Am I 13 years late or 13 years early on bitcoin? Deadass wrong or totally right? Who knows. It's a risk, but one I now understand better and can't ignore anymore.
Lots to think about here, but aside from the substance of the post, tons of respect for anyone willing to challenge their own priors, especially when those priors are on public record.
Ring me up on the sat phone when the US govt takes down the grid and blames China. Your BTC on your hard wallet will be as useless the dead fish in the barrel. The reason they allowed the ETFs wasn’t to give it legitimacy. It was to start the regulation train. With the rabid green push, where they even want to ban gas stoves, you seriously think they will allow the miners to continue operation? You think that people who can’t heat their homes due to grid failure are going to be fine with a mining operation that can power a small city. Think again.
BTC. Is nothing but hopium. Your problem, IMO, as with the others, is you are confusing the beauty of blockchain with actual wealth preservation. There is zero logic there. Zero.
Besides, something that was created by the govt will ultimately be destroyed by the govt. Anyone who believes they don’t have the ability to shut it all down simply doesn’t get it.
Here is the problem with bitcoin in a ETF. If the us goes to shit - you sell your bitcoin etf for huge profits- but profits in US dollars.
Every year I teach an Econ class to 8th graders - 2 years ago they all had the obsession with bitcoin.
I asked why they wanted it - none of them could explain - it is just a mass marketing scheme. I also told them if our government does go belly up - you think bitcoin is going to save you?
Nope - having land and being able to develop food and having more guns and ammo is going to be worth a lot more than your digit wallet.
The video on how it all works is the best I have seen. Not too impressed with some of the other stuff... Here is a long response:
QTR: "I was, and in some degree still am, in the camp that sees gold as having intrinsic value that Bitcoin does not, because of its commodity bid and far superior and longer record as a store of value. This is why, despite coming around to the idea of Bitcoin, my gold position is still larger than my Bitcoin position."
ME: You're right, but you absolutely MUST understand why. On a cold-storage wallet, Bitcoin are particles on magnetic media positively charged (1) or negatively (0). In order for that to be accessible, you must convert the +/- media state to an electrical circuit state (open=0, closed=1). So, you can "store" Bitcoin without electricity. But you cannot convert that stored state into usable currency without electricity. With gold/silver all two parties need is some form of scale both trust to attest to the weight of the metal in order to make decisions about buying and selling. What gold/silver and Bitcoin have in common, though, is mathematics. The mathematics of the chemistry of Noble Metals guarantees the metal's weight (which is what will be measured on the scale) does not dissipate over time due to rust. The same rules of math guarantee that Bitcoin's supply cannot be manipulated and is always tied to transactional volume. Here, it helps to go back to Milton Friedman (Money Mischief), where he explains that inflation is always the growth of the supply of the monetary unit minus the growth in the volume and value of transactions in that unit. Where fiat units can be created without reference to underlying transactions, Bitcoin cannot.
QTR: "In other words, it’s as much reserving a spot on the ledger as it is an investment in the invention of Bitcoin itself. It’s a really big idea — and my brain is really small — which is why it has taken me this long to wrap my head around it. But, as they say, “once you see it, you can’t unsee it."
ME: Yes, BUT... What is the point of making that reservation when the USD has a monopoly on legal tender and all disputes have to be converted to USD in order to be settled? (See the FTX bankruptcy case for a perfect example.) Beyond using that place on the ledger to speculate in currency pairs, there is no other point as long as the USD has its monopoly on legal tender. Bitcoin is a stateless, digital, foreign exchange play as long as the USD has a monopoly on legal tender.
QTR: "And so, when Saylor asks a question like, “How long do you think it’ll be before all cell phones and computers are bundled with Bitcoin wallets?”
ME: Holy shit. Once you do that, your wallet will be sync'd to your provider's cloud servers and the data will be considered a "third party business record" under current SCOTUS precedents. Meaning the government can look anytime they want and you'll never know. You might as well just go with a CBDC at that point.
QTR: "But the fact that regulatory agencies have blessed Bitcoin by allowing the spot ETFs, and that I can go on Twitter and literally see commercials from super serious asset managers like Franklin Templeton and Fidelity, talking about Bitcoin as a sound money hedge, and a way to step outside of the central bank-run global monetary system, is stunning."
ME: Are you buying paper gold? If not, why not? Same question with Bitcoin spot ETFs. NEVER forget when you hear something out of the mouth of a finance sector CEO that he/she is talking their book. Why, all of a sudden, are execs who badmouthed Bitcoin all of a sudden OK with Bitcoin ETFs? Because they know the USD is a piece of shit breathing its last and they want to front run and otherwise manipulate everything Bitcoin like they do with paper gold/silver.
