By Dr. Jim Dahle, WCI FounderI've written several posts about Bitcoin and other cryptoassets over the years. The whole subject is fascinating, even though I don't invest in these assets. It has been fun to watch the wild ride from the sidelines over the last decade and a half. Along with its severe problems as an “investment,” investing in Bitcoin has some really attractive aspects. In this post, we'll talk about the attractive and the unattractive aspects.
6 Reasons to Invest in Bitcoin
People think I'm anti-Bitcoin for some reason, or they tell me, “You just don't understand it.” I view myself more as neutral on it. I'm not blind to its benefits.
#1 Crazy Good Returns
Anytime you write a piece about Bitcoin returns, you had better put a date on it. Its massive volatility means returns change frequently. This is being written on April 11th, 2024. The price of Bitcoin today is $69,813.40, and the “timeline” is in between the introduction of Bitcoin spot ETFs and the latest “halving.” Anyone who bought Bitcoin before November 2020 or between June 2022-October 2023 has experienced spectacular returns with their Bitcoin “investment.” I put quotations around it, simply because I don't view Bitcoin as an investment. It's more of a speculative instrument. But the government certainly treats it as an asset class, so perhaps we should, too. Look at the returns:
That chart starts in 2015. Bitcoin's returns were just as good before then. Here's a slightly out-of-date chart from Investopedia that includes that time period. They had to make it logarithmic for it to make any sense. THAT'S a good sign for your returns.
It's pretty easy to understand why there is so much interest in Bitcoin when it has produced returns like that. FOMO is very real, and if you don't feel any FOMO at all looking at charts like that, you might be the most Spock-like investor on the planet.
#2 Maximally Tax-Efficient
One cool thing that speculative investments have in common is their tax efficiency. Bitcoin is almost perfectly tax-efficient. There are a few benefits of real estate investing that it does not enjoy. You can't depreciate it and use those depreciation losses to offset other income and then recapture that depreciation at a lower rate. You also don't get any tax-exempt capital gains like you do when you sell your personal residence. But there are no other investment tax breaks that Bitcoin does not enjoy. If you never sell your Bitcoin, you will never pay taxes on it. Thanks to the step up in basis at death, neither will your heirs if they sell it soon after inheriting it. If you do sell it and have owned it for at least one year, you will only pay taxes on it at long-term capital gains rates.
The least tax-efficient asset class in my portfolio is real estate debt. It's almost perfectly tax-inefficient. It qualifies for the 199A deduction, and that's it. Every other bit of its return is fully taxable at ordinary income tax rates every year. Even if Bitcoin and real estate debt had the exact same returns (let's say 10% a year for illustration purposes), you'd end up with a whole lot more money with Bitcoin due to that tax efficiency. My marginal tax rate is 45.8%. Ignoring the relatively small 199A deduction that is scheduled to go away in less than two years, that means a real estate debt fund held in a taxable account is only growing at 10%*(1-45.55%) = 5.45%. Over 50 years, a $100,000 investment earning 5.45% will grow to $1.42 million. At 10%, it would have grown to $11.7 million, more than eight times as much money.
I love that about Bitcoin. While its capital gains tax treatment makes it even sillier to use as a currency (supposedly the original intent), it sure is nice for those trying to use it to get rich. Not even gold gets the same treatment. Gains in gold and other precious metals are paid at a higher “collectibles” tax rate (28% instead of 20%).
More information here:
#3 Best Tax-Loss Harvesting
The tax aspects get even better. I cannot explain this one, but for some reason, Congress was convinced to give Bitcoin and other cryptoassets their own special tax-loss harvesting treatment. Normally when you tax-loss harvest, you have to wait 30 days to buy back the same investment or you get a “wash sale” and your loss is disallowed. Not with Bitcoin. You can sell it and buy it back 30 seconds later and still claim the loss. Those losses can be used to offset capital gains in an unlimited amount and even up to $3,000 a year of ordinary income. That's awfully powerful, especially when combined with charitable donations or the step up in basis at death that keeps you from ever paying capital gains.
#4 Low Correlation with the Rest of Your Portfolio
Bitcoin does Bitcoin. Who knows why? Who knows when? It goes up. It goes down. It's all over the place. But what it doesn't do is move in lockstep with anything else. As a general rule, it's a risky asset, and when investors are fleeing all risky assets like stocks and real estate, you may also tend to see Bitcoin go down in value. But as correlation goes, it's pretty low between Bitcoin and most typical portfolio assets. Some people call it “digital gold,” but that's a lousy description. People flee TO gold when the excrement hits the ventilatory system, but they flee FROM Bitcoin.
#5 Rabidly Religious Fan Base
If you've ever discussed Bitcoin on the internet, you know about the “Bitcoin Bros.” These folks live, breathe, eat, sleep, and die Bitcoin. It has almost a religious fervor to it. They are true believers. Now, this sort of thing is mostly irrelevant to your life. There are plenty of people in this country and in this world who believe all kinds of crazy things or conspiracy theories. However, there is a benefit to this fervor when it comes to investing in Bitcoin. It puts a fairly reliable floor under its price; it's what the technical analysts would call a level of support.
These “diamond-handed” people have come to believe that Bitcoin will grow to the moon. They are absolutely convinced, and nothing you can say to them and nothing that happens will ever change their opinion. If they see its value fall dramatically, they don't become scared of it and sell it off. They buy more. They take every penny they earn or that they may have in some other asset and put it into Bitcoin. They've seen it fall precipitously numerous times in the past, and each time it recovered and grew like mad afterward. This group of people puts a fairly reliable “floor” under the price of Bitcoin. Can it go to zero? Sure. But there will be a whole lot of people who ride it all the way down there, and that should be somewhat comforting to you. No. 1, it makes it a lot harder to go to zero. No. 2, you won't be alone when you get there! You'll have all your Bitcoin Bro buddies there with you. It doesn't seem to hurt as bad to lose money when you're doing it with your friends.
More information here:
A Neurologist’s Road to Becoming a Bitcoin Maximalist: Why Bitcoin Is Not the Next AOL
#6 Portability
Over the years, people have proposed numerous use cases for Bitcoin. You know, ways you can actually use it to do something besides speculate. Most of those haven't panned out. But you know what has? Its portability. If you have to flee the country, I don't know of any other asset that is quite so easy to take with you. No need to sew gold into the lining of your jacket. No need to rent a truck to haul off your art. Your business and home aren't coming with you, and assets in a retirement or brokerage account are relatively easy to find and seize. You can take your Bitcoin, though. While that benefit doesn't exist for the new Bitcoin spot ETFs, those do allow for convenient investing via a brokerage account or even many retirement accounts.
