The Rational Investor’s Case Against Bitcoin
Summary
TLDRIn this Bigger Pockets Money podcast episode, host Scott Trench dissects Bitcoin's appeal and the fervor of Bitcoin maximalists. He explains Bitcoin's concept and the ideology behind it, then systematically critiques its potential as a long-term store of value, citing its deflationary nature, scalability issues, high transaction costs, and environmental impact. Trench asserts that Bitcoin is unlikely to replace traditional currencies, challenging the maximalist belief in its future dominance and suggesting a cautious approach to investing in it.
Takeaways
- 😀 The speaker, Scott, is going to explain what Bitcoin is and the thesis behind it, particularly from the perspective of Bitcoin maximalists, and then detail why he rejects this thesis.
- 💰 Bitcoin has a significant market capitalization, with each Bitcoin valued at around $65,000 during the recording of the podcast, and has passionate supporters known as Bitcoin maximalists.
- 🔑 Bitcoin maximalists view Bitcoin as a form of 'hard money' that can counteract the inflation they see as a major societal problem, drawing parallels to the historical use of gold.
- 🌐 Bitcoin is presented as a scarce digital resource, with a limited supply of 21 million coins, which aligns with the Austrian School of Economics' principles and the idea of a non-inflationary currency.
- 💡 The speaker admires the innovation behind Bitcoin and blockchain technology but philosophically disagrees with the maximalist view that Bitcoin will replace all world currencies.
- 🏦 Scott does not believe in the collapse of the US dollar or other major world currencies, and he sees Bitcoin's deflationary nature as a potential issue for a stable economy.
- 💼 He argues that Bitcoin has technical problems, such as high transaction costs and scalability issues, making it impractical for day-to-day use and a poor candidate for a global reserve currency.
- 🌿 Bitcoin mining's environmental impact is highlighted as a significant concern due to the immense amount of energy required, which could deter widespread adoption.
- 🔒 The blockchain's transparency, while beneficial for preventing fraud, also makes it easier for authorities to track illegal activities, contradicting the common belief that Bitcoin is an ideal tool for criminals.
- 📉 Scott's core argument is that Bitcoin has a high risk of a near or complete wipeout in the long run, and he recommends treating it as part of a speculative cash position, not a stable store of value.
- 🤝 The speaker invites rebuttals and debates on the topic, emphasizing that his views are personal and not representative of the Bigger Pockets community or its other hosts.
Q & A
What is the main argument presented by the host of the Bigger Pockets Money Podcast against Bitcoin?
-The host argues that Bitcoin has fatal flaws that will potentially diminish its long-term value to zero, including issues with scalability, high transaction costs, environmental impact, and the lack of practicality for everyday use.
Why do Bitcoin maximalists believe in the potential of Bitcoin as a store of value?
-Bitcoin maximalists believe in the potential of Bitcoin due to its scarcity, similar to gold, its deflationary nature, and the belief that it can serve as a hard money alternative to inflationary fiat currencies.
What is the host's stance on the future of the US dollar and its comparison to Bitcoin?
-The host believes that the US dollar will remain strong and stable, and that he will continue to earn, spend, and pay taxes in dollars rather than Bitcoin for the foreseeable future.
What is the 'Bitcoin maximalism' philosophy as described in the podcast?
-Bitcoin maximalism is a belief that Bitcoin will replace all other currencies as the world's primary form of money, due to its properties as a scarce, deflationary, and decentralized digital currency.
Why does the host disagree with the idea that Bitcoin could replace the US dollar or other major world currencies?
-The host disagrees because he believes that Bitcoin has technical problems, is not practical for everyday transactions, and that major world governments are not likely to collapse or be replaced by a single global reserve currency like Bitcoin.
What are some of the environmental concerns associated with Bitcoin mining mentioned in the script?
-Bitcoin mining consumes a significant amount of energy, which raises environmental concerns about its impact on the planet, especially when compared to more energy-efficient forms of currency.
What is the 'stock-to-flow' ratio mentioned in the context of Bitcoin, and why is it important?
-The stock-to-flow ratio refers to the amount of Bitcoin currently in existence compared to the amount mined each year. It's important because a low ratio indicates scarcity, which is a key factor in Bitcoin's perceived value as a store of value.
What is the host's view on the scalability challenge of Bitcoin?
-The host believes that Bitcoin's scalability challenge is a significant issue, as the high cost and limited capacity of the blockchain network make it impractical for processing the volume of transactions needed for day-to-day currency use.
How does the host address the volatility of Bitcoin?