QTR: "Just last week, I heard somebody say that all Bitcoin buyers are speculators, not people looking to seriously opt out of the monetary system as it exists today for the long term — and I simply don’t think that’s the truth. I think there are a lot of people out there, like me, that are just looking to diversify their way out of a broken fiat system, and Bitcoin is just one of several ways to do that."
ME: Too bad as long as the USD has a monopoly on legal tender there is no way to opt out.
QTR: "And you can’t tell me that a country like El Salvador adopting bitcoin as legal tender is “speculation.” To me, that falls closer to “adoption.”
ME: "Adoption = A legal system in which courts adjudicate disputes in the unit of the agreement. Any legal system where you have to convert a crypto unit of agreement into a fiat unit to settle the dispute is simply not "adoption."
QTR: "The price will continue to be volatile, but it’s also pretty easy to make a case for why it will go up."
ME: Respectfully, this is the worst observation in your article. The price in what? Volatility as measured in USD simply means you're still stuck on stupid fiat.
There is simply no way out of fiat via crypto that does not require the Constitution to be amended to permit crypto to be used as legal tender.
Here's the reason why I don't "invest" in bitcoin: without price appreciation, there is no return on your "investment". If I hold bitcoin, I'm not earning interest or dividends. This is why the argument that bitcoin is protection against $ devaluation via inflation falls flat. That protection is not enough.
Most people hold as little cash in their non-interest-bearing checking accounts as possible. They invest their excess cash in stocks, bonds, CD's, real-estate, etc, all of which offer protection against a depreciating currency, plus a real return. The initial investment is made with cash and the termination of the investment returns cash. Until bitcoin achieves the ability to be accepted directly for the purchase of stocks, bonds, etc. with the return of bitcoin at the end of the investment period, it will only serve to increase the transaction costs of investing in real assets. And b/c of price volatility that time is a long way off.
There's one thing about Bitcoin that no one addresses and that I cannot get past: The fact that when Bitcoin was initially created, it was created out of thin air. I understand that the expansion of Bitcoin is controlled, but you can't get past the fact that the initial pile of bitcoin was created out of thin air. On the other hand, the US Dollar, though it has been expanded beyond belief, at least had value when it was first created.
Bitcoin is simply a means for facilitating transactions. But the Bitcoin network can only handle 7 transactions per second whereas the VISA network has a capacity of 65,000 transactions per second. So the one thing Bitcoin can be used for, it isn't good at.
Intrinsic value for Bitcoin is easy to calculate. It's zero. It has no earnings so it can't have an intrinsic value. Lynn Alden wrote an article claiming that Bitcoin has an intrinsic value, but in the article she never said what the intrinsic value was or how to calculate it. I cancelled my subscription when I read that article.
I have no idea what the price of Bitcoin does in the future, nor do I care.
Great piece Chris. I started buying around the same time you did and also hold more metals than btc. I originally thought btc and all other crypto were nothing more than digital monopoly money. But over the last 16 months, it has become too difficult to ignore the network and all of it’s potential as more and more people, and eventually countries, adopt the technology.
Thanks for all of the research on this, sharing your thoughts and findings, as well as the links.
Disclaimer: I own BTC and I think there are more arguments for a bull case than against it. However, I think it is more and more difficult to believe in its fundamentals, especially because of the SEC`s move to authorize the ETFs. If the SEC regulates it, it is no longer the independent "rebel money" it used to be. Well, it never actually was, anyone who has done some trading on exchanges like Binance knows how much more controlled it is nowadays than it was say, 5 years ago, but whatever.
However, BTC does have a very strong bull case going for it currently. To list the 3 most important reasons IMO:
1. Our current position in the liquidity cycle (liquidity is improving and will probably do so until Q4 2025 or so)
2. BTC`S halving coming up in May/June 2024
3. The ETFs drawing in more capital.
So yeah, I understand why someone would own BTC, but I do not think it is the solution to our financial woes many believe it is.
i still do not understand Bitcoin at all but....but i bought one share in an Bitcoin ETF.....cause naturally one has to be in the Loop if one can afford to be....and at this time i can afford at least one share........so....if Bitcoin goes to the moon i know i will be there for the ride......and if it falls heavy into that Rabbit Hole......no big deal....at least not for me......
Lots to think about here, but aside from the substance of the post, tons of respect for anyone willing to challenge their own priors, especially when those priors are on public record.
Can you imagine someone saying 'why I gold' or 'why I Apple'? Or talking about a pivot on an investment thesis as a 'mea culpa'?
This note reads less like an investment treatise and more like a religious awakening.
I'm not saying you're wrong or that you're making a mistake. I'm saying this sounds very different from your other writing on investing topics.
For what it is worth, I have BTC just as a hedge.