5 Reasons Not to Invest in Bitcoin
Naturally, there are plenty of reasons not to invest in Bitcoin. Despite all those cool benefits above, I don't invest in it. Why is that?
#1 Purely Speculative
Bitcoin is a purely speculative “investment.” It produces no earnings, dividends, rents, or interest. The only way to make money on it is to sell it to somebody else for more than you bought it. That makes it impossible to value in any sort of logical way while also putting you at serious risk for loss.
#2 Massive Volatility
No investment makes you money if you can't handle holding on to it when its value goes down. The more volatile the investment, the harder that becomes. Bitcoin seems to routinely fall by 80%. That's really hard for most investors (including me) to handle without selling low. Not everyone possesses diamond hands and an iron stomach. The day before this piece ran on the blog (less than a month after it was written), Bitcoin had dropped $58,751. That's a nearly 16% drop in only 21 days. Every time it craters, you have to ask yourself, “Is this it? Is this when it goes to zero? Will something else replace it?” Fear of loss is just as powerful as fear of missing out.
#3 Potential to Lose Keys
While it's not that hard to protect the keys to your Bitcoin, losing it seems to be a problem for many. Approximately 7.8 million (40%) of the 19.4 million Bitcoins that have been “extracted” have been lost already. They're just gone. That doesn't really happen with real estate, gold, stocks, etc. There are lots of scammers and fraudsters in this space as well. In 2022, $3.1 billion in cryptocurrency was stolen/hacked.
More information here:
What’s the Future of Cryptocurrency? These Fanatics Say It’s Pretty Darn Bright
A Moderate-Income Physician’s Approach to Alternative Investments
#4 Far Fewer Use Cases Than Expected
For its first five years or so, we were told that Bitcoin was a currency that we were going to use instead of dollars. That hasn't happened, and it likely won't. Maybe we'll routinely use a cryptocurrency someday, but it probably won't be Bitcoin. Aside from portability and undercutting Western Union in Africa, there really aren't any use cases for Bitcoin. Almost everyone buying it is doing so for speculative purposes. That's not a good sign.
#5 Bad Behavior Like FOMO
Investing in a massively volatile, speculative instrument like Bitcoin is bad for your investing behavior. It gives you the same dopamine rushes as gambling. It's the constant fear of loss vs. the constant fear of missing out. When it comes to long-term investing success, the investor matters more than the investment, and I fear that including Bitcoin in their portfolio makes a lot of investors worse at investing.
As mentioned at the top, I don't own any Bitcoin, but that's not because I'm blind to its benefits. I just see the downsides as outweighing them. In our recent annual WCI survey, most of you felt the same way.
If you don't feel the same way, I would caution you to limit your investment to a small percentage of your portfolio, such as 5% if you truly believe in a positive, long-term trajectory for it. In reality, 0%-10% is reasonable; 50% is not. That's just a huge bet. I occasionally see people who put 1% in it, and it makes me laugh. If you believe in it enough to invest at all, don't be a wimp. Put 5% in it. If you don't believe in it enough to put 5% in it, how do you think you're going to weather its massive downturns?
What do you think? Why is or is not Bitcoin in your portfolio? Are you more optimistic with Bitcoin's recent rise?
Great insights on Bitcoin investment! How do you think its volatility affects long-term investment strategies?
The main way is that it keeps most people from investing in it in any sort of effective way because it makes it so hard to stay the course with it. If you had a functioning crystal ball you could really take advantage of all that volatility though.
I sold my BTC and grabbed my gain. I was lucky.
Modern Portfolio Theory might give credence to a 1-2% portfolio holding for diversification.
Fortunately, doctors make enough money that they don’t need to take big risks and shoot for the moon. Simple, basic stocks & bonds will carry you to your dream destination.
my elderly mother recently got scammed for a significant sum in a phishing fraud using bitcoin.
a platform designed for illegality
your elderly mother is able to use bitcoin? That’s amazing
actually she was convinced to feed several thousand dollars into a bitcoin machine at a Circle K convenience store. the clerk helped her do it.
you may find that amusing but i promise at some point in your parents lives they too will be the target of a fraud.
Yeah I know folks that have been scammed in other ways, not involving bitcoin
The blockchain is a public ledger. If a bitcoin transaction occurred you should be able to get the tx id from the machine and contact the authorities, they may or may not be able to track down the criminals in this way, by linking some on chain activity to a real world identity
I still don’t understand the value of bitcoin even after a good faith effort to learn and be open minded about it. No thanks!
Yep, I agree! I read and listened to hours of Ben McKenzie and Jacob Silverman. Despite being skeptics, I felt like they did a fantastic job of actually explaining it (compared to aggressive bitcoin bros–“Just trust me you need this, PLEASE invest i’m begging you!”), and also providing thoughtful warnings about the many pitfalls
permissionless money that is not issued or controlled by any central authority, of a known supply which means the value can’t be diminished by supply inflation
its value is simply existing alongside fiat money, all of which is destined to decrease in value over time because of supply inflation, some at more rapid rates than others.
Having followed your posts for years, I’m waiting for the Bitcoin bros to jump in on the attack of why there are NO REASONS to doubt bitcoin…maybe if you had flipped the title (“5 reasons not to invest (and 6 reasons to invest)”) they’d jump on it faster haha
you’d be surprised, most bitcoiners irl aren’t the aggressive type “bros” you come across on the interwebs.
I doubt you know any bitcoiners irl
Your reviews of Bitcoin are getting better IMO. There are still some things you are missing though. The biggest in my opinion is the use case. You and others frequently say it does not have any significant use cases. However, you always fail to bring up the biggest and most important use case it has. Whenever you eventually figure that out, you will be much better off as will your readers.
As to the “purely speculative” argument, I again defer to this article that discusses the term in detail:
https://medium.com/p/9de06a6b0621
What is the biggest and most important use case?
The short answer is to maintain your purchasing power over time. In other words…savings/hard money/prevent government and fiat based inflation. Read this article all the way to the bottom if you desire to learn:
https://graduallythensuddenly.xyz/bitcoin-is-not-a-hedge/
It’s so big and obvious I can’t tell you. you need to understand it for yourself you lazy bum…
Well said. I guess we are just too dumb and lazy to understand! If only someone like Mr. Napolean would have the energy to respond to our bad takes!
From NapoleanDynamite on the forum: “The comments under this blog post are so depressingly bad. When I see things like this, it always helps me remember how early we are. I don’t have the energy to respond to all of the bad takes right now.”