-The host points out that Bitcoin's high volatility makes it unsuitable for saving for short-term or medium-term financial goals, as its value can fluctuate wildly, making it a risky asset for such purposes.
What is the host's perspective on the blockchain technology beyond its use in Bitcoin?
-The host agrees with Bitcoin maximalists that blockchain technology is primarily useful for the secure, decentralized ledger of Bitcoin transactions. He does not believe it is a useful secure decentralized application for anything else.
What is the host's final recommendation for those who still believe in Bitcoin's potential despite his arguments?
-The host suggests treating Bitcoin as part of one's cash position, with a small allocation, understanding that it could go to zero or increase in value, but acknowledging the risk of a near or complete wipeout in the long run.
Outlines
🤔 Skepticism of Bitcoin's Future Value
The speaker, Scott, introduces his stance on Bitcoin, expressing skepticism about its long-term value and rejecting the Bitcoin maximalist view. He outlines his intention to dissect the Bitcoin thesis and present reasons for believing that Bitcoin has fatal flaws that could potentially devalue it to zero. Scott acknowledges the passion of Bitcoin enthusiasts but counters with his professional understanding and rejection of it as an investment.
💰 Bitcoin as a Digital Currency and Its Maximalist Appeal
Scott delves into Bitcoin's characteristics as a digital currency, highlighting its market capitalization and the fervor of Bitcoin maximalists. He discusses the concept of hard money, the belief in Bitcoin's resistance to inflation, and the historical context of gold as a store of value. Scott also explains the Bitcoin maximalist perspective on the scarcity of Bitcoin, drawing parallels with gold, and the ideological underpinnings of decentralization and the Austrian School of Economics.
🏦 Critique of Bitcoin's Practicality and Technical Issues
The speaker criticizes Bitcoin's practicality for everyday transactions due to its high transaction costs and scalability issues. He points out the challenges of maintaining the blockchain's security post-mining and the potential consequences of deflationary currency on economic behavior. Scott also addresses the volatility of Bitcoin and its limited acceptance, suggesting that these factors make it unsuitable for most financial purposes.
🌍 Environmental and Global Acceptance Concerns
Scott raises environmental concerns regarding Bitcoin mining's energy consumption and questions the global acceptance of Bitcoin as a currency. He argues that the volatility and regulatory challenges associated with Bitcoin make it an impractical choice for payments and taxes. Furthermore, he highlights the impracticality of Bitcoin for short-term savings goals due to its price fluctuations.
🔄 The Illusion of Trustless Transactions and Decentralization
The speaker disputes the notion of a trustless marketplace facilitated by Bitcoin, emphasizing that trust is still a fundamental component in transactions. He also challenges the idea that Bitcoin can prevent economic booms and busts or resolve issues with fractional reserve banking. Scott suggests that the lessons from past financial systems are being repeated in the cryptocurrency markets.
📉 Analysis of Bitcoin's Performance and El Salvador's Experiment
Scott scrutinizes Bitcoin's performance, highlighting its infinite Sharpe ratio due to its growth from zero, and the lack of endorsement from its all-time high valuation. He references El Salvador's adoption of Bitcoin as legal tender, pointing out the low usage and the challenges faced, which do not support the maximalist's vision of global adoption.
🔒 Bitcoin's Transparency as a Double-Edged Sword
Contrary to popular belief, Scott explains that Bitcoin's transparency and immutability make it an ineffective tool for criminals, as it allows for easy tracking by government agencies. He also reiterates his belief in the long-term value of Bitcoin being zero and advises potential investors to consider Bitcoin as a speculative part of their cash holdings, acknowledging the risks involved.
📻 Closing Remarks and Invitation for Debate
In his closing, Scott thanks the audience for their time and reiterates his personal stance on Bitcoin, distinguishing it from the views of Bigger Pockets or its other hosts. He expresses openness to rebuttals and debates, emphasizing that his views are based on extensive research and understanding of the subject.
Mindmap
Keywords
💡Bitcoin
💡Bitcoin maximalist
💡Inflation
💡Hard money
💡Scarcity
💡Stock-to-flow ratio
💡Decentralization
💡Blockchain
💡Proof of work
💡Scalability challenge
💡Environmental concern
Highlights
Bitcoin maximalists believe in the thesis that Bitcoin is a form of 'hard money' similar to gold, resistant to inflation.
Scott, the host, rejects Bitcoin as an investment, despite understanding and respecting its underlying principles.
Bitcoin's market capitalization is highlighted, with each Bitcoin valued at around $65,000 at the time of recording.
The speaker emphasizes the importance of gold as a historical precedent for understanding Bitcoin's value proposition.
