By Dr. James M. Dahle, WCI Founder
While long-term readers know I don't put serious money into speculative investments like cryptocurrencies, foreign currencies, commodities, precious metals, or Beanie Babies, I find cryptocurrency absolutely fascinating to watch. However, one thing I cannot understand is why the market (i.e. all the people speculating in cryptocurrency) does not yet recognize that there is no way that Bitcoin is going to be the winner of this technological race.
Let's talk about why.
The Race to Be the Best Cryptocurrency
The world is up to more than 6,000 cryptocurrencies now. Cryptocurrency is not going to go away. It will only become more popular and more useful as time goes on. However, it seems obvious to me that there are not going to be 20,000 useful cryptocurrencies. In fact, I doubt there will even be 10. Most likely, 99%+ of cryptocurrency uses will be monopolized by one or two cryptocurrencies. There's a race to see which one (or possibly which few) will be the winner. Remember 20 years ago when there were a half dozen or more search engines? Yea, which one do you use now? Sure, maybe you don't use Google, but you're pretty lonely if you don't. Here's the chart:
Yup, Google won. You know why? Because it was better. It was more likely to bring you to the information you were looking for. That's the way technology works. We all use the one that is the best. Sometimes, there's a little competition—you know iPhone vs. Android and Microsoft Excel vs. Google Sheets—but in the end, there are never dozens of winners in these races. This isn't automobiles where style points count.
By market capitalization, Bitcoin is currently way ahead.
However, this is simply due to its early start and, thus, its brand name recognition. You do not have to know very much about cryptocurrency to realize that this will not last. In fact, it cannot last. Bitcoin literally cannot be the world's most useful currency long-term. It lacks too much function. It uses too much energy. It is too slow, and it is too unstable.
Better Cryptocurrencies Than Bitcoin
Look at some of the other cryptocurrencies on the list. Want something more functional than Bitcoin? How about Ethereum? Ethereum introduced smart contracts, tiny pieces of code that live on the blockchain, to the world. This was a game-changer. You've heard of Non Fungible Tokens (NFTs)? Not possible without smart contracts. But guess what cryptocurrency doesn't have smart contracts? That's right, Bitcoin. The eventual winner is definitely going to be compatible with smart contracts, thus, it cannot be Bitcoin.
Most people have heard that it now takes massive amounts of energy to mine Bitcoin. What they may not realize is just how much energy it takes to use the Bitcoin that has already been mined. It currently consumes over 80 Terawatt hours every year. Now I can't conceptualize a Terawatt hour any more than you can, but if you compare Bitcoin to countries, it comes in ahead of Austria right now. So despite the fact that almost no one uses Bitcoin for anything other than speculation, it's already consuming more energy than entire first-world countries. Imagine if we used it to buy gas, groceries, and the morning coffee? No way. We'd have rolling blackouts across the world. But if you look at that list above, there are coins that use far less energy than Bitcoin.
Take Cardano for example. If Bitcoin uses an Austria amount of energy, Cardano uses a Niue amount. (Niue is a South Pacific Island with only 1,600 residents.) At any rate, Bitcoin can't win because we don't have enough energy on the planet for it to win.
What's another big problem that keeps anyone from actually using Bitcoin day-to-day? The volatility. You just can't use a currency that is worth 1/3 less or 50% more than it was a few months earlier (for example, in a 44-day span in the spring of 2022, Bitcoin dropped 40.4%). It's too volatile. Again, take a look at that list above and see if you can spot a cryptocurrency that is dramatically less volatile than Bitcoin. Yup, that's right, Tether or the USD coin are way better from a volatility perspective. They have about 1/20th of the volatility. Maybe Bitcoin becomes less volatile in the future, but I'm skeptical that it will ever have low enough volatility to be useful as a day-to-day currency and store of value.
Bitcoin is also pretty slow. Just about everything on the list above is faster than Bitcoin. One of the fastest ones out there right now is Solana. Bitcoin does about five transactions per second and takes 30-60 minutes to achieve transaction finality. By contrast, Solana does 29,000 transactions per second and takes 2.5 seconds to achieve transaction finality. Bitcoin cannot handle the world's financial needs and, thus, it cannot be the winner.
Heck, a bunch of cryptocurrencies are jokes. They were jokes to start with and they're still jokes. The funniest part is how far the joke has gone on. I mean, look at Dogecoin. Its primary source of value is that Elon Musk tweets memes about it from time to time. It's 12th on the list despite everyone knowing that it isn't going anywhere. Heck, there are even jokes of jokes (see Baby Dogecoin and Shiba Inu Coin for details). You can create your own cryptocurrency if you want. Here's a step-by-step guide.
What Will Be the Best Cryptocurrency to Invest In?
Now my crystal ball is cloudy. I have no idea which cryptocurrency will eventually become the one that is used by everyday people. It probably has not yet been invented. In fact, I think it is entirely possible that the winner will change every decade or so as technology improves. Perhaps soon, there will be one that is more useful than Ethereum, less energy-intensive than Cardano, more stable than Tether, faster than Solana, and cooler than Dogecoin and Shiba Inu combined.
But what is incredibly obvious to me is that the winner will not be Bitcoin. That means those currently on the Bitcoin train (which is the vast majority of cryptocurrency speculators) are either uneducated FOMOites or are planning to get off the rollercoaster before it reaches the top and starts plummeting to its final doom. They're essentially investing on the greater fool theory, i.e. the idea that someone dumber than them will be around to pay them more for it than they paid themselves. Well, that will work until it doesn't. Good luck timing it. Don't be left holding the bag.
Bitcoin is the AOL of the cryptocurrency market. Sure, everyone used AOL to first discover the internet, but 20 years later, who still uses it? Even your grandma moved on a decade ago, and now the company is defunct.
Bitcoin and other cryptocurrencies are not the places for your serious money. If you cannot resist the urge to speculate, do so with no more than 5% of your portfolio. And for heaven's sake, don't bet that 5% on the one that you know is going to lose.
What do you think? Why do people keep bidding up Bitcoin despite its problems? Which cryptocurrency do you see as most promising right now? Comment below!
Dr Dahle, this article will not age well.
I have learned an incredible amount about personal finance and investing from WCI. Generally, I value your opinion. However, on this topic it does not appear that you have done your due diligence. No one has a crystal ball (myself included) so the only logical approach is to study the underlying qualities of a new asset and its value proposition. The main value proposition of Bitcoin is that it is scarce (more scarce than gold), decentralized (no central point of failure/attack), has the largest network of any crypto and thus first-mover advantage. All other cryptos have varying levels of centralization and thus subject to government regulation or subject to changes by those who control it. Why does Bitcoin have the largest market cap of all crypto’s if is domed to fail as you suggest?
Bitcoin is not the AOL of crypto, it is the internet protocol (TCP/IP) of digital money.
I enjoyed a different view point that my own about BTC from Dr. Dahle, and think that a lot of his reasons to not be long BTC are valid – however, like you point out, BTC has a number of other things going for it including the limited supply, halving rate, institutional ownership, financial incentive associated with mining, economic infrastructure around it (just look at all of the related mining stocks, new ETFs), etc. I can see ETH and Solana being a useful utility for transactional purposes, but with unlimited quantity, unsure how these cryptos can be a source of increasing value.