…Oh well. Will anyone save us from our ignorance? Send help!
Bitcoin use cases (some):
Store of value against inflation
Cross border payments
Monetizing stranded energy
Censorship resistance payment in authoritarian regimes
See above
https://www.whitecoatinvestor.com/reasons-to-invest-in-bitcoin/#comment-703849
You may not be aware you’re not the target audience for this post, but your tribe is mentioned in it!
“Hard money” isn’t a use case. Hard money is money (i.e. a currency) and Bitcoin is too volatile to actually be currency. Not to mention nobody I want to spend money with actually takes it. Mastercard, yes. Visa, yes. Bitcoin, no.
“but muh gas and groceries!”
that seems to be the hill you’ve chosen to die on regarding bitcoin even though you’ve never even tried to use it
I paid my barber last week using bitcoin, he was happy to accept it. He knew basically nothing about it before he started cutting my hair
Bought our half of beef last fall with bitcoin.
I certainly prefer to save my bitcoin and spend my USD, there is little incentive to grow bitcoin payments particularly in the US where we have the luxury of the dollar and realized gains and losses are to be reported, plus my dollars are constantly declining in value and this will of course continue
I see bitcoin not as an investment but as a speculation tool or game where people exchange money with each other,hoping to take out more than they put in. Is a classical pyramid scheme the same?
Also as a means of money laundering/anonymous exchange of money,also tax evasion although I think that it might not be as anonymous (invisible to US Treasury/IRS) now as it might have been in the past.
Remember the original “Cryptolocker” computer ransomware — when that hit the news I think was the first time I heard about bitcoins.
Paradoxically the speculatively running up of the price of bitcoins renders them impractical as a means of exchange I think.
Is there even such a thing as a bitcoin or is it only an abstraction created as a sort of virtual chit for a complex game ? Is a bitcoin a second order fiat currency unit that gets it value from first order fiat currencies ?
How long will “bitcoins” retain their redemption potential in dollars if people stop sending in their money to buy “bitcoins” ?
Disturbing that stocks do have some similarities in the way they are priced/valued to this thing but there is a Big difference : Dividends !
Did Jack Bogle once do a lecture on the distinction between investment and speculation ?
it’s pretty funny when you realize the first bitcoin post on this block was over a decade ago at an exchange rate of less than $1000. Evergreen content as they say
of course we’re all rich so it doesn’t matter, right?
Maybe the last one will have a exchange rate of less than $1,000 too.
it’s been a decade and we’re nearly 100x from that first blog post.
Blackrock and Fidelity now hold billions of dollars worth of bitcoin. There is massive infrastructure around bitcoin that wasn’t there a decade ago. There are multiple publicly traded companies whose sole business is mining bitcoin. There are nation states holding bitcoin.
but yeah maybe we’ll see sub $1000 bitcoin again
You mean massive infrastructure like FTX, Genesis Global Capital, BlockFI, Celsius Network, Voyager Digital, Three Arrows Capital, Gemini Trust, exchanges banned in China, the Binance scandal etc? 🙂
The only reason there is general interest in Bitcoin is because it has gone up in price. Look how little interest there is in NFTs now. Basically nobody cares. The technology itself is no less useful than it used to be, but nobody is buying.
That’s a potential future for Bitcoin.
And as far as nation states owning it, if you ignore the ones who are just auctioning off seized Bitcoin like the US, we’re talking about what….North Korea and El Salvador? So two out of 195? Not exactly a very strong argument. The US and China own $25 billion worth of seized Bitcoin. El Salvador owns $370 million. North Korea basically just steals Bitcoin. But if that makes you feel better to know that “nation states” own it, knock yourself out.
Some of the companies on the list of “top bitcoin miners” are WCI size. Only 5 have a market cap of $1B or more. Again, weird argument, but if it makes you feel better. The use of these sorts of arguments feels like arguing with insurance agents about the value of whole life. You shoot holes in one and they just switch to another.
If the value of a Bitcoin fell dramatically and then stayed in a range of $1,000 to $10,000 for ten years, the amount of interest in it would plummet 99%. The vast majority of people, institutions, businesses, and nation states are only interested because it has gone up in price. When/if that stops, the interest will go away for all but the religiously dedicated.
I know it’s almost as if bitcoin should have failed 5 times already with all that’s happened right?
and yet where is it today? Massive resources committed to it. Power. Physical infrastructure. Dollars. Human time and energy. Compared to a decade ago, it’s crazy.
“Only 5 of the mining pubcos are worth more than $1B. It’s only small or rogue nation states. I’ll ignore blackrock and fidelity” lol
You’re right that price drives interest. And interest drives price. And in the decade since that first post what has happened to price and interest?
Could it still fail? Yes. But my guess, if you want to write another blog post at sub $1000 exchange rate you better get working on your time machine
But that’s exactly the problem. It’s your guess. I mean, 61,500 wake up every morning and go to work at Exxon to add value to the company. They pour their heart and soul into their work all day long. The company makes products people actually use, has earnings and profits etc. Same with all the other S&P 500 companies. And Bitcoin does…….what exactly? It just sits there and mostly just gets swapped from one person to one company to an ETF to another ETF. What it’ll be worth in a year or 10 years is anyone’s guess. What is the typical large cap company going to be worth in 10 years? A little more than it is today and it will have distributed a significant amount of its profits over that time period. So different.
“And Bitcoin does…….what exactly?”
It just exists as uncensorable digital money, alongside the fiat system, and blocks just keep coming every 10 minutes or so
the fact that you ignore the primary use case because it doesn’t work the way you think it’s supposed to or it isn’t something that you need, well, I’d say I think you have a blind spot
Bitcoin was designed to be a sound money, monetary policy forced by code, and free from the abuse of money printing which no government has learned to avoid. As an open decentralized protocol it has numerous open source developers contributing to it from around the globe, maintaining it’s code base, creating proposals for protocol improvements which improve scalability, privacy, etc. over time. Because it’s an open source protocol, companies can also build on top of it.
There are numerous both public and private companies around the world that are utilizing bitcoin in various ways, whether it is as a mining company incentivizing renewable resource generation and flexible demand response, Microstrategy adopting bitcoin as it’s corporate treasury asset and demonstrating the power of switching from a melting ice cube of USD to the hardest money ever created, Strike using bitcoin’s open protocol to power it’s peer to peer global payments network between hundreds of different currencies, etc. Even Blackrock, Fidelity, etc. have utilized bitcoin to create the most successful ETFs of all time!