Bitcoin maximalists argue that Bitcoin is superior to gold due to its digital nature and divisibility.
Decentralization and the avoidance of government control are core to the Bitcoin ideology.
The speaker doubts the long-term viability of Bitcoin due to its potential technical flaws and scalability issues.
Bitcoin transactions are criticized for being expensive and impractical for everyday use.
Volatility of Bitcoin is presented as a significant barrier to its use as a stable store of value.
Environmental concerns related to Bitcoin mining and its energy consumption are discussed.
The speaker challenges the notion that Bitcoin is a haven for criminals due to the transparency of blockchain transactions.
El Salvador's adoption of Bitcoin as legal tender is critiqued as not being widely accepted or successful.
The argument is made that Bitcoin's current valuation does not endorse its future potential but rather indicates risk.
The speaker suggests treating Bitcoin as part of a cash position with the acknowledgment of its potential to go to zero.
The podcast concludes with an invitation for rebuttal and debate on the topic of Bitcoin.
Transcripts
in this episode of the Bigger Pockets
money podcast I Scott one of our hosts
am going to describe exactly what
Bitcoin is what the thesis behind
Bitcoin is that is driving the
zealousness that you may have seen from
Bitcoin maximalists I'm going to break
that down and inform you about why I
reject it piece by piece and I'm going
to go through an exhaustive list of
items about why Bitcoin has a fatal
flaws that I think will potentially take
his long-term value to zero stay tuned
and let's get into it Bitcoin has a huge
market capitalization it's got like $1.3
trillion doll in market capitalization
each Bitcoin individual Bitcoin is now
worth about $65,000 at the time we're
recording this video and Bitcoin people
Bitcoin maximalists as I'll refer to
them through the rest of this uh
recording here um really have a passion
for it and that passion in many cases
leads to a total lack of Tolerance
empathy and almost an aloof um
overconfidence when discussing the
subject among other people I noticed in
a recent Facebook uh thread that when I
said hey I actually uh don't invest in
Bitcoin because I understand it um a lot
of Bitcoin people were like uh politely
but kind of kind of aloofly incredulous
like oh really you did your homework and
understand Bitcoin I I don't think so I
don't think you fully understand it if
you're not investing in it and I'm like
guys I understand it and I reject it I'm
not like some uh ignorant guy who hasn't
done my homework but this I considered
it part of my profession and my career
to understand these concepts of personal
finance and today I'm going to lay down
my view on why I don't like Bitcoin and
just to couch that again like am I like
against it philosophically no we've had
Dr saine amus on the Bigger Pockets
money podcast episode 371 he is the
author of the Bitcoin standard
fascinating I love learning about
Bitcoin it's an awesome experiment it's
an awesome thesis in what money ought to
be um I think there's a lot of things to
really empathize with and admire about
the people who invest in Bitcoin and the
experiment that is Bitcoin uh and the
blockchain and their special symbiosis
so I really looking forward to getting
into it and um obviously you can tell
I'm very passionate about the subject
bit Bitcoin is a digital currency it is
intended to be a form of what Bitcoin
maximalists or people who subscribe to
the Austrian School of Economics um call
hard money um so the the rationale at
the highest level is uh a Bitcoin
maximalist will believe that inflation
is a prime evil in today's society
inflation eats away at the um uh the the
earnings or the the the wealth created
by lay people who are not investors for
example right if you just hoard dollars
you know they're going to be worth at
probably at least 2% less every year and
many Bitcoin maximalists will argue
it'll be worth much less per year and
that inflation um rates are are vastly
understated um Bitcoin maximalists will
talk about how hard money has benefited
societies for Millennia they'll point to
the fact that societies that have used
gold for example um which they believe
is a form of hard money um have
benefited greatly from the fact that the
people were able to preserve their
wealth and that um eras where gold was
money um were really kind of Golden Ages
for Human Society so what makes gold a
hard money and I think that gold really
understanding gold is absolutely
critical to understanding the Bitcoin
thesis by the way gold is hard money in
the sense that you can't create a lot of
it um people have tried to create gold
for Millennia through the practice of
alchemy which has failed over and over
and over and over and over again gold is
an element so it cannot be created or
destroyed gold never rusts or decays so
it can be it can infinitely preserve
value gold is very easy to melt and
smelt into small components or bring
together and make into um um um you know
coins or bars or other things there it's
it's because it's so rare and small It's
relatively easy to transport and store
so in a lot of ways gold is this ideal
form of money and civilizations over the
Millennia have agreed with this thesis
that's why gold has been such an
important form of money for so long uh
throughout history and other forms of
money have kind of come and gone over
those time periods so what Bitcoin
maximalism is is Bitcoin maximalists
believe that Bitcoin is is almost like