The US dollar is quickly becoming worthless and BTC has more of a chance to be a workable currency than gold.
Ring me up on the sat phone when the US govt takes down the grid and blames China. Your BTC on your hard wallet will be as useless the dead fish in the barrel. The reason they allowed the ETFs wasn’t to give it legitimacy. It was to start the regulation train. With the rabid green push, where they even want to ban gas stoves, you seriously think they will allow the miners to continue operation? You think that people who can’t heat their homes due to grid failure are going to be fine with a mining operation that can power a small city. Think again.
BTC. Is nothing but hopium. Your problem, IMO, as with the others, is you are confusing the beauty of blockchain with actual wealth preservation. There is zero logic there. Zero.
Besides, something that was created by the govt will ultimately be destroyed by the govt. Anyone who believes they don’t have the ability to shut it all down simply doesn’t get it.
But I still love you. Your just wrong here.
I really relate to this. I ignored Bitcoin for years. I eventually matched my gold holdings with Bitcoin. I now only own RE, Bitcoin, and my business.
It's hard because crypto is filled with charlatans, but I couldn't ignore all the people I respect proclaiming Bitcoin’s benefits.
Here is the problem with bitcoin in a ETF. If the us goes to shit - you sell your bitcoin etf for huge profits- but profits in US dollars.
Every year I teach an Econ class to 8th graders - 2 years ago they all had the obsession with bitcoin.
I asked why they wanted it - none of them could explain - it is just a mass marketing scheme. I also told them if our government does go belly up - you think bitcoin is going to save you?
Nope - having land and being able to develop food and having more guns and ammo is going to be worth a lot more than your digit wallet.
Bitcoin is amazing !!
Congrats on taking the first step a year or so ago. It's a journey.
I think Bitcoin is not going to survive long, gold is much better option.
The video on how it all works is the best I have seen. Not too impressed with some of the other stuff... Here is a long response:
QTR: "I was, and in some degree still am, in the camp that sees gold as having intrinsic value that Bitcoin does not, because of its commodity bid and far superior and longer record as a store of value. This is why, despite coming around to the idea of Bitcoin, my gold position is still larger than my Bitcoin position."
ME: You're right, but you absolutely MUST understand why. On a cold-storage wallet, Bitcoin are particles on magnetic media positively charged (1) or negatively (0). In order for that to be accessible, you must convert the +/- media state to an electrical circuit state (open=0, closed=1). So, you can "store" Bitcoin without electricity. But you cannot convert that stored state into usable currency without electricity. With gold/silver all two parties need is some form of scale both trust to attest to the weight of the metal in order to make decisions about buying and selling. What gold/silver and Bitcoin have in common, though, is mathematics. The mathematics of the chemistry of Noble Metals guarantees the metal's weight (which is what will be measured on the scale) does not dissipate over time due to rust. The same rules of math guarantee that Bitcoin's supply cannot be manipulated and is always tied to transactional volume. Here, it helps to go back to Milton Friedman (Money Mischief), where he explains that inflation is always the growth of the supply of the monetary unit minus the growth in the volume and value of transactions in that unit. Where fiat units can be created without reference to underlying transactions, Bitcoin cannot.
QTR: "In other words, it’s as much reserving a spot on the ledger as it is an investment in the invention of Bitcoin itself. It’s a really big idea — and my brain is really small — which is why it has taken me this long to wrap my head around it. But, as they say, “once you see it, you can’t unsee it."
ME: Yes, BUT... What is the point of making that reservation when the USD has a monopoly on legal tender and all disputes have to be converted to USD in order to be settled? (See the FTX bankruptcy case for a perfect example.) Beyond using that place on the ledger to speculate in currency pairs, there is no other point as long as the USD has its monopoly on legal tender. Bitcoin is a stateless, digital, foreign exchange play as long as the USD has a monopoly on legal tender.
QTR: "And so, when Saylor asks a question like, “How long do you think it’ll be before all cell phones and computers are bundled with Bitcoin wallets?”
ME: Holy shit. Once you do that, your wallet will be sync'd to your provider's cloud servers and the data will be considered a "third party business record" under current SCOTUS precedents. Meaning the government can look anytime they want and you'll never know. You might as well just go with a CBDC at that point.
QTR: "But the fact that regulatory agencies have blessed Bitcoin by allowing the spot ETFs, and that I can go on Twitter and literally see commercials from super serious asset managers like Franklin Templeton and Fidelity, talking about Bitcoin as a sound money hedge, and a way to step outside of the central bank-run global monetary system, is stunning."
ME: Are you buying paper gold? If not, why not? Same question with Bitcoin spot ETFs. NEVER forget when you hear something out of the mouth of a finance sector CEO that he/she is talking their book. Why, all of a sudden, are execs who badmouthed Bitcoin all of a sudden OK with Bitcoin ETFs? Because they know the USD is a piece of shit breathing its last and they want to front run and otherwise manipulate everything Bitcoin like they do with paper gold/silver.