Bitcoin maximalists are a bit tiresome however, and I do agree that cryptocurrency should only make up a small portion of one’s investment philosophy. I am currently at <5%…
Consider how quickly institutions can drop it before you put too much faith there. Also, consider what happens when there is no more Bitcoin to be mined…
Again, 95% of my short term/long term investments are in a variety of ETFs, but this article does a pretty good job of explaining the advantages of BTC over the other cryptocurrencies. Lyn Alden is a pretty great resource / read…
https://www.lynalden.com/invest-in-bitcoin/
You are woefully uneducated on this subject and are doing a massive disservice to young doctors who are naturally cautious investors as it is. Now you are stirring up uncertainty and clouding others’ ability to understand the asset/technology/opportunity by posting irresponsibly misleading and misunderstood (on your part) information. This article would have been quickly dismissed a year, two, even three, four five years ago as lacking basic understanding of what’s even going on in the space or what blockchain/crypto is at its heart. The fact that this article was posted TODAY, NOVEMBER 15th, 2021, makes me strongly discount not only your judgement on day-to-day investing and personal finance 101, but makes me discount everything you’ve ever published, including medical research and this entire website. By the way, the right 33% of your website reminds me of Times Square — the irony
It’s amazing you spend so much time reading something that is only 67% accurate.
Classic internet hater: “It’s all wrong, but I’m not going to tell you what’s wrong about it”.
I don’t. At all. I don’t spend any time reading your terrible advice. I never would. My brother, who is a surgeon and who I respect deeply, sent me this link after I’ve been bothering him to invest in crypto. I skimmed through it and immediately saw flawed arguments, glaring omissions, regurgitated scare tactics, and so on and immediately understood why he’s been hesitant to even give me the time of day to hear about it
Your advice is awful financial advice – it’s just cozy financial advice for doctors that have worked hard for a large salary and are frightened to lose the extra money they’ve worked hard for. You just feed the patient what they want even though you either a) have no idea what youre talking about or b) know full well that it won’t make the patient better, but it will certainly keep them sick and a patient
Thanks for your valuable feedback.
Jim Dahle has provided a valuable service to the medical community to increase the financial literacy of physicians and other healthcare professionals.
For many years, he did it free of charge because he believed in what he was doing.
To come in here and criticize all his excellent work is pretty pathetic.
The information here is still free to you, that hasn’t changed. Free blog. Free podcast. Free videocast. Free newsletter. Free Forum/FB Group/Subreddit. I was always trying to make money with WCI, I just wasn’t very good at doing so for a while.
I actually appreciate WCI finally producing a post about crypto. I have an EM buddy who is a little over a year out of residency is now a “Bitcoin millionaire” (~$1.2mil in assets) because he’s been putting in $10k per month of his attending paychecks into crypto over the last year+ in addition to his residency contributions. I personally have about 5% of my portfolio in ETH and BlockFi interest account per WCI’s advice. If I would have listened to my friend and invested like him for these past couple of years, my loans would likely be paid off.
I actually enjoyed this article because I did not know about the smart contracts of ETH. Would have enjoyed a little more substance on what a smart contract is and why its superior. Jim, please keep the crypto posts coming. Would also love a crypto-only podcast. I bet this article gets the most hits ever on your website. Would love some follow up on its traffic.
Thanks for the feedback.
They CANT drop it quickly without anyone knowing or without crashing the price of their own investment. Are you dumb? When mining stops, what happens? New supply stops. What happens to demand when supply stops increasing or starts to actually go down? DEMAND INCREASES, CAUSING PRICES TO RISE. LITERALLY ECON 101
unbelievable
You seem triggered Brian. Are you worried your investments won’t keep going up unless there are new suckers to keep buying? Of course you are.
wow there are so many errors one cannot possibly address them all. First look at my email. AOL.is not defunct. Second I use BING as a search engine. so third analogies are never anything close to any kind of proof or even explanations. in a fight a lion will beat a tiger because a tomcat can beat a rat. Bitcoin is not a software it uses software to to run the money.
GOOD Money is scarce , immutable and liquid and cannot be controlled by humans!!! all cryptos except bitcoin fail at one or multiple of those tests.
What happens when we mine the 21,000,000,000 bitcoins in the 2040’s? we start using the 210,000,000,000 Satoci’s that will take us to 2400 or more. Sth is controlled by one person who can inflate it all he wants and reverse transactions as he already has and its subject to torture or coercion or bribery. Try that with Nakamoto. speed have you heard of Lightning? Defi and Smart contracts? That is not money. It coin is money like gold is money that is not the same as currency. DEFI may be useful in the future as better legal entities and that can be added on to bitcoin if it turns out to be useful. You need to do some serious learning by reading e” the Bitcoin standard” and listening to Trader University”s bitcoin videos. free on you tube . To repeat you are wrong on so many counts I can’t continue. Have you heard of ElSalvador?
How’s AOL and Bing these days?
Wow your post has a huge error itself. The total number of bitcoin is 21,000,000, not the 21 billion you typed out above.
[Ad hominem attack deleted]
@Mark Maynard
Your points ignore the apparent weaknesses of Bitcoin stated in the article. Can you refute these to further support your position?
Only one way to know if it ages well or not. The first mover advantage is a big deal, but there is literally nothing else keeping anyone from making another Bitcoin, so the scarcity argument only works so long as people believe the first Bitcoin is somehow better than all the others.
WCI–just wondering if you’ve read “The Bitcoin Standard”. I own no crypto, but read it as an educational exercise. It addresses your arguments, particularly the one about why other cryptos are not as good as BTC. I have no opinion either way at this point, but did find the author’s reasoning to make some sense on that point. Of course I’m sure he owns a lot of BTC . . .
No. Care to summarize the arguments?
This is it in a nutshell:
“All other cryptos have varying levels of centralization and thus subject to government regulation or subject to changes by those who control it. ”
In other words, the argument goes, BTC is the only ground up crypto (which according to the author of the book is its most important attribute)–everything else is a top down knockoff. Again, I don’t know enough about crypto to verify, but he does give an example (and I think it’s ETH) where some was stolen and the designers went back and undid the transaction (thereby proving (in the author’s view) that the whole ETH protocol is suspect ). This would be impossible with BTC unless over 51% of everyone using the protocol approved it.
I’d recommend the book, if only to bolster your ability to knock BTC.
Jim, I’m with you. My perspective is that of a crypto dabbler who puts some play money in. While there is a paradigm shifting nature of BT, I think it has been overstated by posters here. I haven’t seen an acknowledgement that (most) people owning crypto living breathing human beings subject to the rules of citizenship in sovereign nations. Most governments on the planet don’t (usually) tolerate their currency being devalued and have very big levers to pull (a la IRS and tax code) and other stroke of the pen measures–these transactions still require access to the network via wifi/cellular/etc which are squarely under government control most places, albeit indirectly. What good is a currency if you hoard it away and can’t spend it without incurring massive penalties? The idea that a few high schoolers and techies who bought a BT lottery ticket in the aughts for mere pennies will be the financial rulers of the world whenever the last Satoshi has been mined seems a stretch. The vast majority of ordinary people would not tolerate the downward pressure that would be imposed on transacting with such an instrument, when all they really want to do with it is buy a coffee with it. Maybe you can’t just create a new Bitcoin, but there are a LOT of ways the institutions that run the world can break the original. Crypto won’t go away, but there will have to be a peace made with fiat currencies.
“there is literally nothing else keeping anyone from making another Bitcoin”
You used the world literally incorrectly, by the way. This sentence literally could not be further from the truth. You could never make another Bitcoin and develop its network to this point without one or many government(s) or group(s) of mercenary-hackers sabotaging it. It would never happen. It only happened because it flew under the radar long enough for it to be impossible to stop/delete/destroy/prevent as we go forward.