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.” – Satoshi Nakomoto
Bitcoin’s use case is as permissionless, digital, sound money, an alternative to the fiat currency experiment which has led to rising inflation, unsustainable debt levels, etc. It has already had so much relative success, from something that was just an idea, to something just shared amongst cypherpunks and nerds that had no actual value, to now a trillion dollar asset class with increasing adoption.
At what price or level of adoption will you admit you’ve been wrong Jim? I’ll leave you with this article/quote…
“What would it seem like if it did seem like a global, digital, sound, open source, programmable money was monetizing from absolute zero?” – Allen Farrington, “Wittgenstein’s Money” ( https://allenfarrington.medium.com/wittgensteins-money-7cac8d0635cf)
It’s not an alternative money/currency because it can’t be practically used for that. You might wish it was used for that, but it isn’t.
If you think my position on Bitcoin can be proven wrong, you probably don’t understand what it is. I fully admit I have no idea what price a Bitcoin will be worth 10 years from now. In fact, that’s a big reason why I don’t invest in it.
But when it gets used as money (i.e. everyone is buying gas and groceries with it instead of dollars), I’ll admit I was wrong about that. I’ve been waiting for over a decade and it seems less and less likely over that time period.
Look I get why it might be cool to have money with all those feature. I’m just pointing out that nobody is treating Bitcoin as money. Can you imagine an ETF (or 11) that just bought a bunch of dollars and did nothing with them but charged you an ER for holding them?
“ Look I get why it might be cool to have money with all those feature. I’m just pointing out that nobody is treating Bitcoin as money. ”
wrong
1. Just bc you don’t encounter such people in SLC or your travels or described in Bloomberg and Forbes articles, doesn’t mean such people don’t exist
2. Holding a money is using a money
I use the gravel in my back yard as money. It’s super valuable to me. I just use it to “hold money.” I don’t care that nobody else thinks it’s money. It’s not important that anyone else accept it as money. It can still be money.
See how dumb it sounds when I say it? Money is what people accept as money. So far, not very many people accept Bitcoin as money, including our government which treats it as an investment. So it’s not very useful as money.
“I use the gravel in my back yard as money. It’s super valuable to me. I just use it to “hold money.” I don’t care that nobody else thinks it’s money. It’s not important that anyone else accept it as money. It can still be money.
See how dumb it sounds when I say it? Money is what people accept as money. So far, not very many people accept Bitcoin as money, including our government which treats it as an investment. So it’s not very useful as money.”
wrong again
money has fundamental properties. Gravel makes horrible money for a lot of reasons. Gold makes pretty good money. Dollars make pretty good money too. Not many people use gold as money or medium of exchange. You may argue gold therefore is not money either because our gov doesn’t accept it. But it’s a weak, statist argument.
and, our government doesn’t treat bitcoin as “an investment”. Check out the recent case of samourai wallet devs arrested for being “unlicensed money transmitters” for developing and running a bitcoin coinjoin service. How can one be a money transmitter if the thing being transferred isn’t a money in the eyes of the gov?
Yes, I make that “weak statist” argument too about gold. Go ahead, go try to buy something with gold. You’ll find nobody takes it.
I’m not sure I’ve ever been accused of being a statist before though. What’s the opposite, an anarchist? I’m definitely not for that.
So, gold isn’t money either? You conflate the terms currency and money. They are not the same
Our gov and many others hold gold, lots of it. Why would they do so?
Seems reason people hold stocks, bonds, land etc.
Look, I get why you love this stuff. I see the benefits. But money is what people use as money. Currency is what people use as currency. Bitcoin may someday be money. Bitcoin may someday be currency. But it isn’t today. Because nobody (okay, very few) are using it that way. It is what people use it for. And what people use Bitcoin for is to speculate and try to get rich off it. Don’t believe me? Look at the flows into and out of Bitcoin ETFs this year. Those people don’t care about Bitcoin as money. They’re just hoping it goes up in price so they can exchange it for something they can spend on something they actually care about. So sure, Bitcoin is money in the same way that treasuries or Apple stock or a brick of gold is money, but in reality, it isn’t money just like none of those other things are either.
Incidentally, your bizarre argument that money and currency are somehow different things is a bit contrived from how the terms are used by most people. Here are the dictionary definitions:
Money: a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively.
Currency: a system of money in general use in a particular country, the fact or quality of being generally accepted or in use.
Neither includes stocks, bonds, and Bitcoin.
If your position is that gold isn’t money, or that gold and bitcoin are money in the same way that apple stock is money, or that money is only issued by the state in the form of coins or banknotes, well we have a fundamental disagreement.
there have been folks working on bitcoin integration into payment terminals, but there’s not great incentives to get that done in western societies where payment is already very convenient, and with IRS tax treatment of bitcoin and other crypto, but I guess in your view, if that happened and all of the sudden I could easily pay with bitcoin at the grocery store then it would become money, where it wasn’t money the week before. I just don’t see the logic in such argument, bc nothing about bitcoin has changed in that scenario. It just exists as a software protocol
noticed that you also conveniently ignored the point of our gov treating bitcoin folks writing code and running a bitcoin related business as “money transmitters”
I’m not saying there can’t be money that isn’t issued by a state, I’m saying there isn’t yet any money that isn’t issued by a state. I fully recognize that there would be some cool aspects to having money that isn’t issued by a state. It just hasn’t happened yet.
Yes, you describe my argument well. An important aspect of money is that people use it as money.
I’m not familiar with the case you mentioned about the money transmitters and not super interested in it, thus I ignored it. Seems a weak argument for your main point anyway.
What you wish and what actually is are two different things RIGHT NOW when it comes to Bitcoin. That may change in the future. Or Bitcoin forever remains an interesting little experiment in the history of money like rai stones.
When you can ignore dollars in your life the way I ignore Bitcoin, then Bitcoin will be money.
I bring up the samourai case bc you brought up that “our gov treats bitcoin as an investment” and I’m pointing out that this is simply not true
the gov doesn’t know what to do with it. CFTC says its a commodity. IRS declares it as “property”. SEC is noncommital but seems to say it’s not a security. FINCEN says money transmitter laws apply if bitcoin is custodied. DOJ says that’s not true and arrests two guys applying money transmitter laws and says custody is not required in contradiction to FINCEN guidance
I don’t disagree with you that many or most people buying bitcoin or the ETFs are purely speculating and hoping for gains. But that doesn’t make it not money.
if bitcoin payments were integrated tomorrow into typical CC payment terminals would it then be money?
If people were using it, sure.
