Earlier this year I bet fellow Cabot analyst Tyler Laundon that Bitcoin would have a better year of returns than Microsoft (MSFT). The loser had to buy the winner a bottle of WhistlePig Bourbon, which is produced near where Tyler lives in the upper Northeast. Well with three weeks to go, I think it’s safe to say I won that bet. Here is the tale of the tape:
Year-to-date Bitcoin is higher by 152%.
Year-to-date MSFT stock is up 54%.
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Not a bad year for MSFT stock as the company is seemingly firing on all cylinders, and Tyler’s subscribers to Cabot Early Opportunities have enjoyed his pick of the stock and its performance. Here is a small sample of what Tyler recently wrote about MSFT post-earnings:
Microsoft (MSFT) reported yesterday afternoon and crushed it (again) in the last quarter as Azure growth reaccelerated and margins expanded, largely thanks to AI-based solutions. Revenue in the first quarter of fiscal 2024 grew 12.8% to $56.5 million (beating by 3.7%) while EPS of $2.99 grew 27.2% and beat by $0.34. Shares are up today, as they should be, even in a down market.
However, a 54% gain in MSFT is peanuts compared to the monster 152% 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 holiday season.
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