Either this is intentionally misleading/trolling or med school did not teach you to think critically whatsoever. Again, you have not done you reading/homework, which you should know you must do if you actually graduated from med school. Did you? Actually graduate from med school? Why would someone ever buy and hold a worthless object for $60,000 that anyone with half a brain, according to you, could re-create?? They wouldn’t, would they, if they knew what they were doing – so your next question should be ‘what is it that they know that I don’t?’ not ‘why are these people so dumb?’ Because they aren’t dumb, they’re among the most successful and most sophisticated financial institutions and investment managers on the planet. You wrote somewhere else “consider how fast institutions can drop bitcoin” – THEY CAN’T – NOT FAST AT ALL – NOT WITHOUT SIMUTAENEOUSLY CRASHING THE PRICE OF THE VERY THING THEY OWN. Do you know ANYTHING relevant about basic investing? If you knew anything about finance you would know that these juggernauts do not buy and sell on a whim, they study meticulously what they will buy, buy it, and then hold it because they believe the value will rise in the future – they don’t buy and flip bitcoin quickly, they don’t do that with any of their investments, only specialized/boutique hedge funds/trading shops do that.
Please god put your money where your mouth is and short BTC, please, please, please, almost nothing would make me happier than seeing an arrogant doctor/lawyer/politician/banker talk brazenly and ignorantly about a subject they know nothing about, not be a coward by putting their money where their mouth is, and then being made a fool of for it
Tell me more why bitcoin cant possibly “be the best bitcoin?” Lol.. what does that even mean? Bitcoin is the name of the currency, like iPhone is the name of a cellphone. Are you really that thick-headed and slack-jawed at the same time? 😀 dear god
You write, “not be a coward by putting their money where their mouth is.” It appears you must invest in Bitcoin. I’ve invested in Bitcoin in the past but was hoping you could elucidate this point a bit. What is your personal portfolio percent allocation towards stocks, bonds, crypto, etc. And what is your breakdown within crypto of Bitcoin versus Etheureum, etc.?
I agree. You have really not in the work needed to understand BTC. Contrary to your assertion that people in BTC are FOMOits. Some of us have done the work, understand math and more importantly risk vs benefits and position sizing.
Just like Einstein would never agree to Neils Bohrs quantum mechanics… though his theory laid the foundation for quantum mechanics , your concept of being frugal taking control of your financial destiny, avoiding high cost and inflation leads to BTC.
All the arguments you have raised are not new and have all be addressed. BTC 12 yrs have proven it to be anti fragile.
I Stay curious and keep learning especially when seismic changes are afoot(run away inflation). I hold strong opinions but willing to change.
On second look, it appears this article did in fact age well. LOL!!!
I’m not sure you can conclude that yet. Bitcoin is still winning the race against its peers; whole field just got punched in the nose.
ada is also best currency in future i think
This article will unfortunately not age well. There’s a reason Bitcoin is called Digital Gold. Just like Gold its impractical to use day to day but somehow has remained a consistent store of value. Bitcoin is a scarce, decentralized an incorruptible. Most who are knowledgeable about crypto believe it will remain King of the cryptos for sometime to come. Bitcoin only appears volatile for those looking at it day to day. Bitcoin has increased in value over 100% year after year for over a decade straight. It’s trajectory is unwavering and upwards. I cant name another asset which has done this. This is probably our only hedge against inflation and hope more physicians consider learning more about Bitcoin.
“Somehow has remained a consistent store of value” for less than 15 years. Not exactly a long track record. Not very consistent either, but at least it has mostly been inconsistent in a favorable direction so far! And unwavering? Have you even looked at a BTC chart?
Just an observation that since this comment was posted, bitcoin is down 50%.
I’m curious to see how things go with cryptocurrency over the next several years. My guess is a repeat of UK’s Railway Mania, but who knows.
Your curiosity can be easily resolved by looking at any bitcoin chart going back greater than a year.
The asset has gone through multiple similar and worse corrections since inception in 2009.
However, in the long term the asset has compounded at roughly 100-200% a year for the last 13 years.
Volatility is the price paid for return. Only manipulated propped up markets go up consistently without correction. Volatility should be welcomed by any serious long term investor because it only wrecks short term speculators.
Cool. I’ll be back in 5 years and another 5 after that and see where it all ended up.
If it keeps dropping down to $20K, there will have been no nominal return (much less a real return) since December 2017. The price you buy something at matters, especially when the return is entirely speculative.
Trees don’t grow to the sky. If you’re expecting long-term 100% annual returns on anything you are highly likely to be disappointed.
That scenario can happen only if you went all in for the ~30 day period at the end of 2017 when it peaked and continued to only purchase at peaks like a degen gambler. 11 out of the 12 months of 2017 was below 10k and the following 4 years consolidated around 10k as well. Even if you’ve been DCA’ing from even the highest peak of 2017 you’d still be up substantially with a drop back to 20k….ifff
I cherry picked the time period for sure.
While my crystal ball is cloudy, I disagree. I don’t think all cryptocurrency is going away within a few years. I think there will be lots of shuffling though. As far as BTC, there are probably too many true believers for it to go to zero any time soon, but I would expect it to remain volatile and to continue to oscillate back and forth on either side of what it actually costs to mine a BTC. I believe that figure is around $10K currently. Why someone would pay $70K for a BTC when they can mine one for $10K is beyond me though.
Yea forssure. Why purchase an apple when you can grown it your self.
It’s because profit exists in any market economy as the main mechanism for growth. Without it participants wouldn’t be incentivized to take risk. Like spending capital on land, infrastructure, and ASICS hardware.
And your valuation thesis doesn’t really make sense. You are attempting to fit a square into a circle peg. Even gold isn’t valued that superficially. Cost of production matters but the market ultimately determines prices based on value.
If you’ve come the conclusion that treasuries are a legalized ponzi scheme and don’t want to take part in them then bitcoin is way more valuable then 10K.
I won’t be able to sleep before my night shift if I don’t correct that darn spelling!
If you’ve come the conclusion that treasuries are a legalized ponzi scheme and don’t want to take part in them THEN bitcoin is way more valuable THAN 10K.
🙂
Yes, but the price of gold does not become completely untethered from the price of production.
People talk about $1200 being the cost of mining an ounce of gold. From 2012 until now gold has ranged from $1100 to just under $2000. It hasn’t gone to $7000.
I agree that some people are buying BTC for belief system reasons rather than any sort of rational investment reason.
That’s a pretty big range for such a large and established asset like gold. I’d would say “detached” in that context.
Belief? Maybe in the context of societal externalities such as stabilizing the energy grid, bringing free and inclusive financial services to the rest of the developing world, removing money from state, and promoting individual sovereignty by allowing self custody of capital.
As far as one’s personal portfolio it takes way more belief to use a treasury than btc. It’s just simple bond math. What’s the saying? Full FAITH and credit of the US govt? The credit is based on faith because if credit risk was assessed the same way you would do for a corporation then the treasury would be a negative yielding junk bond in real terms. “Return-free risk”.
I believe the new Bitcoin update allows for smart contracts. Many of these points are well known and valid concerns with Bitcoin. I wonder how many of these concerns can be fixed with future updates.
I was happy to see that. It’s a fast moving space when things can change in between the time I write a post and when it is published.