digital gold it's a it's the it's a a
version of gold but better for the 21st
century and beyond Bitcoin is a scarce
resource only 21 M Bitcoins can ever be
mined uh in a long-term future state so
that creates an inherent scarcity like
gold Bitcoin also has a very limited
stockto flow ratio right so there's
certain amount of Bitcoins that are in
existence today and only a small
percentage of them about one or two% per
year will be mined over the next 100 you
know 140 years um according to coin
optimists until the last one is mind so
that's going to create a low flow of
these coins um and make it very hard for
there to be an increase in Supply and
Bitcoin maximos will contrast this
scarce resource with uh fiat currency
like the US dollar and say hey the
Federal Reserve can print money at a
whim right and if the federal deficit
goes up the temptation to print money
and inflate the way out of government
problems is going to be very high and
the dollar is going to go down and down
and down and down and down and people
will turn to bitcoin and that this will
happen one Society after another um
these governments are going to out print
uh or print their their currencies uh
print too much money and their currency
their value of their currencies will
inflate and people will turn naturally
to a much better alternative like a gold
although Bitcoin maximist believe that
Bitcoin is the answer here um another
component to bitcoin that um Bitcoin
Maxim must think is really critical is
these folks are often grounded in this
very libertarian school of thought so
Austrian School of Economics
libertarianism these folks believe that
decentralization is better and again I
empathize with some of these things like
there's lots to like here like I think
that I I you know I'm sure many of my
friends are Bitcoin Ma I know many of my
friends are Bitcoin ma maximalists um I
would love to have discussions about
these types of things and probably would
agree on many of these issues but the
central tenant of decentralization is so
critical to the Bitcoin thesis and its
special symbiosis with the blockchain
like there's a finite supply of Bitcoins
that can ever be mined like gold Bitcoin
is going to be very expensive and
difficult to mine very limited stock to
flow ratio Bitcoin like gold Bitcoin can
be broken out into tiny increments 100
million Satoshi make up one Bitcoin so
you can divide Bitcoin by up to 100
million um making it a very powerful um
uh theoretical option for everyday
transactions for example now unlike gold
and better than gold a Bitcoin Maximus
will argue um Bitcoin has the added
advantages of being able to be
transacted digitally and they it that
digital transaction takes place on a
remarkably immutable secure and
transparent Ledger called the blockchain
which a Bitcoin maximalist by the way
believes is a special purpose-built
technology exclusively for Bitcoin
Bitcoin maximalists actually are not big
fans of blockchain technology which
people may have heard who are unfamiliar
with this as like this Saving Grace for
all these other applic
Bitcoin Max must believe that blockchain
technology is only um valuable for the
application of Bitcoin and don't worry
I'll get into the blockchain later on
this and we'll ND out uh plenty more as
we get going here on that so this leads
us to our core thesis right um Bitcoin
maximalism believes that governments and
societies that use fiat currency today
will one by one succumb to the
temptation to inflate their way out of
their problems and will and the people
of those societies will turn to a better
form of money these governments and
societies be forced one by one to adopt
Bitcoin as hard money and in the not so
distant future Bitcoin will be money for
most or all people in the world so a
Bitcoin maximalist literally believes
the long-term value of Bitcoin is
essentially that of all of the world's
outstanding currency it will replace all
dollars all you want all Euros all Yen
every other currency you can imagine and
that means to that leads to a long-term
market cap of tens of trillions of
today's dollars uh maybe hundreds of
trillions of dollars in future value
right um uh future inflated uh dollar
there and what's more these Bitcoin
maximist believe that this is good for
society that the common person is going
to experience experience like
unimaginable wealth and benefits from
this trans this transition that
innovation's going to flourish the
econom is going to stabilize and that
without inflation to worry about the
common people are going to consume less
leading to happier more productive and
more sustainable living they think that
governments will be forced to enter into
sustainable fiscal policy policy as a
result of this change spending less than
they take in and that those that can't
are going to dissolve and reform so like
that's the thesis right Bitcoin Maxim
Must Believe invest in Bitcoin watch the
man collapse make a nearly infinite
return and do good for society and
what's more it's like that's awesome
right it's a great thesis it's a great
it's admirable it's cool right it's
libertarian and I completely respect the
intention I admire the detail and
thought and intricacy of Satoshi
Nakamoto the inventor of Bitcoin and
it's just fun to learn about and talk
about this experiment in the path to
perfect money long term so I just want
to couch that there's no evil there's no
like bad intent there's no lack of
intelligence Bitcoin maximalists are
zealous but they're not like evil
they're not manipulating other people