QTR: "Just last week, I heard somebody say that all Bitcoin buyers are speculators, not people looking to seriously opt out of the monetary system as it exists today for the long term — and I simply don’t think that’s the truth. I think there are a lot of people out there, like me, that are just looking to diversify their way out of a broken fiat system, and Bitcoin is just one of several ways to do that."
ME: Too bad as long as the USD has a monopoly on legal tender there is no way to opt out.
QTR: "And you can’t tell me that a country like El Salvador adopting bitcoin as legal tender is “speculation.” To me, that falls closer to “adoption.”
ME: "Adoption = A legal system in which courts adjudicate disputes in the unit of the agreement. Any legal system where you have to convert a crypto unit of agreement into a fiat unit to settle the dispute is simply not "adoption."
QTR: "The price will continue to be volatile, but it’s also pretty easy to make a case for why it will go up."
ME: Respectfully, this is the worst observation in your article. The price in what? Volatility as measured in USD simply means you're still stuck on stupid fiat.
There is simply no way out of fiat via crypto that does not require the Constitution to be amended to permit crypto to be used as legal tender.
https://www.amazon.com/dp/B0CL2HLC3N
Here's the reason why I don't "invest" in bitcoin: without price appreciation, there is no return on your "investment". If I hold bitcoin, I'm not earning interest or dividends. This is why the argument that bitcoin is protection against $ devaluation via inflation falls flat. That protection is not enough.
Most people hold as little cash in their non-interest-bearing checking accounts as possible. They invest their excess cash in stocks, bonds, CD's, real-estate, etc, all of which offer protection against a depreciating currency, plus a real return. The initial investment is made with cash and the termination of the investment returns cash. Until bitcoin achieves the ability to be accepted directly for the purchase of stocks, bonds, etc. with the return of bitcoin at the end of the investment period, it will only serve to increase the transaction costs of investing in real assets. And b/c of price volatility that time is a long way off.
Welcome brother.
As times goes by your conviction will grow and the amount of gold you hold will get less and less lol.
There's one thing about Bitcoin that no one addresses and that I cannot get past: The fact that when Bitcoin was initially created, it was created out of thin air. I understand that the expansion of Bitcoin is controlled, but you can't get past the fact that the initial pile of bitcoin was created out of thin air. On the other hand, the US Dollar, though it has been expanded beyond belief, at least had value when it was first created.
Bitcoin is simply a means for facilitating transactions. But the Bitcoin network can only handle 7 transactions per second whereas the VISA network has a capacity of 65,000 transactions per second. So the one thing Bitcoin can be used for, it isn't good at.
Intrinsic value for Bitcoin is easy to calculate. It's zero. It has no earnings so it can't have an intrinsic value. Lynn Alden wrote an article claiming that Bitcoin has an intrinsic value, but in the article she never said what the intrinsic value was or how to calculate it. I cancelled my subscription when I read that article.
I have no idea what the price of Bitcoin does in the future, nor do I care.
Great piece Chris. I started buying around the same time you did and also hold more metals than btc. I originally thought btc and all other crypto were nothing more than digital monopoly money. But over the last 16 months, it has become too difficult to ignore the network and all of it’s potential as more and more people, and eventually countries, adopt the technology.
Thanks for all of the research on this, sharing your thoughts and findings, as well as the links.
There are really 2 ways to look at bitcoin IMAO.
1. Believe it in fundamentally (or not)
2. View it as an asset with a possible bull case.
Disclaimer: I own BTC and I think there are more arguments for a bull case than against it. However, I think it is more and more difficult to believe in its fundamentals, especially because of the SEC`s move to authorize the ETFs. If the SEC regulates it, it is no longer the independent "rebel money" it used to be. Well, it never actually was, anyone who has done some trading on exchanges like Binance knows how much more controlled it is nowadays than it was say, 5 years ago, but whatever.
However, BTC does have a very strong bull case going for it currently. To list the 3 most important reasons IMO:
1. Our current position in the liquidity cycle (liquidity is improving and will probably do so until Q4 2025 or so)
2. BTC`S halving coming up in May/June 2024
3. The ETFs drawing in more capital.
So yeah, I understand why someone would own BTC, but I do not think it is the solution to our financial woes many believe it is.
i still do not understand Bitcoin at all but....but i bought one share in an Bitcoin ETF.....cause naturally one has to be in the Loop if one can afford to be....and at this time i can afford at least one share........so....if Bitcoin goes to the moon i know i will be there for the ride......and if it falls heavy into that Rabbit Hole......no big deal....at least not for me......