Things didn’t change between the time you wrote the post and when it got published. The taproot upgrade has been planned for a long time and it just happened to coincide with the publishing of your opinion piece. I won’t accuse you of knowing this and intentionally leaving it out of the article but it certainly does take away some of your credibility when it comes to commenting on Bitcoin and crypto in general.
Does it bother you that your favorite asset is still having to be fixed after over a decade in use?
lol Jim now you’re just straight up trolling
I figured you didn’t want to make any sort of specific argument that someone might disagree with. We’ll leave that to the man in the arena.
Sounds to me like you’re more interested in sniping from the peanut gallery than having any sort of legitimate discussion. Kind of like most of the cryptofans commenting today that pour out derision at anything that doesn’t fully support the speculative positions they have taken with their money.
What about my last post offends you enough to not post it? Is it because it makes you look bad?
I haven’t deleted any of your posts. You did have one held for moderation though, which I have since approved. Not sure why. It just does that sometimes.
If you’ve been reading the other comments, you know I’m not afraid to allow comments on these posts that disagree with me, call me names etc. Yours was hardly the most offensive of the lot. I think Brian probably wins that award, but since he is not a regular reader, I assume he doesn’t know me very well. Most of the time those sorts of ad hominem comments say more about the person making them than about me.
I appreciate the clarification and I apologize jumping the gun.
we’re chatting over in the forum, you should join us some time
90 comments here so far today and that many more on Twitter. Hard to have this discussion in a half dozen places at the same time. Thanks for the invite to my own forum though…
forum discussion > blog comments > twitter
Depends on your goal for the conversation I suppose. If your goal is to have someone else actually see the conversation, that probably isn’t the right order.
Nice strawman argument, Jim. I never called it my favorite and I never called it an asset. I also never said I invest in crypto. It’s clear you have an axe to grind. And don’t act like you’re interested in having a “legitimate discussion” because you’re clearly not. You present incorrect information/analysis, get called out on it with facts, and then claim “sniping from the peanut gallery.” I don’t expect you to admit when you’re wrong, because you don’t seem to be that that kind of person, but Dunning-Kruger has taken ahold of you on this topic.
And just as an aside, does it bother you that your “favorite assets” (be it the dollar, the stock market, bonds, etc) are needing to be “fixed” all the time? Because the fed sure has done a lot of “fixing” lately, haven’t they?
I see the crypto lovers and BitCoin keyboard warriors are predictably out in force and no doubt won’t be able to resist responding to this comment. Not going to refute their points because it’s a waste of time and you can’t reason with something that has little logic behind it. It’s reminding me of Pets.com. BitCoin will continue to go up but if I were actually to get into this market, which I never will, I’d start shorting it and hope for big profits from that within the next 10-20 years.
Yes, it’s very interesting that they think I’m nuts for putting 0% of a portfolio into it then admit they only have 1%, as if there is some significant difference between those two positions.
1% btc + 99% cash portfolio has beaten the S&P 500 for the last 10 years. If you had entered early of course. Maybe 5-10% will do the same moving forward? Who knows. I’m personally 30% btc. I’d be happy to sell you both puts in the future 🙂
30% huh? That’s a big bet. Tough month for you eh?
What year did you buy most of your BTC? I’m guessing it wasn’t 2011.
Why would it be tough? This is a great sale to acquire more for long term accumulation. I’ve been DCA’ing since early 2017 and will continue to do so as with the rest of my portfolio. That allocation is still beating the market Jim. Swing and a miss.
Don’t put serious money in crypto but join us for the Facebook Live event for a private REIT with a minimum investment of 25k!
Jim, I think the predominant argument against BTC is that it has no intrinsic value. People don’t see worth in it because it’s not tangible. I just think it’s too convenient and shallow view. Here’s no examination in that argument. It’s basically a knee jerk response. It’s an argument that my mother could give.
Let’s take a step back. I think a decentralized blockchain is an amazing technology with so many use case applications. At its core it allows people to trust information on the ledger without having to trust individuals. That’s quite powerful. You can basically enter into a transaction with absolute faith that it will occur without having to vet anything.
And BTC is the progenitor to the entire industry that will rapidly and inexorably be a critical part of our everyday lives. It’s not the best or fastest blockchain, but it has huge historical relevance. Like if you were able to get an Apple one, what would that be worth? It’s relevance is not how it’s specs compare to modern day computers. It holds huge significance as a collectible. Except BTC is the not just the first of a company, it’s the first of an entire industry, and perhaps the most life changing industry since the internet!
There are many very wealthy people who would be happy to just horde and hold it. They won’t ever sell it regardless of what the market does. 80% of BTC does not get traded. The wild swings are from the 20% of circulating supply where people are trying to scalp a profit. The real people who own bitcoin are not selling, they don’t need to cos they’re wealthy and even extreme swings in the price doesn’t significantly affect their net worth.
AOL was very historically relevant too.
I disagree that there are a lot of people who will hold it if it drops 99% in value.
In the 2017 crash 86% of people did NOT sell. Pretty amazing statistic.
14% sold? That’s actually dramatically higher than what is seen in stock market crashes at least per Vanguard’s data.
Are you suggesting we should take on some advertisers selling cryptocurrency related products and services?
The lightning network which is a second layer of Bitcoin solves most of the points you make against Bitcoin. With the lightning network you get
1. Smart contracts
2. Drastically reduced energy requirements. It costs me about $7 a year in electricity costs to run a lightning node.
3. 40,000,000 transactions per second.
4. Fees as low as 1 sat/vbyte. This can be as low as .001% of a transaction.
There are already stores that accept Bitcoin as payment and they use the lightning network to do so.
Volatility is an issue. But what is the metric to decide what the baseline value is? Is it the USD? Didn’t the fed increase the money supply by 40% with the click of a button?
Maybe Bitcoin won’t be the big winner 10 years from now but the lightning network solves many of these major issues.
I agree the lightning network addresses some of these issues partially, but introduces new issues.
I will never understand why very early adopters seeing the intended use of the asset as more of a transactional currency as apposed to a store of value adds to one’s skepticism. It’s completely irrational. The internet was thought to be of use only for the military’s endeavor to share government research. Obviously, as the use case evolved the value has only increased.
Yes, but in the case of the internet the use cases increased from what was expected. With BTC, they have decreased!
One can only come to that conclusion living in a bubble Jim. There is really no debating this. The asset has clearly increased in adoption and its use cases have not only increased but matured to an institutional level. Store of value, inflation hedge, credit default hedge, financial sovereignty in the form of being able to securely self custody capital for the first to in human history without a third party financial institution, and remittances in some cases just to name a few. And the asset’s infrastructure side has endless applications already being applied in expanding and stabilizing energy grids.
You’re a true believer. I would submit that perhaps you are living in a bubble in a lot of ways. BTC isn’t a “store of value”, it’s down 50% in the last month. It isn’t an inflation hedge. Inflation is up and rising and BTC is again, down 50% in the last month. None of these proposed uses are new either. Remember how it was supposed to be a useful currency long before now? Remember that? Buy pizza? Pay for your gym membership? No, the uses cases for BTC are decreasing, not increasing.
At any rate, I’m not going to talk you out of this any more than I’m going to be able to talk you into changing religions so I’m not going to try. Hope it all works out okay for you in the end.
You’re missing time scales Jim. The WCI plays the long game. The asset is 100% hedging inflation and preserving value for anyone DCA’ing over the long term. It is for me.