they truly believe in this thesis first
at the end of the day Bitcoin is
intended to be a store of value a
digital currency money I'm an investor I
don't invest in currency I keep the very
minimum amount of currency that I need
to secure my short-term liquidity needs
and to sleep well at night and then I
invest the rest in cash flowing assets
like real estate stocks businesses um
and other p uh debt or other private um
opportunities even in a world with truly
perfect hard money that was deflationary
I would put my Capital to work trying to
create real inflation adjusted wealth
not by it stored in Bitcoin and allow it
to collect digital dust
second I believe in the United States
its people economy and Military I do not
believe that it or its currency are
going to collapse or decline in a
relative sense in my lifetime I believe
that I'm going to earn spend and pay
taxes with dollars not Bitcoins for the
duration of my entire life and not only
that but I believe that this will be
true for everyone I know for all my kids
for all of their future descendants for
many generations I have and will
continue to happily bet against anybody
who wants to take the opposite stance
and believe that believes that the us is
going to fall and I'll do that by
passively investing in low fee index
funds if I do that I believe I'm going
to passively absorb the wealth of almost
everyone who invests in Bitcoin or
otherwise predicts doomsday and the
decline of Western civilization in the
United States third if I believed that
the United States government and US
dollar was going to collapse or decline
materially on the world stage I'd invest
in a bunker guns and ammo canned corn
and other resources like that not
Bitcoin fourth if I did believe that the
government of the United States would
col and the US dollar would collapse
without ending my way of life as I know
it I'd bet on another government
controlled currency or future
cryptocurrency replacing the dollar
fifth I believe that Bitcoin maximalists
missed the fact that Bitcoin as a
potential theoretical future currency
has fatal flaws that make it an
extremely unlikely candidate in the
extremely unlikely event that the world
does adopt a future Reserve currency
Bitcoin has huge technical problems and
I think that a future iteration of
Bitcoin namely a future cryptocurrency
um that does not exist yet will likely
resolve those issues okay let's use like
I I Bitcoin maximalist challenged me on
this thesis the other day and they said
like look at the British Empire it has
completely faded it used to span the
whole world and I'm like this is a
terrible example of this is like this is
like perfectly fitting into my my
rationale here the Great British pound
has been used since 760 ad so that is
almost what 1,300 years of continuous
use of a government currency over that
that time period some of it that some
during some of that it was backed by
gold during some other times it wasn't
but like that currency has survived and
so is that government if you are a UK
resident you have lived your life and uh
using Great British pounds uh for the
entire time you will probably um
whenever you pass away you will your
estate will still be using Great British
pounds and your children their
children's children will probably
continue to be using those I believe
that's the same general state of of
United States the United States also if
we really want to get into it I think we
have a lot of advantages we have a ton
of problems but every every problem and
Advantage is relative on the world scale
we have a tremendous amount of abundant
natural resources here compared to other
large um countries around the world our
population segment is really stable we
have plenty of young people compared to
places like China Japan Western Europe
those areas we have immigration people
want to move to the United States from
all around the world so whenever we
decide how we're going to handle
immigration we can we can we will have a
flow of people who want to be here and
make their lives here um so those are
not trivial uh advantages and like yes
we have problems we can't agree on
anything our government spends more than
it brings in um but we have um again
this very stable um this very stable
resource base and population base we
also have the world's strongest military
so it's like where what what other
country would you rather bet on long
term it hasn't been profitable to bet
against the United States for the last
50 years and I don't think it's going to
be profitable to bet against the United
States in the next 50 years and look
people are going to disagree with that
that's totally fine but don't call me
and the people who invest in stocks US
Stocks us real estate ignorant because
we don't believe that the United States
is going to collapse I'm just happy to
bet against you I'm happy to bet against
somebody who thinks that the world is
going to collapse or Western
Civilization is going to collapse and I
believe I'm going to passively absorb
your wealth over that time period so
Bitcoin is not just a potential store of
value it would actually be deflationary
in a long-term sense perhaps
significantly so so if like if the
vision of a Bitcoin maximalist was
realized remember that Bitcoin Supply is
ultimately finite according to bitcoin
optimists who believe that it will be
adopted as a world Reserve currency the
last Bitcoin will be mined in
2140 so once they're all mined the only
thing that can happen is for the supply
to decrease and like
people will guard their precious
