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?
Thanks for taking my comment the right way. In this case I just meant 95% as a lazy synonym for down "a lot". Partly because that is the ball park of where the tech glamour stocks fell in the aftermath of the dot com bubble. I didn't suggest that it would go to zero because I'm not aware of a mechanism through which it could go there, as long as someone is willing to pay a token price for it. While I do humbly believe its intrinsic value is zero, it would live on as a speculative asset in some form, although it's hard for me to imagine a repeat of the mania we are currently seeing. Happy to admit I've been wrong on this for some time though.
"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)
To clarify, are you saying that the majority of bitcoin users are criminals and that criminals do not save money therefore bitcoin is not a store of value? Also, are you saying that gold has no value period or that it holds no value for criminals because they do not save?
never ceases to be amazed as those with a stake in crypto cannot do a web search yielding hundreds of results. but here goes anyway :
of course gold is used in enterprise crime, such as russia avoiding dollar-based sanctions. (and drug cartel exchanges in gold used to get more headlines). it is just inconvenient to fly plane transports full of gold, and this type of use will shrink.
however, if you are convinced the primary global utility of gold also is enterprise cybercrime, than nothing i point to will help.
as most know, authoritarian regimes are growing their internal cybercriminal "public/private" partnerships. it has been too successful, and now politicians across many nations, as well as traditional institutions want their cut of transactions, giving it credibility :
again, if one doesnt realize that the end-criminals ultimately have to use hard currency, usually dollars, to buy their cars, houses, etc.., then nothing i can say will convince you they are not using bitcoin.
i like to compare bitcoin to mickey mantle rookie baseball cards. limited supply-check. highly valued by some - check [a mint condition card went for $12.5 million-just looked it up]. bitcoin has the advantage of being easily transmitted and exchanged, as well as being divisible, and it has value not only for criminals and avoidance of capital controls- it is also useful for low value international remittances. basically, however, i think that it's a fad, like those yacht club monkey jpeg nft's. as bitcoin mining becomes ever more uneconomic with each halving, who is going to want to pay to keep powering the blockchain?
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?
Thanks for taking my comment the right way. In this case I just meant 95% as a lazy synonym for down "a lot". Partly because that is the ball park of where the tech glamour stocks fell in the aftermath of the dot com bubble. I didn't suggest that it would go to zero because I'm not aware of a mechanism through which it could go there, as long as someone is willing to pay a token price for it. While I do humbly believe its intrinsic value is zero, it would live on as a speculative asset in some form, although it's hard for me to imagine a repeat of the mania we are currently seeing. Happy to admit I've been wrong on this for some time though.
"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
You touch on some key points and I'm very open to being wrong on this topic.
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)
To clarify, are you saying that the majority of bitcoin users are criminals and that criminals do not save money therefore bitcoin is not a store of value? Also, are you saying that gold has no value period or that it holds no value for criminals because they do not save?
never ceases to be amazed as those with a stake in crypto cannot do a web search yielding hundreds of results. but here goes anyway :
of course gold is used in enterprise crime, such as russia avoiding dollar-based sanctions. (and drug cartel exchanges in gold used to get more headlines). it is just inconvenient to fly plane transports full of gold, and this type of use will shrink.
https://www.thecaliforniacourier.com/bullion-bypass-how-russia-circumvents-sanctions-to-export-billions-of-dollars-worth-of-gold-through-armenia/
however, if you are convinced the primary global utility of gold also is enterprise cybercrime, than nothing i point to will help.
as most know, authoritarian regimes are growing their internal cybercriminal "public/private" partnerships. it has been too successful, and now politicians across many nations, as well as traditional institutions want their cut of transactions, giving it credibility :
https://www.forbes.com/sites/digital-assets/2025/01/19/the-51-billion-crypto-crime-industry-is-adopting-stablecoins/
again, if one doesnt realize that the end-criminals ultimately have to use hard currency, usually dollars, to buy their cars, houses, etc.., then nothing i can say will convince you they are not using bitcoin.
i like to compare bitcoin to mickey mantle rookie baseball cards. limited supply-check. highly valued by some - check [a mint condition card went for $12.5 million-just looked it up]. bitcoin has the advantage of being easily transmitted and exchanged, as well as being divisible, and it has value not only for criminals and avoidance of capital controls- it is also useful for low value international remittances. basically, however, i think that it's a fad, like those yacht club monkey jpeg nft's. as bitcoin mining becomes ever more uneconomic with each halving, who is going to want to pay to keep powering the blockchain?