Why does it matter if it was first proposed as a peer-to-peer currency? And why would it matter if those use cases are new or old? Multiple theories are postulated, some are adopted and mature over time. It’s the most obscure logic i’ve heard so far to criticize the asset class. It makes less contextual sense than saying it “wastes energy” or is “used my criminals” as if the existing monetary system isn’t riddled with corruption and waste. Gold was used a currency as well, how long have you been waiting for the crash on that? Several hundred years? When’s the last time you use your chest of gold doubloons to buy pizza? It’s empty logic sir.
There are many many rational reasons to not to own bitcoin. That ain’t one.
Is it possible that maybe you have a hard time changing some of your readers mine on this topic is because you’re incorrect?
Not my job to change anyone’s mind.
And no, I don’t think Gold is a useful currency either. Hasn’t been for a long, long time. I don’t think it’s a good investment either, so saying BTC is “digital gold” makes me like it less, not more.
You said the use cases for BTC are increasing. I showed you that they are, in fact, decreasing compared to what people thought it would be used for initially. In fact, the primary one appears to simply be speculating on its value. That’s why most people buy it. So don’t kid yourself. If you don’t believe that, you’re the one in a bubble.
The asset appears to have zero correlation with inflation as near as I can tell. A hedge would be something that goes up with inflation. It seems pretty clear it doesn’t do that. Just because its returns so far have been higher than inflation so far doesn’t really say much.
BTW–I noticed you dodged my question about when YOU bought your BTC. It really doesn’t matter what the returns were in 2011 if you didn’t have any money in it at the time. Very few did. The vast majority of BTC owners don’t have spectacular returns. In fact, if it drops back to the cost of production, I would guess most would have negative returns.
Fair on gold. But I would barely call both an investment tho. They’re more savings vehicles. But these are semantics now and it doesn’t change the main point that it’s use case changing and also increasing is a completely irrational and logically empty reason to be skeptical of an asset. There is zero precedent for that. Give me another example if there is please so I can understand.
I clearly listed TWICE now the use cases. They have increased. This is 3rd grade math. 1 proposed use(currency) to 1+ uses(inflation hedge, store of value, credit default hedge, financial self sovereignty) is an INCREASE. Just because YOU don’t use it for any of those reasons doesn’t make it not true for others.
Incorrect for a couple reasons. An inflation hedge doesn’t have to immediately go up with inflation. A lag in one direction or another doesn’t negate a thing. It’s actually the CPI calculation that lagged. Even at this lower price(36k at the time of writing) btc has doubled over the couple years as the money supply increased at the same time. Instead of waiting for CPI you could have watched btc’s price.
And BTW I never dodged your questing because it only supports my point. I answered my entry time in the other post a couple times now. DCA’ing since 2017, still beating the market, stilling beating inflation.
People have been talking about those uses for a decade so I wouldn’t call them an “increase.” BTC was supposed to change everything. So far it hasn’t changed anything. Maybe it will still, but 10 years after I heard of the internet it had completely changed my life. 10 years after I heard of BTC I still haven’t even needed to buy one and all anyone is really doing with it is speculating.
Like most current owners, you missed out on all those pre-2017 returns, so you can quit claiming them as yours. Still good returns since then (at least for money put in between 2018 and 2020) but not the absolutely mind-smashing ones that anyone who bought BTC in 2011 has experienced.
I totally believe that you’ve never needed to use it. And most never need to use insurance….
The internet started development in the 1960’s. What you use today is the product of over a half century of network maturation.
And I never claimed 2011 returns Jim. Wish I could. Only told you that my allocation beat market, a lot. Any anyone who’s DCA’d from even the last couple years is prob beating it as well.
I hope that’s still the case two years from now. But I seriously have no idea whether it will be or not.
As far as the internet, I first heard of the internet in 1995. By 1996 I was using it every single day. I first heard of BTC in 2011 and I’m still not using it at all, much less every single day. Don’t you think it’s possible that maybe BTC is not and will not ever be as useful as some people think it will be? It certainly does not yet appear to be the equivalent of the internet so maybe we should quit using that analogy. Maybe it’s more like a projection TV. Some cool niche uses. Some people get one. Some people don’t. But it really doesn’t dramatically alter society.
And if it’s just insurance against societal collapse or need to flee the country, then you have to weigh the cost of the premium. For example, if you want to be able to flee the country with $1 million worth of BTC, you have to spend a million dollars on it. That’s kind of expensive. Now you can say the premium is less than that (or is even negative if the BTC appreciates), but that’s not accounting for risk. And that’s where the nub is…how do you account for a risk that nobody really completely understands. What is the risk of a serious, permanent loss of capital invested in BTC? 5% in 20 years? 50% in 20 years? I have no idea but it certainly isn’t 0%.
I have no idea what the future will bring but bitcoin’s adoption curve is growing substantially faster than the internet. As far as your insurance concern the simple solution is to DCA over time and hedge the risk like a WCI 🙂
https://coinshares.com/research/institutional-crypto-adoption-three-factors-watch#:~:text=Bitcoin%20has%20been%20growing%20at,4%20billion%20users%20by%202030.
https://bitcoinist.com/how-bitcoin-adoption-rate-is-beating-the-internet/
https://michael-levin.medium.com/part-1-the-dual-adoption-curves-of-bitcoin-2ffafbc5d5e7
The adoption curve is growing substantially faster than the internet? What world do you live in? I completely disagree. But I suppose if your news source is “Bitcoinist” I can see why you might be confused. Bitcoin has been “on the verge of mainstream adoption” for years, but for some reason, it never gets adopted by the mainstream.
Remember that infrastructure had to be built to get the internet to everyone. That infrastructure for Bitcoin, i.e. the internet, was available from day 1. The adoption of internet use AFTER the infrastructure was in place was very rapid, far more rapid than BTC.
Besides the adoption of a speculation habit isn’t exactly a good thing. The actual number of people using BTC for anything else is pathetically small. For example, what are you using it for? Oh, speculation like everyone else? Why am I not surprised? All these use cases and the primary one is roulette.
Nice try.
Cute. You’re more than welcome to double check the sources Jim. Please accept my forgiveness for not citing CNBC.
Sorry, it just seems like you are intellectualizing yourself out of common sense on this one over principle. Holding bitcoin is use, plain and simple. The adoption RATE is faster when simply counting how many humans own bitcoin over time. Basic stuff man. And it really doesn’t matter in the end if you don’t like the way some people use it. You’ve narrowed your scope like many do on emerging technologies. Reminds me of Paul Krugman’s comments about the internet’s effect on the economy being no greater than the fax machine’s lol.
If you admit no one has a crystal ball then who is the more irrational investor, the one suggesting to have a zero position or the one suggesting a non-zero position?
No called strikes. You don’t have to own every investment. You don’t own every crypto, every beanie baby etc. That’s a straw man argument anyway.
On a side note, I find it fascinating that people go to blogs with the goal of convincing the blogger of something. Weird reason to go to a blog. If you find a blog useful or interesting, feel free to read it. If you think it’s stupid, stop reading it. If you like something but not something else, take what you find useful and leave the rest. But it’s almost like people get a sense of angst when they find out a blogger they previously thought was smart disagrees with them on something and it drives them to try to convince the blogger to agree with them. Produces cognitive dissonance or something. Or maybe they’re just trying to save all my other readers from my folly. Beats me. But I find it odd. Mostly only happens with whole life insurance and Bitcoin though. They’re the only two things that people hold very strongly held almost religious beliefs about. Nobody shows up and argues with me for days about how to rebalance a portfolio or whether 100% stocks is a good idea or not. They’re perfectly fine with differences of opinion on those topics. But BTC? Nope, anyone that doesn’t agree must be stupid.
