Shrinking Denominators

How is Texas Pacific Land trust(TPL) similar to Bitcoin?

Thanks to a reader for a heads up on this one!

Written in March 2018.  Simpler times.

Right up my alley though as I own both.  It’s all about those long tails.

At Ikkurty Capital, we focus on Blockchain assets and we don’t spend any time on stocks. There is an interesting lesson to be learned from understanding why the Texas Pacific Land Trust stock has performed so well. This company achieved this by continuously buying back shares, reducing its outstanding shares from 500 million to 7.85 million. Since outstanding shares are reducing, every time they buy back a share, the next share purchase is a greater proportion of the remaining shares. They built a compounding machine. The supply of shares is shrinking; therefore, the price has to just keep going up. This is similar to Bitcoin in many ways. Bitcoin’s total supply is 21 million which is supposed to be released by 2140. Bitcoin’s current circulating supply is close to 17 million. But we do know for a fact that every year a large number of people are losing their passwords and losing access to their wallets. Based on a study, nearly 3.78 million bitcoins are lost forever. This is exactly like the shares being retired in case of TPL. Every year a vast number of people are going to lose the coins, due to many human errors. All those lost bitcoins are a gift to all the people who are still holding their bitcoins, causing the value of remaining coins to go up. In the case of bitcoin, when you lose the private key you lost your money permanently. It is exactly like retiring stock by buying back shares in the open market. The stock market is a mechanism to transfer wealth from impatient holders of capital to patient holders of capital. All those patient investors of bitcoin will be well-rewarded from the money lost from the impatient holders, who do not understand the mathematics behind bitcoin.

One thought on “Shrinking Denominators

  1. good read. I’m looking to take up a small starter position with bitcoin as well. Probably 1% to start maybe up to 5% I could easily loose 5% and not care but I would have something that works towards diversification with real assets for inflation.

    from Reuters:

    Exclusive: Saudi Arabia threatens to ditch dollar oil trades to stop ‘NOPEC’ – sources
    LONDON/DUBAI (Reuters) – Saudi Arabia is threatening to sell its oil in currencies other than the dollar if Washington passes a bill exposing OPEC members to U.S. antitrust lawsuits, three sources familiar with Saudi energy policy said.

    They said the option had been discussed internally by senior Saudi energy officials in recent months. Two of the sources said the plan had been discussed with OPEC members and one source briefed on Saudi oil policy said Riyadh had also communicated the threat to senior U.S. energy officials.

    The chances of the U.S. bill known as NOPEC coming into force are slim and Saudi Arabia would be unlikely to follow through, but the fact Riyadh is considering such a drastic step is a sign of the kingdom’s annoyance about potential U.S. legal challenges to OPEC.

    In the unlikely event Riyadh were to ditch the dollar, it would undermine the its status as the world’s main reserve currency, reduce Washington’s clout in global trade and weaken its ability to enforce sanctions on nation states.

    “The Saudis know they have the dollar as the nuclear option,” one of the sources familiar with the matter said.

    “The Saudis say: let the Americans pass NOPEC and it would be the U.S. economy that would fall apart,” another source said.

    Saudi Arabia’s energy ministry did not respond to a request for comment.

    anyways…we live in interesting times

    Liked by 1 person

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