resources in in this future hypothetical
state where Bitcoin has taken over and
the last one has been mined um very
jealously but still people will die
people will lose their keys that store
the information about how to access and
transmit Bitcoin and so the the the
supply will actually shrink over a long
period of time and that is going to
compound this deflationary problem of no
more mining no more bit no more Bitcoins
being mined um here I'm not aware of any
Democratic or capitalistic civilization
that has endured with a deflationary
currency over a long period of time
because if you truly do have a
deflationary currency it says that the
best thing you can do is to hoard that
currency and not to invest in assets and
other things because the the currency is
what's going up in value that creates
huge problems here o over a long period
of time I also want to call out that the
incentive to mine Bitcoin the um um uh
this act of securing the blockchain that
is so critical um and goes so hand inand
with the the Bitcoin thesis where is the
incentive to continue expending this
computing power on an individualized
basis once the last Bitcoin is mined so
there's an endgame problem here for
Bitcoin um that you know there's the
various theories on how to solve um but
I'm skeptical of at a certain point and
I think that we're going to see that
problem emerge uh as Bitcoin mining um
as as haling events happen for Bitcoin
mining okay second Bitcoin transactions
are super expensive and impractical for
day-to-day use so this is called the
Bitcoin scalability challenge um and
basically the problem is that because
the blockchain requires so much
computing power to secure transacting
Bitcoin is fairly expensive it actually
costs about $1 to3 do to make a
transaction on the blockchain um here
and so the world does not possess and
will not possess for the foreseeable
future enough computing power for the B
the blockchain to process anywhere near
enough transactions to allow Bitcoin to
be used as day-to-day currency so if
Bitcoin was widely adopted the price to
transac Bitcoin would
Skyrocket now the community has proposed
and implemented various solutions to
this problem Each of which has pros and
cons but true decentralization and mass
Payment Processing are still a long way
off for Bitcoin um for Bitcoin users if
it ever comes despite these increasingly
clever clever mechanisms and then I also
want to call out there's another problem
here where like why why was the world
able to move off of a gold standard in
the first place right well what happened
here is the US government bought and and
World governments basically bought a lot
of gold and then used that gold to back
their currencies and then move their
currencies to Fiat
right that same scenario there's nothing
that would exist to prevent governments
from purchasing Bitcoin from their
people in the event that and then moving
it back to a fiat currency at some
future State Bitcoin has no has well has
no solution for that particular problem
okay next up Bitcoin is Not Practical
for most purposes going forward so
Bitcoin is super volatile right now and
is going to remain very volatile even
according to bitcoin optimists for the
foreseeable future that means that
unless you're really bold you're not
going to put your down payment for your
next house and buy Bitcoin to save up
for that you're not going to buy Bitcoin
to save up for your kids college fund
you're not going to pay save up Bitcoin
to buy Bitcoin to save up for your next
vacation because of that volatility you
can't save for a near-term or objective
that you know you need that liquidity
for um in the next couple of years um
again unless you're very bold very few
people are going to do that SEC second
another one here is that Bitcoin is not
widely accepted for payments or goods or
services like I'm not going to accept my
salary in Bitcoin um and I cannot easily
use Bitcoin to purchase goods or
services or pay my taxes to the US
government of again I'm a US citizen um
the people who do uh choose to accept
Bitcoin as a form of payment often have
problems with this right so like if you
receive payment in Bitcoin uh in 2024
for example that's worth a million
dollars and by the time you go to pay
taxes in 2025 that Bitcoin is worth
$500,000 you have a real problem on your
hands um from a liquidity perspective so
a lot of people have come into this
problem in years past another problem
with Bitcoin Bitcoin is a huge
environmental concern Bitcoin mining
consumes an incredible amount of energy
um and a large portion of the world's
population is not going to to be aligned
with adopting a currency with such large
environmental consequences so while a
small fragment of Libertarians who again
we can empathize with and admire in some
cases um May love this concept of
decentralized currency many more people
are unlikely are are likely to be like
no we're not going to expend a
ridiculous amount of computing power um
to stabilize our currency um we're we're
comfortable with some centralization for
this again a lot of these issues are
solvable in future state cryptocurrency
iterations so a bet on bitcoin is also a
bet against some future invention
solving many of the issues that I just
discussed so yes you can make some
software updates and other variations to
the blockchain to mitigate some of these
issues but there's always going to be an
easier Perpetual flow of better
theoretical alternatives to Bitcoin in
my opinion I'll keep going here I also
think that there's just no such thing as
