilistic outcomes, rather than deterministic thinking. The goal is not to time markets perfectly, but to reduce exposure during periods of elevated risk and increase exposure when long-term expected value improves.
Since 2020, Bitcoin’s market structure has evolved meaningfully, with deeper derivatives markets, greater macro sensitivity, and sustained institutional participation. Notwithstanding these changes, the central ideas explored in this report—risk modulation, diminishing returns, and volatility-aware positioning—remain directly relevant to how Bitcoin is evaluated today.
This report is presented as foundational research and a precursor to my current analysis. It reflects an early articulation of a risk-based approach to Bitcoin that focuses on capital preservation, asymmetry, and regime awareness over narrative-driven conviction.