Bitcoin

I interviewed Roger Ver about Bitcoin and Joseph Lubin about Ethereum almost exactly four years ago. Both men were influential in their respective cryptocurrencies formation and evangelism.

Bitcoin was trading around $650. Ethereum was trading around $8.50.

I bought much more Ethereum than Bitcoin during late 2016 and early 2017. I was primarily smitten by the technological promise of disintermediating financial institutions with Ether’s ‘smart contracts’ technology.

I rode the 2017 bubble up to see Ethereum reach over $1300. I knew just enough to know that 60x returns on investment is INSANE. Also, a few finance bloggers I trusted wrote about how taking some gains off the table (read: cashing out) would go a long way to minimize regret.

I ended up selling about 75% of my crypto. The fiat cash I traded it for paid off my remaining student loans and allowed me to make a down payment on a condo.

It was life-changing and I was insanely lucky.

Since the bubble burst in late 2017, I’ve not paid a ton of attention to the blockchain space.

I downloaded the Brave browser because the technology seemed like a no brainer. It makes the web faster while blocking most trackers.

I syndicated Piper’s YouTube channel to Lbry because I knew the founder of the project and the idea of a media platform that could not be controlled by censors seems like an increasingly important social good. 

Besides that, I focused on starting my company (which I would have never been able to do if I still had student loans) and becoming the best marketer possible.

But, when markets started to waver in late 2019, I started to re-engage.

When the coronavirus started to become salient in March, and the Fed made multiple emergency interest rate cuts, I became hyper-focused.

Over the next few months, I shifted my *very small* portfolio heavily into Bitcoin. Below I will explain why.

If you want the basics of what Bitcoin is, check out: link 1, link 2, link 3. 

Our Currencies have been Severely Debased

The US Dollar went off the gold standard in 1971, meaning that each bill of US currency stopped being backed by a physical piece of gold in a government controlled vault.

That’s the origin of paper currency. It was a debt on a hard asset elsewhere. 

With this single piece of historical information, you can answer the riddle, “WTF happened in 1971?!?”

During the 50 year slide that has since transpired, government balance sheets have been allowed to explode with debt.

A government can always carry some debt, but once they surpass 50% of the nation’s GDP, it becomes inconceivable that any reduction of that debt will be smooth. In fact, it’s usually terrible.

Short-term incentivized politicians will make spending decisions that get them re-elected, and that rarely involves austerity.

We’re way past that point.

If the currency debasement continues, a hard asset like Bitcoin will go up in value because it is scarce. More money printing by governments around the world means more dollars competing for scarce assets.

There Must Be a Unit of Value that is Digitally Native

We have digitized almost everything in our lives.

Zooms and Google Hangouts have replaced meetings.

Video games have replaced sports.

Malls have been replaced by Amazon.

The list goes on and on.

Why would we expect the old world system of finance to be optimal for the new world?

Almost every serious technologist agrees with this thesis. 

Here is Twitter & Square founder Jack Dorsey explaining why he’s a believer in Bitcoin.

Founder and venture capitalist Balaji Srinivasan agrees.

Think about this geographically.

Newspapers were obliterated when they lost their geographic monopoly. As soon as the local paper started competing with every web blogger on Earth, they saw their revenue & relevance  decrease by an order of magnitude.

The exact same thing happened to the taxi industry when Uber and Lyft unlocked their regional monopolies and decentralized the transportation industry.

In both instances, the legacy companies had no choice in the matter.

Meanwhile, our currencies our still monopolized commodities constrained by the geography in which we are transacting. In an internet-connected world, that seems woefully inadequate.

Wall Street is Starting to Wake Up

Those technologists have been talking about Bitcoin for more than a decade. They are the fringe. The earliest adopters.

It’s no longer fringe. 15% of American adults now own some form of cryptocurrency. This has made the big money folks start to take notice.

Wall Street is where the folks managing pension funds, endowments, and sovereign wealth funds reside.

They’re starting to get comfortable with Bitcoin.

Here is Paul Tudor Jones, a billionaire hedge fund manager, talking about how he’s put his own money into crypto.

A few weeks later, Stanley Druckenmiller admitted that he has also allocated some of his wealth into Bitcoin.

If you feel yourself starting to foam at the mouth, please set some time aside to watch this video (full disclosure: this is the video that radicalized me).

But Aaron, Won’t the Government Shut this all Down?

Honestly, that’s a non-zero risk.

But, here’s where I keep coming back to:

What part of 2020 has made you confident in the government’s ability to stop a viral contagion from spreading across the country?