I agree there is still plenty of regulatory confusion/uncertainty. Which doesn’t help its volatility problem. Which is a big reason why people aren’t using it as money.
https://www.imf.org/en/Publications/WP/Issues/2024/04/05/A-Primer-on-Bitcoin-Cross-Border-Flows-Measurement-and-Drivers-547429
are these people using bitcoin as money?
your focus on (the lack of) bitcoin spending in daily transactions in the US and bitcoin speculative investing is clouding your view
Clouding my view of what? The lack of utility of Bitcoin to me? If I can’t use it as money and don’t want to speculate on its future price, why would I be interested in buying any?
Just because it’s better than Western Union in Subsaharan Africa doesn’t make me want to run out and buy some, no.
“ Clouding my view of what? The lack of utility of Bitcoin to me? If I can’t use it as money and don’t want to speculate on its future price, why would I be interested in buying any?
Just because it’s better than Western Union in Subsaharan Africa doesn’t make me want to run out and buy some, no.”
perhaps in your next blog you’ll qualify your comments with that language, the utility “to you”
but again, the fact that bitcoin has no utility and isn’t a money “to you” as a wealthy person living in SLC, doesn’t make it not a money
and don’t get confused in thinking that I care what you do or whether you buy or hold bitcoin. In truth I hope you continue not to, it’s more entertaining that way
I don’t think its status as useful money is particularly dependent on being wealthy nor living in Utah. Just because you found somebody who treats it as money doesn’t make it money to the vast majority, which is what matters.
When you say something is “clouding your view” its best to be specific about what view you’re talking about. I think my position on Bitcoin is pretty clear but I’m often surprised when I run into people who don’t understand what it is. So here’s “my view”:
1) I have no idea what the price of Bitcoin will be in 10, 30, of 100 years.
2) I have no idea if Bitcoin will ever be widely accepted as money/currency.
3) I don’t think Bitcoin is very widely accepted today as money/currency.
4) I don’t invest in Bitcoin because I don’t invest in speculative instruments and Bitcoin, as an investment, is a speculative instrument.
5) If someone wishes to invest in speculative instruments with part of their portfolio, I recommend they limit it to something like 5% of the portfolio.
Which part of that do you have a problem with exactly that you think my views are cloudy?
This is the view that I think is cloudy:
“Aside from portability and undercutting Western Union in Africa, there really aren’t any use cases for Bitcoin.”
the use case is money separate from the state
I think you see that use as far more useful than I do. In fact, I’d call it a potential use.
It’s used that way today by lots of people
But I get it, you’ve set up a you-centric steelman argument “When you can ignore dollars in your life the way I ignore Bitcoin, then Bitcoin will be money”
You don’t have to invest in everything to be successful. There are no called strikes in investing.
we don’t have to invest in anything, as rich doctors, but that’s not really the point now is it
It’s exactly the point when we’re discussing Bitcoin as an investment.
The discussion is your position that bitcoin has no utility and isn’t money
But I guess if I were you and had been wrong for a decade and a 100x price move against the dollar, I might also just stay hunkered down on that hill I chose
What have I been “wrong” about? Are you saying I was wrong because I didn’t tell WCIers to put 80% of their portfolio into Bitcoin in 2011? That’s a heckuva hindsight bias. But if that’s the case, then I guess I was “right” to tell them not to invest in NFTs, gold, silver, beanie babies etc. 4 out of 5 ain’t bad.
Enjoy your victory lap and I hope for your sake that Bitcoin doesn’t go to zero or flatline or whatever that would cause you to not reach your financial goals.
“ What have I been “wrong” about? Are you saying I was wrong because I didn’t tell WCIers to put 80% of their portfolio into Bitcoin in 2011? That’s a heckuva hindsight bias. But if that’s the case, then I guess I was “right” to tell them not to invest in NFTs, gold, silver, beanie babies etc. 4 out of 5 ain’t bad.
Enjoy your victory lap and I hope for your sake that Bitcoin doesn’t go to zero or flatline or whatever that would cause you to not reach your financial goals.”
sir, you write a finance blog and have published varying degrees of generally negative things about bitcoin for over a decade while it did a 100x
I mean, this garbage was less than 3 years ago: https://www.whitecoatinvestor.com/what-is-the-best-cryptocurrency/
It’s only negative to those who worship at the Bitcoin altar. Everyone else sees it as neutral at worst.
not about worshiping at the bitcoin alter, rather simply being wrong about bitcoin
money, decentralized and separate from the state, resistant to capture and control even from nation-state level actors
for sure there’s a nonzero chance that bitcoin won’t ever fulfill that in your view
but the thing that is certain is that bitcoin is the only “crypto” that even has a snowballs chance in hell to get there
the provenance matters, when in comes to a decentralized digital money
that’s the part where I think you could reset and reapproach for better bitcoin and crypto content in the future
I don’t think that’s certain at all. It’s entirely possible that IF a cryptocurrency goes mainstream, it won’t be Bitcoin.
I never denied that Bitcoin is decentralized, separate from the state, resistant to capture etc, only that still, after a decade and a half, it’s not being used as money in a meaningful way for the vast majority of the world. Maybe it just takes more time. But it seems more and more likely that it’s just not going to happen. If it is so obviously better as you believe, why aren’t we using it?
Your religious devotion to this code is clouding your judgment. Your have so much of your money (i.e. saved life energy) tied up into it, you can’t see that you might be wrong.
Let’s set the goalposts. I don’t know what “going mainstream” means and if I guessed my answer would probably be different than yours.
So in your mind, what should we expect, for a decentralized digital money separate from any state or central authority control, that would be described as success, vs failure?
That the majority of people prefer to pay and be paid in Bitcoin instead of dollars. That’s success as a currency. Heck, I’d be impressed if it got into the top 5 currencies in the world as far as number of transactions.
Success as an investment is simply that it continues to go up long term at least at the rate of inflation.
Jim there are 8 billion people on the planet, but success to you of a decentralized digital money means that it replaces the US dollar?
How many of those 8 billion will accept US dollars? The answer is billions. How many will accept Bitcoin? Thousands? Maybe?
Ok. Lets accept that as baseline
So then success of a decentralized digital money you define as surpassing the dollar?
Doesn’t it also take a lot of energy to mine Bitcoin?
Do its benefits justify the energy expenditure that you would have to have in perpetuity to maintain it?
How much energy are you willing to spend for the most sound money in human history?😃
Maybe 2-3x the amount of what is spent to maintain something like the current banking ACH system, venmo, etc. But the problem is that for btc it would more like >100x.
And I’m not even one of those ESG enthusiasts.