a truly trustless Marketplace so even
when I transmit Bitcoin to someone on
the Block chain I'm trusting them to
deliver whatever good or service if I
want to buy a pizza on the blockchain
I'm trusting somebody else to deliver me
that pizza after I transmit Bitcoin
somebody has to enforce that contract
that's a centralized government um that
has physical power so this like true
decentralization Vision I think is
unlikely to be ever realized in there
Bitcoin also does not prevent contrary
to what Bitcoin maximalist will say the
booms and bust of modern economies or
resolve the problems of fractional
Reserve banking please look up
fractional Reserve banking I would love
to explain it but that would take us
down a big rabbit hole um here you can
perform fractional Reserve banking on
any currency so cryptocurrency investors
learned this the hard way with the fall
of major cryptocurrency exchanges like
FTX um and these are lessons that the US
financial markets experienced in the
early 20th century that these new
attempts at World Reserve currencies are
finding out and discovering all over
again um the lessons learned from these
other centuries are just are just being
repeated in the crypto currency markets
so I think that the vision of true
decentralization and trustless
transactions is unlikely to be realized
or necessary at any future point and
that while governments have collapsed
and will continue to collapse the new
governments that emerge from those
collapses are not necessarily going to
turn to bitcoin so next I want to talk
about the blockchain right this is like
uh Bitcoin maximalists acce in the whole
again blockchain is an accounting record
of Bitcoin transactions from the
beginning of time anybody can go at any
time and look at the blockchain and see
who currently holds Bitcoin and the
entire history of transactions when
someone tries to send Bitcoin the rest
of the network collectively verifies the
transaction instead of having a person
like a central bank or like the FED an
accountant or bureaucrat um we have a uh
the Bitcoin uh Network verifies this
transaction through a technical process
called proof of work so essentially the
network competes to solve a very
difficult technical problem that
requires a lot of computing power to
prove but once proven can be verified
easily by the rest of the network and
they compete to solve this technical
problem because the network rewards them
with Bitcoin that process is called
Bitcoin mining and this is what makes
the Bitcoin Network so secure is so many
people from so many places around the
world are competing to solve these
problems that there's no one person that
is needed to verify that a transaction
is legitimate so to hack the blockchain
somebody would need unimaginable
computing power they need more than 50%
of the computing power currently being
devoted to mining Bitcoin and securing
the blockchain so this is as secure a
ledger as almost anything can imagine in
the real world um it's also the reason
why Bitcoin mining consumes so much
energy output more than 27,000 terawatt
hours which is more than many small
countries last year a true Bitcoin
maximalist again does not believe that
the Bitcoin is good technology for any
other application because if like for
example medical record in the medical
record space unless somebody has Dev a
tremendous amount of computing power to
maintaining a medical record blockchain
it's in theory possible that someone
with a really powerful Computing Network
could hack that blockchain take over
with more than 50% of the computing
power and rewrite history right and that
would be a problem so blockchain
technology is only useful as a secure
decentralized Ledger in one application
according to bitcoin maximalist
maximalism which is money itself Bitcoin
as a single worldwide backed uh uh uh
currency and for the record I agree with
Bitcoin maximalism on this point I think
that true decentralized blockchain
technology is not a useful secure
decentralized application for anything
but a theoretical um future state where
Bitcoin is a world Reserve currency
couple of other items that I want to go
through um sharp ratio Bitcoin
maximalist will talk about how great
Bitcoin sharp ratio is a sharp ratio is
a way of measuring returns relative to
risk so um Bitcoin Max will talk about
how Bitcoin has this like incredible
ratio of returns relative to risk but
this is a kind of a silly argument in my
view because Bitcoin was worth zero when
it was invented and now it's worth
something anything that goes from zero
to one has an essentially infinite sharp
ratio and so that allows anybody to
conveniently look back at any point in
the last over the last 15 years and make
in many cases an argument for an
incredible sharp ratio so don't let
someone use that Gem of an argument and
get away with it as a defense of Bitcoin
another big point from Bitcoin people
the El Salvador experiment in 2021 El
Salvador became the first and still the
only country to make Bitcoin legal
tender so this is apparently a huge
victory for Bitcoin enthusiasts a clear
point where hey my thesis that world
governments are going to collapse and
turn to bitcoin is being validated oops
2 years later less than 1% of Central
Bank remittances in El Salvador were
Bitcoin so it turns out the locals don't
really accept Bitcoin and you're
absolutely going to need Alternative
forms of currency to enjoy a visit to
Els Salvador although in some places
mostly tourists can enjoy the experience
of using Bitcoin to pay for very highly
marked up goods and services so this has