Either way, I doubt you found the conversation any more useful than I did so perhaps we should end it.
Good luck investing.
Relax man. If you took a step back you would realize it’s just a conversation not a mission to discredit the blog. The irony is that that you accuse anyone who disagrees with you of religious fervor and absolutism. It’s not a good look and it’s a classic manipulation tool wether intentional or not. Two things can be true at the same time. I can respect you and your blog for the value it offers and also believe your content on bitcoin is intellectually dishonest.
I appreciate your attempt at making sense of bitcoin, but there are a few things that need to be cleared up.
1) Bitcoin can perform smart contracts
2)Bitcoin is currently an asset, not a currency. This might change in the future when the halvings don’t have as great of an effect on the supply shock and miners make most of their money from transaction fees.
3) Your argument for the high energy use is the exact reason why Bitcoin will win the race. Energy use = secures the network. It’s the entire reason why it it hasn’t been taken down by a 51% hack. Renewable energy is already ramping up in the space and will continue to rise.
4) Speed of transactions are slow on the final chain, but that’s what layer 2 solutions provide. No reason to store all transactions on the final blockchain at all times, it can be done in chunks and this means fast transactions which are also secure.
Unfortunate to see such mistakes, but mostly that’s what happens when someone tries to educate about something they aren’t experts in. I’d be happy to talk about it if you ever want someone to ask questions about the tech.
I appreciate all you do
1. The Taproot upgrade took place just a few days ago, long after this article was written.
2. That’s my argument. But bitcoin fans have long been arguing its use as a currency. Which it still doesn’t have.
3. Yes, it makes it more secure, but also makes it less useful. Renewable energy doesn’t change that.
4. Sounds you agree I’m right with the speed criticism. There are lots of ways to improve on this, and you find them in other cryptocurrencies. In fact, nearly every other crytpocurrency.
Thanks for your comments, even if they’re a thinly veiled ad hominem attack. If you want to “talk about it” it’s easy to submit a guest post here:
https://www.whitecoatinvestor.com/contact/guest-post-policy/
Renewable energy doesn’t mean zero cost. Many earth minerals are required for manufacturing renewable energy infrastructure – copper, nickel, manganese, cobalt – to name a few. These finite resources use energy to extract from the earth and process into a useable form. Billions of people don’t have access to clean water, sanitation, hygiene, food, healthcare, transportation, housing. Energy for basic human needs trumps cryptocurrency.
Does this article mean WCI is shorting bitcoin?
Heck no. The usual problem with shorting is the market can remain irrational longer than you can remain solvent. That principle certainly applies here. And that’s not even including the possibility that I’m wrong, however small that probability may be.
I’m very happy using DuckDuckGo! If it makes me lonely, so be it.
I’ve grown weary of feeding the Google data vacuum. I didn’t even want to have to click the reCaptcha, haha.
sadly Jim looks at bitcoin through the same flawed lens as most everyone else. if you try to understand the concept of “money” you can begin to understand the fundamental flaw in the analysis
bitcoin is solving a different (and far more important) problem than ethereum and cardano and solana etc
Jim if you want to discuss come check out the forum
https://forum.whitecoatinvestor.com/general-welcome/302515-discuss-latest-wci-blog-post-bitcoin-is-just-like-aol-it-won%E2%80%99t-win-the-race-for-best-cryptocurrency#post302579
Taproot upgrade (which has been in the works for a long time) addresses many of your concerns. It greatly increases it’s use cases. Not commenting on this upgrade in your article maybe takes away some of your credibility on the topic? Blockchain is the future of the internet and anyone who refutes that is not paying attention. Yes, most cryptos will fail but saying with certainty that Bitcoin will fail is shortsighted.
I’m very disappointed in this article. You are misleading your readers into missing one of the greatest technological advancements and investment opportunities in our lifetime. Bitcoin HAS ALREADY WON as a store of value and inflation hedge far superior to gold and fiat. Additionally you basically ignore taproot, the lightning network, worldwide adoption, corp balance sheets, the total failure of the bond market causing investors to flock to bitcoin to beat inflation, the growing institutional interest, the regulation clarity, etc. please really research BITCOIN I think you will have a different opinion an this revolutionary technology.
I almost correctly guessed the number of comments this morning by just reading the title! Crypto truly is the Third Rail of finance. The nearly religious fervor around this stuff should be a warning. We’re at the point where office staff making $11/hour are “investing” in crypto while at work.
Shiba to the moon!!! :O)
sadly Jim you’re looking at bitcoin through the same flawed lens as most everyone else. if you try to understand the concept of “money” you can begin to understand the fundamental flaw in the analysis
bitcoin is solving a different (and far more important) problem than ethereum and cardano and solana etc
come on over to your forum and discuss
Disagree with your underlying thesis. Bitcoin will likely not be replaced for its purpose. Comparing ETH, BNB, ADA , SOL etc or any other programmable layer 1 protocol to BTC is like comparing bonds to RE and saying one will replace the other. Completely different functions. This is why:
Cryptographic blockchains are a spectrum.
Security(Immutability/decentralization) VS. Programmability & Transactional efficiency (centralized/easily changed)
The base layer for a new digital global monetary system needs to absolutely secure, completely decentralized and immutable(entire purpose). If we are removing “trust” then there is no compromise on the feature of security and immutability. This currently eliminate every other currency out of the 6000.
The other protocols sacrifice security and decentralization for more function. This is great for other things. Smart contract platforms you mentioned. These are currently being used for decentralized finance applications, NFTs and play-to-earn.
A separate argument could be made that all these applications could be ran on a layer 2 bitcoin in the near future. Things like the lightning network and Stacks protocol could theoretically make programmable but insecure layer 1 protocols irrelevant.
The energy comment is incorrect. Capital = Frozen Time + Energy. The two most important resources in the universe. The energy costs needed to secure such a precious asset in form of bitcoin let us say is miniscule. For a fun comparison the energy costs of securing the world’s capital in form of millions of govt and private banks, financial institutions world wide to name a few trumps bitcoins energy expenditure(I guess the sky scrapers in every city are powered by unicorn kisses…….crickets). I also don’t see you making the same argument about your washing machine or refrigerator usage, both trump bitcoin’s energy expenditure. More importantly energy is not wasted, it can only be used/changed for a valued purpose. Value is personal. You are also missing how it can revolutionize the energy grid and improve carbon emissions.
Via email:
Your blog post made me think of an email I read a few months ago that separates the crypto industry between currency versus technology. I attached it in case you want to give it a quick read (it’s short) because I thought it did a good job separating what makes bitcoin unique in the crypto market.
Also, I don’t want to make this seem like I’m trying to do a point-by-point rebuttal, but the energy usage conversation is flawed in many ways, and I don’t think it’s done maliciously. Here’s a blurb from Nic Carter writing about the Bitcoin Energy Debate, where he says:
Many journalists and academics talk about Bitcoin’s high “per-transaction energy cost,” but this metric is misleading. The vast majority of Bitcoin’s energy consumption happens during the mining process. Once coins have been issued, the energy required to validate transactions is minimal. As such, simply looking at Bitcoin’s total energy draw to date and dividing that by the number of transactions doesn’t make sense — most of that energy was used to mine Bitcoins, not to support transactions. And that leads us to the final critical misconception: that the energy costs associated with mining Bitcoin will continue to grow exponentially.
Here’s the link to the article if you’d like: https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume
All in all, I’m excited to see how it unfolds, but I don’t think bitcoin is necessarily the AOL of crypto. Maybe it will be. Maybe not.
