Bitcoin tracks global m2 with a lag but in the short run trades with high volatility as a speculative asset. Most important, though, is that central banks buy gold, not Bitcoin. I think central bank demand for gold will continue to increase. I'm less convinced there is a growing market for Bitcoin
True, bitcoin cash and other forks are essentially the same as bitcoin while gold is a commodity with unique physical properties. From that perspective bitcoins first mover advantage and network scale are its only advantages and time will tell how important or unimportant those advantages are.
The future value calculation presented is nonsense in this context, and an attempt to give the illusion of precision to an estimate which is speculative at best and ludicrous at worst….
Thanks for the comment. My intention was to establish that if two things serve the same purpose with equal or comparable utility then they should be valued similarly in the market. Assuming that it's ludicrous, which it very well could be, its a good reminder to limit your initial position size in any investment.
I love your work, but I respectfully find this piece delusional. If Bitcoin was a true store of value like gold I believe it would trade uncorrelated to popular indices. Instead, crypto trades perfectly like a highly leveraged version of the NASDAQ. The only reason the mania has lasted as long as it has is the good fortune to be discovered during an unusually long bull run for tech stocks and it will likely be down 95% whenever the Mag 7 correct properly.
Thanks for the kind comment. It's a vulnerable feeling to throw your thoughts out for public comment on the internet but hearing from someone who appreciates it is encouraging. Out of curiosity if bitcoin goes down by 95% why wouldn't it go to zero? Are you suggesting there is some utility in the network or was the number you picked just to illustrate your point?
"Gold is money, everything else is credit" - JP Morgan, 1912. Scarcity alone doesn't make something valuable. Social utility does. Humanity has forever assigned value to gold, and it is that long long history which gives it value. Bitcoin has a social utility but from what I can tell that social utility is reserved for someone with too much wealth to carry in gold as they flee from a country (think a rich Ukrainian, Russian, or Chinese businessman). Also for governments or criminal organizations to pay large and untraceable sums quickly. Every single Bitcoin investor I speak with tells me a story about why they will get rich from Bitcoin, as if you could eat it, drive it, live in it, and heck even make love to it. The market cap for the social utility of this asset class is, in my view, reflective of human nature and not of its true social utility. And if you disagree how could you prove it? I would suggest a Charlie Munger favorite: "Extraordinary Popular Delusions and the Madness of Crowds" as a great explanation for the purveyance of such an asset class. The JP Morgan quote is wonderful, but I also like, "if it looks like a duck, and quacks like a duck"
One perk of Bitcoin that many people overlook—compared to gold, currency, or any other asset - is that even if Bitcoin doesn't continue to appreciate over time (unlikely), you can still own a relatively small portion and "carry" it across borders by simply memorizing 12 words, without anyone knowing. This serves as a valuable safety measure in the event of a regime/country collapse or the like.
bitcoin is simply a (portable dollar alternative) play on the spectacular global growth of professional and political b2b crime. many americans, not just trump&cronies, prop up its credibility. traditional institutions want to participate in transaction tolls, not as holders.
in the end, when involved individual criminals want to consume, they all want dollars. (not gold either)
Bitcoin tracks global m2 with a lag but in the short run trades with high volatility as a speculative asset. Most important, though, is that central banks buy gold, not Bitcoin. I think central bank demand for gold will continue to increase. I'm less convinced there is a growing market for Bitcoin
Good point in mentioning that central banks buy gold and not bitcoin. That is an important difference between the two assets.
Something to consider: In theory Bitcoin is replaceable, while gold is a precious metal with unique physical properties.
True, bitcoin cash and other forks are essentially the same as bitcoin while gold is a commodity with unique physical properties. From that perspective bitcoins first mover advantage and network scale are its only advantages and time will tell how important or unimportant those advantages are.
The future value calculation presented is nonsense in this context, and an attempt to give the illusion of precision to an estimate which is speculative at best and ludicrous at worst….
Thanks for the comment. My intention was to establish that if two things serve the same purpose with equal or comparable utility then they should be valued similarly in the market. Assuming that it's ludicrous, which it very well could be, its a good reminder to limit your initial position size in any investment.
I love your work, but I respectfully find this piece delusional. If Bitcoin was a true store of value like gold I believe it would trade uncorrelated to popular indices. Instead, crypto trades perfectly like a highly leveraged version of the NASDAQ. The only reason the mania has lasted as long as it has is the good fortune to be discovered during an unusually long bull run for tech stocks and it will likely be down 95% whenever the Mag 7 correct properly.
Thanks for the kind comment. It's a vulnerable feeling to throw your thoughts out for public comment on the internet but hearing from someone who appreciates it is encouraging. Out of curiosity if bitcoin goes down by 95% why wouldn't it go to zero? Are you suggesting there is some utility in the network or was the number you picked just to illustrate your point?
"Gold is money, everything else is credit" - JP Morgan, 1912. Scarcity alone doesn't make something valuable. Social utility does. Humanity has forever assigned value to gold, and it is that long long history which gives it value. Bitcoin has a social utility but from what I can tell that social utility is reserved for someone with too much wealth to carry in gold as they flee from a country (think a rich Ukrainian, Russian, or Chinese businessman). Also for governments or criminal organizations to pay large and untraceable sums quickly. Every single Bitcoin investor I speak with tells me a story about why they will get rich from Bitcoin, as if you could eat it, drive it, live in it, and heck even make love to it. The market cap for the social utility of this asset class is, in my view, reflective of human nature and not of its true social utility. And if you disagree how could you prove it? I would suggest a Charlie Munger favorite: "Extraordinary Popular Delusions and the Madness of Crowds" as a great explanation for the purveyance of such an asset class. The JP Morgan quote is wonderful, but I also like, "if it looks like a duck, and quacks like a duck"
Sidenote I actually really enjoy this substack, despite my comments
One perk of Bitcoin that many people overlook—compared to gold, currency, or any other asset - is that even if Bitcoin doesn't continue to appreciate over time (unlikely), you can still own a relatively small portion and "carry" it across borders by simply memorizing 12 words, without anyone knowing. This serves as a valuable safety measure in the event of a regime/country collapse or the like.
bitcoin is simply a (portable dollar alternative) play on the spectacular global growth of professional and political b2b crime. many americans, not just trump&cronies, prop up its credibility. traditional institutions want to participate in transaction tolls, not as holders.
in the end, when involved individual criminals want to consume, they all want dollars. (not gold either)