So if you tax loss harvest everytime it goes down significantly, it’s possible one won’t ever have to pay capital gains tax when finally selling?
Sure, if you sell it for less than you bought it for you don’t pay capital gains taxes.
Even if you sell at a gain, you could avoid paying capital gains taxes due to all the losses accumulated during tax loss harvesting?
Make up a hypothetical example with real numbers and you’ll find the answer to this. If you buy 1 BTC for $50 and price drops to $10, you could harvest a $40 dollar loss. If price goes back up to $50, you would have a $40 capital gain that would exactly offset your loss. You don’t really avoid any taxes this way. The value in harvesting this loss is to use it to offset ordinary income (up to 3k) and other potential capital gains you may realize in the selling of other assets (a home or business for example).
Or if you never realize the gain due to the step up in basis at death or giving appreciated assets to charity.
Thanks that makes sense. Are we able to tax loss harvest BTC ETFs without the 30-day wash rule the same as if we were directly selling/buying BTC?
Yes. You can sell at a loss and immediately rebuy and lock in a capital loss that can be carried forward indefinitely.
I don’t think so but I confess I’m not 100% sure.
Agree with the article, purely speculative. I do invest but less than 1%. This is just nonsense “If you believe in it enough to invest at all, don’t be a wimp. Put 5% in it.” I can see something as a gamble where losing the small amount isn’t a big deal, but the (I think) likely significant increase would be a nice little windfall. I don’t like gambling in general, but betting a little bit here doesn’t bother me. That doesn’t somehow mean I need to do 5% or I’m some kind of Bitcoin fraud. I put all my Vegas money on B(itcoin)lack. I’m too risk averse to doing more than 1%. That extra 4% can buy me another investment property, and I actually enjoy doing that.
Curious though with the significant amount of lost bitcoin, does that also serve as a floor since it obviously can’t be sold?
P.S. Aren’t you now investing in bitcoin since I imagine it’s a part of VTI now.
It’s not a stock, so it’s not directly part of VTI although I understand some companies in VTI do own some.
I have two criticisms regarding your criticisms. Regarding use case: if one lives in authoritarian regime where you are being persecuted, it can be your only method for funding. I recommend you briefly visit the human rights foundation website https://hef.org/devfund
It is also a store value in many countries with hyper inflation. I submit that we often are guilty of first world/financial privilege.
Second, regarding loss of keys: This has been resolved by the new ETFs.
ETFs have not resolved the risks inherent in self custody. If you own an ETF you own a bitcoin IOU, you don’t own bitcoin
Excellent point regarding our privileged world views coming from western democracies (though our freedoms are ever decreasing!) and especially the US with our currency as the world reserve currency, which shelters us from the worst of the inflation we put out into the world with our politicians unsatiable appetite to spend outside their means.
Highly recommend listening to this podcast from Human Rights Foundation’s Chief Strategy Officer regarding bitcoin uses cases: https://www.linkedin.com/posts/alexgladstein_the-ultimate-bitcoin-use-cases-with-alex-activity-7183233152281194496-eLh2
This is a person whose entire career has been spent fighting for human rights, and he came to understand bitcoin not as an investment or speculative asset, but for it’s truly unique use cases in fighting to prevent human rights abuses across the world.
Now quite a buzz on Bogleheads Forum concerning that a former exec. of BlackRock is to become the new CEO of Vanguard.
Interesting concern that this exec. seems to have flipflopped as to BlackRock selling a bitcoin etf
I think in the past and still continuing up to now Vanguard had an ethical objection to selling a product that either encouraged or was designed for short term buy and sell or that was very likely to damage the buy and hold investor even if it made a profit for the “bourse”
Is there a potential for bitcoin to eventually result in wealth redistribution? Who wins/who loses? Does holding a bitcoin etf eliminate some of the danger of holding “bitcoin” directly or in a “wallet” — losing your “key” or digital code — ?
Any possible comparison between bitcoin derivatives and derivatives of mortgage backed securities such as are now widely blamed for having caused or having amplified/ contributed to causing the “Great Financial Crisis” (the Lehman bankruptcy and the credit freeze of 2008) “systemic risk” ??
I think Bitcoin is still too small to crash the system. It’s still less than 1% of the world market cap. But who knows what the future holds. Derivatives have a way of leveraging things up don’t they?
Does BlackRock make money on its bitcoin ETF when bitcoin “goes up” ?
Does money sent in to BlackRock to make purchases of the ETF make bitcoin “go up” ?
If bitcoin eventually stabilizes at $3.57 does BlackRock still keep the money it made on the ETF ?
They charge an ER which is like an AUM fee so yes as asset price rises, fund earnings rise
Net inflows into the fund is buy-side pressure on the asset which yes increases spot price. Net outflows from the fund would create sell-side pressure and spot price decline. (Assuming honest behavior by the fund, buying and selling spot asset equal to inflows and outflows)
I guess if the ER is fixed then yes.
When money is sent to Blackrock, the manager of the ETF has to go out on the market and buy more Bitcoin just like if you were buying it yourself. That’s some additional demand which puts upward pressure on the price, just like when a person or ETF needs to sell some puts downward pressure on the price.
Yes, Blackrock is going to keep its fees even if Bitcoin goes to $3, but they probably close the fund long before it gets there.
A couple points to add here:
We can fool ourselves into thinking we can somehow “value” stocks because of earnings and cash flow, and we can’t value Bitcoin because it has no earnings. But in reality, the value we give stocks is all herd mentality. Why should the PE not be 50? Or 100? Why not 5? It’s herd mentality, as are all the financial markets.
The fact is that Bitcoin is THE best tracker of global liquidity for the past decade plus. Excess liquidity has very clearly flown strongly into bitcoin due to its status as a highly liquid and globally-traded 24/7 asset. Better than the S&P. Better than gold.
If one expects global liquidity to trend upwards for the forseable future (and for it to not would mean for all global governments to stop printing money – – good luck with that), then the Bitcoin investment thesis is a strong one. Call it speculation if you will, Jim, but sometimes it pays to be forward-looking.
With regards to when Bitcoin will become money: When and only when trust in the dollar breaks, for better or for worse, that’s when Bitcoin becomes a medium of exchange in the US. It’s not gonna happen in the first 10-15 years of its existence, Jim. These things play out over decades.
I personally believe it’s more speculative to believe that ANY fiat currency can exist into infinity when history strongly shows that just has never been the case. So maybe Bitcoiners are speculating over the next 1-5 years, but I like the chances of Bitcoin over the next couple of decades. That’s why I buy and hold and I don’t sell or trade it.