been widely documented including by
Bitcoin enthusiasts it's not exactly a
shining example of how this is going to
work okay another point the current
valuation is not a endorsement of the
future potential of Bitcoin the fact
that a currency that this many problems
is at all-time highs is an indication of
risk not validation of a
thesis okay now all that is my argument
against Bitcoin I want to concede one
point to bitcoin maximalists here to
close things out so contrary to popular
belief Bitcoin is not really a good tool
for criminals remember all the secure
applications of the blockchain and how
clear and immutable alleger that is well
for criminal transactions that actually
makes it remarkably easy for government
agencies to track criminal activity and
catch criminals this has been widely
documented and people who are dealing
drugs or using Bitcoin um uh to transact
on illegal activities are often caught
using the blockchain Fairly easily by
government agencies so don't walk away
from today's call thinking that Bitcoin
is actually going to be a great tool for
criminals only the most technically
sophisticated and very smart um folks
who know how to hide things um on the on
the on on how how to really mask their
activity in the blockchain are going to
be able to get away with it long term so
all that said I think that the long-term
value of Bitcoin is zero I do not
believe that Bitcoin has a 1% or 0.1% or
whatever probability waiting you want to
uh give to it of replacing all of the
world currencies or some of the world
currencies in a longterm sense um as
legal tender as money itself so I don't
hold anything in Bitcoin and again I'm
not saying that the Bitcoin maximalism
thesis is wrong um I guess I kind of am
saying that it's wrong at least for me
from a belief standpoint um but I'm not
saying it's crazy it's not like it's not
grounded in a reasonable school of
thought you have just know that if
you're going to invest in Bitcoin you
have to disagree with what I said you
have to ascribe some probability of the
collapse or decline of Major World
governments and the replacement of their
currency with Bitcoin to some non-zero
probability and just understand that
that's the bet that you're fundamentally
making and that a Bitcoin Maxim most is
fundamentally making and I think that
that leads me to logical place like what
can what should a rational person who's
reacting to this video and saying Scott
I disagree with you I think there is a
probability of investing in Bitcoin what
should you do well my recommendation
would be that you should treat Bitcoin
as part of your cash world right
understand that it's part of your cash
world that could go to zero or it could
go up um to some to some expense but
think about it as part of your cash
position so for example if you had
$120,000 in cash you might consider
putting $40 in US Dollars 40 in gold and
40 in Bitcoin if you subscribe to the
belief that Bitcoin could take over as a
future State World Reserve currency to
some degree and that might help you
achieve some of the goal of preserving
that wealth um in a relative sense and
giving you some liquidity but again I
believe that that is it's much more
likely that this runs the risk of a near
or complete wipeout in the long run and
extreme volatility in the short run so I
do not do that personally all right if
you got this far I really appreciate you
taking the time to listen to my
impassioned speech on bitcoin here I'll
point out that even if I turn out to be
dead wrong and the Bitcoin takeover does
happen with without the collapse of my
way of life as I know it then I will
just transition to taking my dividends
and Rental income in satoshis instead of
dollars the real value of my collected
rent and the dividends that I have in my
um my my portfolio uh will remain
relatively constant even in that event
where Bitcoin does take over regard that
that's the real value of the wealth and
the those companies and my rental
properties are producing regardless of
which currency or which form of money is
flowing through the underlying assets
just a remind everybody again thank you
for listening I welcome a rebuttal and
debate on this topic this is my view
it's not the view of Bigger Pockets it's
not the view of the other people who
host podcasts at Bigger Pockets it's
probably not the view of many in the
community we've had Dr safine amus on
the Bigger Pockets money podcast author
of the Bitcoin standard We Are W we
would welcome another guest in the
future who wants to rebut many of the
points I've made just don't tell me that
I haven't done enough homework please
because I'll get really annoyed about it
I've done plenty of homework on this
subject and I understand it I'm happy
for rational informed debate and
disagreement though so again if you
listen this far thank you so much and uh
look forward to seeing you on the next
episode of the Bigger Pockets money
podcast Bigger Pockets money was created
by Mindy Jensen and Scott trench
produced by haar elos editing by Exodus
media copyrighting by Nate wiro and
lastly a big thank you to the Bigger
Pockets team for making this show
possible
[Music]
関連動画をさらに表示
What is Bitcoin? Bitcoin Explained Simply
Bitcoin Surge Continues as Stock Tops $72,000
Teaching Bitcoin Part 1: Asset or Money?
Will Bitcoin Price Skyrocket Or Collapse Post-Halving? | Marathon Digital CEO Fred Thiel
Bitcoin Halving Explained Simple - Does it Affect Bitcoin's Price?
Bitcoin Halved! What Happens When ALL 21 Million Bitcoin Are Mined?
5.0 / 5 (0 votes)