Thanks for sharing your post!
Thanks.
What do you think is flawed about the assumption based off that article? Because Tx fees energy costs might go up? Bitcoin’s energy expenditure is going to reflect how much value it offers in the form of capital preservation. Banks and financial institutions do this right now but more inefficiently from an economic and environmental point of view because of the need for a trusted third party. I don’t see you asking your readers to reconsider Laurel Road because their annual electric bill was too high. The concept is ridiculous to even debate to be honest.
I find it amazing that I’m always getting cryptofans writing me asking me to write more about it, but then when I do those same fans complain about it. Yet none of them ever send me a guest post about it. Very interesting.
Easy to snipe anonymously on the internet.
For me, I like to try to sharpen or sometimes change my point of view by pushing back on an alternative point of view from someone I otherwise deeply trust for financial guidance. I try not to snipe. Other might get carried away.
Really? Such a disappointing post! You are doing a serious disservice to the young doctors and others that follow you. Wise men admit when they are wrong. I look forward to a future retraction but I’m pretty sure we will never see one as you’re not so wise after all.
I would like a working, stable cryptocurrency so I can buy stuff in other countries or send money to family without the banks making up their own exchange rate or taking a cut.
I’m sad to think it may not have been invented yet.
Sorry Jim.
But this is monumentally bad post. There are an incredible amount of inaccuracies and incorrect statements in it.
To seek truth requires one to ask questions. Too many people never ask about something because their ego and arrogance prevent them from doing so.
Continuing to dig in on previously bad opinions and refusing to ask questions and learn about something does a disservice to your readership. You claim that you have learned about Bitcoin and cryptocurrencies. However, this post proves that you have not and are not continuing your financial education. If you refuse to learn about it, I would suggest you discontinue posting about it.
Cheers.
“It’s all wrong but I’m not going to tell you what is wrong.”
Thanks for the not so useful feedback.
This is disingenuous.
You know we have “discussed” it before. But in case you forgot, you could start with the thread on your forum that is now about 140 pages long that I started in May of 2020 when the BTC price was about $8,800.
https://forum.whitecoatinvestor.com/general-investing/236645-bitcoin-is-still-early
Dr. Dahle,
I generally like your podcast and advice but respectfully disagree with your assessment here for the following reasons:
1. This idea that there is a “best cryptocurrency” is an erroneous way of framing things. If you frame it that way then you’re probably going to try to find the best one as you suggest. The issue is that most cryptocurrencies aren’t currencies and we’re never designed to be. However, they all exist on blockchains, which enables them to be very easily traded like currencies, and as a result a lot of people trade and use these coins like currencies. Call it “off label use”. The term “crypto asset” is a better one, and crypto assets span all kinds of different use cases, so you can’t really compare all the coins in an apples to apples manner. But it is very hard to resist that urge since they all exist on a blockchain and can be traded more or less in the exact same manner. This multiple markets and different use cases for crypto assets are important nuances to understand about crypto.
2. Bitcoin isn’t a great currency for many of the reasons you described – I agree with you more or less- but it is a GREAT store of value. It’s a better store of value than gold (which is also a horrible currency), and that’s enough to be bullish Bitcoin for at least our lifetime.
3. I don’t think it’s fair to use diversion tactics like bringing up NFTs and Dogecoin when you’re making a case against Bitcoin. Those points are irrelevant and have nothing to do with Bitcoin. I’m not a maxi by any stretch but most people who seriously participate/invest in crypto recognize the pure speculation involved with projects like meme coins. Yes, they are meant as jokes, and I tend to assign little to no value to them, but a lot of people look at some of those coins more as fun – perhaps like a game. And there is value there to those people. Just a different use case to reference my first point.
I hope you’ll be able to keep an open mind when it comes to Bitcoin and crypto in general and have some markers along the way that cause you to re-examine your judgments. Ultimately the market will decide the value of any and all of this, and it seems that the market simply continues to find more and more value in Bitcoin as more people critically examine it.
I hope I’ll be able to keep an open mind too. You will find that most people think their mind is always open and I’m sure I’m not exception.
I really try. I think it takes a lot of discipline to objectively re-evaulate a firmly held position in the face of changes or new information. Regarding BTC, I’m not fully sold on it as there are some very real points of failure such as a 51% attack or some future breach of protocol security. However, I think it is one of the most promising and exciting monetary innovations, and it has really stood the test of a decade’s worth of time – which is significant considering some of the best minds have tried to break it.
A decade is only a long time in the crypto space given that some of them seem to come and go in just a matter of months as technology and investor favor passes them by so rapidly.
Considering that crypto is a new asset class, and BTC represents the birth of crypto, I’d argue that if you were going to invest in any crypto asset, BTC should be the one – very contrary to your opinion and tone in your post. I think that’s probably where I disagree with you the most. Anyone considering investing even a small portion of their portfolio into crypto should be considering investing firstly into BTC. As you say, the majority of the other coins come and go. Why would you choose them over the only crypto that has stood the test of time for the entire lifespan of the asset class?
Hard to use a phrase like “the test of time” and “entire lifespan of the asset class” when we’re talking about little more than a decade. I’ve got multiple cars in my garage older than this asset class.
I actually agree with your comment.
Does it bother you that the use case for Bitcoin keeps getting more and more narrowly defined as the years go on?
I think Bitcoin’s use case absolutely needs to be narrowly defined. Defined as a digital, decentralized, secure, fixed supply store of value. For the most part none of the other stuff like smart contract capabilities matters, simply because being a “digital, decentralized, secure, fixed supply store of value” is too important. I don’t think you could more narrowly define Bitcoin anymore than what I’ve described without eating into BTC’s core value proposition. Ultimately, Bitcoin wins the game if it can unconditionally maintain those above qualities over time.
It’s too volatile to function effectively as a store of value. Not sure how that can be solved as volatility doesn’t seem to have decreased over the last decade.
I think the volatility is more a result of price discovery. There’s been steady and sometimes rapid adoption over the past decade. I think the volatility will decrease once there’s real mass adoption – when the market matures and becomes more efficient. For now, BTC is simply a great investment that outruns the majority of alternatives. One day, it won’t be as great of an investment but most likely a better store of value – so a win-win situation for anyone buying now.
This is a really strong point. We have such limited adoption right now, it’s no wonder the volatility appears high. Much like the stock market in the first few decades, only crypto is available to everyone world wide with an internet connection, right now. Once we hit mass adoption, volatility will decrease even more than it has in the last decade. But for now it’s still a killer investment, despite the rollercoaster cycles.
I find your use of the present tense interesting. Seems more accurate to use the past tense when talking about returns.
Time will tell here. However, past tense returns are inarguably some of the best across all markets. As we approach present tense, YTD returns on BTC are 100%. Sure, lots of volatility. Sure, some people bought the “top”. Sure we could crash 50% tomorrow (we crashed 10% in the last couple days). But over the long term, BTC has only moved in one direction: up.
Present tense though I think a 100K BTC (~70% ROI) is reasonable within the next 12-18 months and that sort of return spanks total market index funds. BTC still has a lot of room to run, especially considering all the present tense institutional investments that are pouring in. Additionally, in the meantime, if you’re holding BTC, you can earn ~6% APY in like kind on numerous platforms.
The key to all of this is taking a long position on BTC. The volatility is scary, and if a person knows they can’t stomach it, then stay out. Otherwise, I think it’s wise to place a small highly asymmetric bet on an asset that has a high probability of having outsized returns. And why not earn 6% interest on that asset while you ride the roller coaster?