So if the purpose of Bitcoin is to use as a currency, why not wait until it is actually being used as a currency to switch from the dollar or whatever to Bitcoin? What is the downside? The only possible downside is to miss out on a possible run up in its value in the meantime. Meanwhile, there a several upsides including not having to deal with it and not having to worry about it going to zero or dramatically down in value long term.
No, that’s not a particularly strong argument to buy Bitcoin now.
I disagree that valuing Bitcoin is similar to valuing stocks. The reason I wouldn’t pay a PE of 100 for the stock market is that there are better ways to buy earnings/income at a better rate. I can buy a house down the street at a cap rate of 4 and rent it out and earn 7% on it. I can make 5% on cash and 4-6% on bonds. Why I would buy the stock market at PE of 50 or 100 instead of that is beyond me.
But valuing Bitcoin is tough and requires predicting its future value somehow (impossible) and then discounting it back to the present somehow. I have yet to see any reasonable method for knowing if BTC is over or under valued.
The reasons to buy Bitcoin now instead of waiting are:
(1) Buying now provides significant upside potential that simply won’t be there when it’s already being used broadly as a medium of exchange. Everyone needs to tailor their allocation to their risk tolerance and conviction, but again, for the patient students of history, it’s a strong thesis to buy now. Historically, the longer one waits to buy it, the exponentially more expensive it becomes. It seems to have a habit of going up an order of magnitude every few years.. Again, call that speculation if you will.
(2) Do you wait to buy your homeowners insurance before the fire or after the fire? You are going to be able to protect your assets much more effectively in the case of hyperinflation and collapse of the dollar if you already have Bitcoin well before that happens. If everyone is rushing to buy it and it’s clear that collapse of the dollar is imminent, you’re going to get less Bitcoin with 100% of your portfolio at that time then you would probably would get with 5% of your portfolio now.
(3) I agree. It is hard to know the fair value of bitcoin. However, if we believe in the efficient market hypothesis, although short-term games can always be played with assets, in the long run they will trend to their true value. And again, if you believe that Bitcoin has staying power as a global marker of liquidity and will go up over time in tandem with global liquidity (aka money printing), then it makes sense to just dollar cost average into Bitcoin as with anything else. You then don’t have to worry if it’s overvalued or undervalued at any point in time. And when it becomes a significant enough percentage of your portfolio that it no longer makes sense to dollar cost average, then you just stop and you hold it, and maybe even consider dollar cost averaging out of it. Just as with any asset.
(4) Finally, currently it is legal to buy Bitcoin and put it into self custody. It’s unclear how long this stays the case. If the only avenue to buy it in the future becomes through ETFs which the US government can easily seize, obviously Bitcoin becomes loses its portability and also wouldn’t TRULY be a hedge against currency debasement because the government could seize it as it has historically with gold during currency crises. You take the bird in hand by buying Bitcoin into safe custody today while you can. Buying the ETFs is a gamble. Europe has already passed legislation hostile to self custody wallets.
So in the present time, Bitcoin serves as a store of value and insurance against fiat debasement, and it’s prudent for the above reasons to buy it now rather than wait. When and if it becomes a global medium of exchange, then you can start spending it. And if the dollar does not collapse in our lifetimes, then we can all be very thankful and enjoy our gains from the S&P. That’s why we diversify.
Just typing more doesn’t make an argument stronger. Your arguments are basically:
1) Speculation that the price will go up. Addressed many many times here before. The counter argument is that prices can go down and that many of us don’t invest in primarily speculative investments.
2) Insurance against rapid local economic collapse/rapid need to transport money out of a country. A reasonable argument for a relatively small amount of Bitcoin. Not useful of course in general economic collapse when guns, ammo, and canned food is what you want, not gold or Bitcoin.
3) Speculation rephrased. “I believe Bitcoin will go up in price so I’m going to buy it.”
4) Insurance rephrased.
I think you’re using the insurance argument to justify speculating. If you want to speculate, knock yourself out. It’s your money. You don’t need to justify it to me or anyone else. Maybe you get rich. Maybe you don’t. I have no idea. But I recommend you limit how much of your money you speculate with. 5% is reasonable. 50% isn’t.
Sometimes arguments take longer to flesh out than a tik tik video, Jim. More typing can be useful to look at arguments from various angles.
I never said it’s prudent to have 50% Bitcoin allocation. I think 5% is very reasonable.
And we’re talking about the future, Jim. ANY investment is speculation. Don’t try to make it unique to Bitcoin.
Bond investment is speculation a currency does not collapse. Stock investment is speculation on the success of underlying companies and continued demographic and productivity growth. Gold investment is speculation its supply won’t triple by discovery of massive new reserves. Real estate investment is speculation in population growth and supply not exceeding demand.
Our job as investors should be to look as far into the future as is reasonable for our life circumstances and goals and hedge perceived risks accordingly. To that extent, Bitcoin is an excellent hedge against fiat debasement. The stronger you feel this is a possibility in the future, the more of it you can consider buying. And as I tried to explain to you above, it’s better to buy insurance before the fire, not after.
Regarding the “guns, food, and ammo” argument: you’ve made it before, and I just don’t see how it’s valid. Did the world revert to this when the Dutch Guilder or British Pound fell out of favor? A new money eventually takes hold. People need money for commerce. Barter is not a feasible long term option. Bitcoin is a hedge against fiat debasement, not a nuclear or zombie apocalypse.
If you think the amount of speculation involved in buying VTI is precisely the same as the amount involved in BTC, there’s not much I can help you with.
There was no need to buy dollars decades in advance. The British Pound fell out of favor and then you had a century or two to move your money to dollars. Heck, you can still use pounds just fine. Yet you seem to think that there won’t be an equivalent time period to move money from dollars to Bitcoin or Ether or whatever comes next.
If things get really bad in a nuclear Winter, Bitcoin isn’t going to be any more useful than gold or dollars. If you can’t see why that is valid, again, I can’t help you. You think Bitcoin is this great insurance, but it’s only insurance if things get a little bad, not really bad. It’s insurance for a very limited scenario, i.e. a rapid local currency debasement. And in that scenario, it’s probably no better than far more stable currencies currently available.
Never said the amount of speculation was the same, Jim. Don’t put words in my mouth. And for that same reason you wouldn’t allocate as much of your portfolio to Bitcoin as you would to VTI.
I think you need to spend some time studying how currency devaluations work, Jim. The government announces them, and your money is worth less overnight. Look at Lebanese Pound vs Bitcoin chart as a clear example. It’s evidence in plain sight of how fast these things can happen.
And look at what happened in our own US history: “Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve in exchange for $20.67…The 1934 Gold Reserve Act subsequently changed the statutory gold content of the U.S. Dollar from $20.67 to $35 an ounce.” Was that a “century or two” for the US dollar to devalue against a hard asset? Hardly.
Also, I said bitcoin is NOT a hedge in a nuclear apocalypse. I think you misread my post. And yes Bitcoin protects against “local currency debasements,” but that’s not what I’m worried about. I’m worried about “global currency” debasement of the dollar, and I’m not going to buy the Pound or Yen to protect myself against that. I’m going to buy Bitcoin.
You’re the one who used the English pound as the example. Don’t blame me for continuing to use it.
Classic Bitcoin religionist argument–“you just need to spend more time studying until you agree with me.” It’s been over a decade. More study isn’t going to change my opinion of whether I should invest in Bitcoin.
I mean, let’s take your ideal scenario for Bitcoin here. The dollar is horribly debased. So all the cash in my bank account is now worthless. Am I in some terrible situation that I need to insure against? No I’m not. Most of my net worth is still in stuff like my house, my business, stocks, real estate, TIPS etc. I don’t need to buy insurance to protect a 5 or 6 figure amount of cash. I don’t even need it to protect against the loss of the 10% of my portfolio in nominal bonds.
If we all start using Bitcoin as currency, I’ll charge advertisers in Bitcoin, collect from my patients in Bitcoin, sell my stocks for Bitcoin, take my rents in Bitcoin. No big deal. A change in currency isn’t a financial catastrophe that needs to be insured against.
So why buy it now? No reason I can think of other than that I fear the government is going to take everything I have and somehow I’ll magically be able to protect my Bitcoin or, the primary reason people buy it, to speculate on its price. Since I don’t care to speculate on its future price and I’m not a conspiracy/prepper type, I’m still not interesting in owning it no matter how many words Bitcoin maximalists type into the internet.
It’s OK, Jim. I don’t fault you for not getting Bitcoin after knowing about it for a decade. Not everyone grasps concepts quickly.
In economies experiencing currency debasement, stock markets tend to rise significantly in nominal terms. However, when adjusted for inflation, the gains are often much less impressive or even negative. Investors typically do not see real wealth gains. The currency collapse has a way of wrecking the underlying economies such that stocks don’t protect wealth as they would in a slow and steady inflationary environment.
Also, a change in currency is not a catastrophe for people who still have ability to make significant earnings like you do, but for someone who already has significant savings and does not expect to have a multi-million dollar income every year going forwards, and they have significant assets with exposure to the dollar, a hedge against collapse of the currency makes sense.
And no, there is no magic involved in protecting your bitcoin. Just 12 words you keep in your head. Call that magic.
Or understand Bitcoin and call it math.
I frankly don’t care if you think Bitcoin is all speculation or not. And I certainly don’t think by this point I’m the one who will change your mind on it! I’m only posting on here because I know how influential your website is to physicians, and if any physician is curious about Bitcoin and reading your articles and comments, I don’t want them to blindly take your word as gospel.
Thanks for stopping by to submit 1700 words in comments on a 2000 word blog post.
I already gave you a chance last year to send a guest post/email to every white coat investor. You sent them 6,000 words about Bitcoin and why you think it’s so awesome. I don’t think you need to worry so much that they haven’t heard your point of view on the subject. If your writing was going to convince them to invest in Bitcoin, they already have. So I must assume some other motive in all this effort to post comments on this website. I have no idea what that is, but I hope you find some resolution to it.
Heaven forbid someone blindly takes my word as gospel and make an informed choice not to invest in Bitcoin. What a tragedy that would be for them. It makes me all sad inside to think about it.
https://xkcd.com/386/
What’s a few thousand words amongst friends, Jimbo?
I know you think your blog is a repository of evergreen content, but I don’t think anyone is digging up that article a year after the fact. Hahaha. Especially with mutiple subsequent articles on Bitcoin.
I agree! It would be a tragedy! Heaven forbid you save them from preservation of their hard-earned wealth…
Last word.
This is one of the better rundowns I have seen. It is a difficult topic because the “Bitcoin Bros” typically won’t even engage on substance, and will just engage in a lot of mutual admiration and back-slapping while saying that anyone who doesn’t agree with stacking as much as possible just “needs to learn math” or is “evidence of how early in the cycle we are.” They then either refuse to actually engage in the substance or direct you to “read the white paper” or a book written by a fellow obsessive, none of which I have seen meaningfully handle criticisms or objections.
What nobody seems to be able to answer is why, exactly, there won’t be substitution risk, even if other risks, like regulatory risks, quantum computing breaking its encryption, or others, are ignored. Numerous putative use cases have fallen by the wayside. There are debates about block sizes, using layer 2 assets to actually perform transactions at faster than a snail’s pace, and so on, but even if it’s never used for actual commerce in any meaningful way, they argue, it will remain a store of value just due to its scarcity. But that is premised entirely on consensus that it is worth something. With gold, you have the same issue, but there are thousands of years of history of acceptance of the asset there, and it’s an attractive, actual object that will have ornamental and other value. There is at least some price floor.
But with bitcoin, it just is code that exists and updates on a ledger, using tremendous computing and power resources. Why won’t people or governments agree that another, newly developed coin is superior, or just decide to use it instead? I appreciate network efforts and existing agreement, but those in favor of it both want the benefit of it being so early in the cycle, with almost no real-world adoption, but also want to argue that it’s entrenched and won’t go away or be substituted for.
It’s just really hard, since so far, they’ve been right in terms of its price, at least, even if some were wrong about many aspects of its adoption, and the price has increased in a reliable way on a log chart, consistent with “power law” and/or “stock and flow” models. Advocates even acknowledge and note that future drawdowns are coming and will be massive. It’s going to be hard for anyone to hold through that, just on the basis that it’s a scarce thing that people are going to want to exchange currency for. Yet it’s hard to imagine just standing by and having no exposure if it continues to increase in price. It isn’t something I can gamble my family’s financial future on with any real size, though. So, boring as it may be, I just have a little exposure. It’s only enough to be glad I have a little if it moons and to not be despondent if it falls apart. It’s a recipe for general unhappiness either way.
it’s hard to have substantive back and forth in these comments. Better on the forum
Curious to know what your opinion is on. Bitcoin now that we are in 2025 and the price today is at 113k 🙂 any new insights or have you had any change of thoughts?
Did something change with Bitcoin? I’m not aware anything changed other than “price go up”.