Dr. Dahle – this is not your best work. I’ve highlighted the misinformation and lack of understanding in a tweet thread below. I’d welcome a discussion if you are open to it. Your readers do deserve a more informed opinion though.
https://twitter.com/IDFinancial/status/1460330021982195719
That’s not a particularly easy way to keep the discussion in one place. Care to summarize/copy/paste here?
Here is a summary of the thread with resources:
“However, this is simply due to its early start and, thus, its brand name recognition. You do not have to know very much about cryptocurrency to realize that this will not last. ” – this is wrong and an obvious error as you don’t understand what is money – dig deeper.
Resources – The Bitcoin Standard and Gradually Then Suddenly – Parker Lewis (https://unchained.com/blog/dollar-crisis-to-bitcoin/)
You start to advocate for the network effects of #Bitcoin which is good – I’d recommend digging in more there as there is a reason for those effects lasting over time. How many internet types do you use? The same is true of money. Capital flows to the hardest best money. Bitcon at $1T is the digital monetary asset.
“There’s never been an example of a $100b dollar monster digital network that was vanquished once it got to that dominant position. Find a digital dominant network that dematerialized some fundamental thing. Bitcoin is the monetary network.” – Michael Saylor
“Ethereum introduced smart contracts, tiny pieces of code that live on the blockchain, to the world. This was a game-changer. That’s right, Bitcoin. The eventual winner is definitely going to be compatible with smart contracts, thus, it cannot be Bitcoin.” – FALSE
Did you know about discrete log contracts (DLCs) Dr. Dahle? Have you heard about Taproot? I’d recommend digging deeper. (https://river.com/learn/terms/d/discreet-log-contract-dlc/)
Here’s information on Taproot (a recent upgrade as of this weekend) – https://bitcoinmagazine.com/technical/dlcs-are-on-bitcoin-bringing-new-functionality-and-major-potential
Oh boy, the energy FUD “What they may not realize is just how much energy it takes to use the Bitcoin that has already been mined. It currently consumes over 80 Terawatt hours every year.” – SCARY #Bitcoin will destroy the earth – FALSE
Since the world uses over 170,000 TWh of energy per year, that means that the entire #Bitcoin network, at its peak estimated consumption level, uses less than 0.1% of the world’s energy consumption. That’s for a network with 100+ million estimated users. (https://www.lynalden.com/bitcoin-energy/)
“With real-world data, we demonstrate that
bitcoin mining could encourage investment in solar systems (solar grids + batteries), enabling renewables to generate a higher percentage of grid power with potentially no change in the cost of electricity.”
https://assets.ctfassets.net/2d5q1td6cyxq/2D2BnksJjavw4a6SUvAPwZ/c42a9e3a520b0cc3b230cda3b43eead5/BCEI_White_Paper_.pdf
Tune in here to understand why #bitcoin actually is helping the environment become “greener” (https://www.youtube.com/watch?v=b-7dMVcVWgc)
You fail to mention the costs of the current financial system that’s curious – take a look Eyes #Bitcoin is way more efficient. (https://ark-invest.com/articles/analyst-research/bitcoin-myths/)
The energy debate is done right?
“What’s another big problem that keeps anyone from actually using Bitcoin day-to-day? The volatility. You just can’t use a currency that is worth 1/3 less or 50% more than it was a few months earlier. It’s too volatile.” – all monetary develop and grow see ⬇
Collectible > Store or Value > Medium of Exchange > Unit of Account
There are millions of people using #bitcoin as a unit of account and medium of exchange in El Salvador today. You don’t understand the Lighting Network yet – but you should dig a little deeper. It works well!
Also – the volatility is a hurdle to use daily (as shown above it’s a progression) – but protecting purchasing power is massive. You can follow along on the $30 every Salvadorian received worth close to $40 today > https://twitter.com/ElSalvadorBTC_
Inflation is theft and damages purchasing power the 21 Million supply cap on #Bitcoin has never changed and will not – so short-term volatility for long-term stability is a massive upgrade (again read The Bitcoin Standard). Chart of US Dollar insert – 90% of purchasing power lost since 1950 – 75% of all USD created has come since 2008.
Oh boy – “Bitcoin is also pretty slow. Just about everything on the list above is faster than Bitcoin.” FALSE – learn about the lighting network. Also – centralized vs. decentralized is key!
https://bitcoinmagazine.com/technical/gentle-introduction-to-lightning-network
If you download a Muun Wallet funds can be sent in less than 3 mins from when you start downloading the app using Lighting.
You give examples of Solana, Ethereum, Cardano in your writing – do you know the difference between Proof of Work and Proof of Stake? Massive implications you need to understand.
Great visual of Proof of Work – https://twitter.com/yung_finance/status/1421557111335661575
Proof of Stake is flawed and is a recreation of the legacy financial system – https://hugonguyen.medium.com/proof-of-stake-private-keys-attacks-and-unforgeable-costliness-the-unsung-hero-5caca70b01cb
“But what is incredibly obvious to me is that the winner will not be Bitcoin.”
Are you willing to make a public bet on this stance? You have the field of other “cryptos” pick any 10 you want to own and I’ll take #Bitcoin
Let’s have some fun here – make it for charity!
Lastly, A gentle and friendly reminder that a ton of medical professions look up to you and this blog post is full of misinformation that shows you need to dig into this more prior to having that strong of an opinion as people will read and adopt your view without factual data.
The data and information when researched refutes the entire article.
I’ve already got a post planned where readers can help me give to charity and unlike many crypto purchasers, I’m not much of a gambler.
Thanks for sharing your arguments though. I don’t agree with most of them, but the argument against Proof of Stake was new to me. I’ll have to noodle on that one some more.
The fact that Taproot took so many years is more of an argument against Bitcoin than one for it.
@ Isaiah Douglass: THIS is the response that I wish I had time to write out. Excellent work and resources.
Many discounted the value of the internet in the early days. Now there is not a moment of your life that you don’t interact with the Internet (except maybe sleeping, but even then… sleep trackers ). The same will be true of Bitcoin. People will write it off, think it’s a scam (like I did in 2017), but the hardest money will eventually win and all will adopt it.
A farmer, pre-1872 (invention of internal combustion engine), who struck oil in his corn field had a problem on his hands (corn field ruined). That same farmer TODAY has a fortune on his hands.
The point is that timing maters! We are very early in witnessing the emergence of a new, smarter, more secure, immutable, harder money that cannot be inflated away by governments/Fed. We all get to choose WHEN we opt out of the old fiat system. But it will happen gradually…. Then suddenly.
Jim, I hope that you consider looking into some of the points that have been made by others and consider taking a second look at Bitcoin and forget all the personal attacks. Appreciate what you do!
Agree. My server blocks social media.
At this point in bitcoin’s history, it’s far riskier to allocate $0 to bitcoin than 5-10% of your portfolio.
Depends on your opinion of the end game. Is it 1 BTC = $1.5 million or is it $1 BTC = $0? I have no idea, but if I had to put money on it (and I don’t and won’t despite all the challenges in this stream of comments to make bets with people) I’d put it on $0 before I put it on $1.5 million. But I don’t have a lot of confidence in that particular bet.
LOL!!! Still think it’s risky to have zero dollars in bitcoin in November 2021!? Lololololol
Hell hath no fury like a crypto-bro reading a negative article about it. Goodness gracious, some of yall are so cringey.
Well said!