The Price is the Product
and it always has been
Narrative One
In the early days, bitcoin promised adopters an offramp from the financial system; a kind of digital Galt’s Gulch where liberty minded individuals could go transact with each other the way von Mises intended. Want to buy drugs? Ok! No sales tax or capital gains. A world entirely free from The Man™️. Transact anonymously!
Narrative Two
Fast forward slightly and the narrative shifts. It’s not actually anonymous but it’s pseudonymous which is just as good! Number Go Up™️! HFSP™️! (Have Fun Staying Poor. Yes people were (perhaps still are) saying this. Can you imagine?)
Liberty isn’t freedom from The Man™️, it’s freedom from want! You will be able to buy whatever you want from those who fail to recognize this opportunity they’re missing!
The transformation was swift from libertarian crypto-utopia to a fervent belief in financial salvation. Philosophy became religion. Salvation from a crumbling global social order! The chosen people will be kings in the new utopia! Just buy this thing!
Narrative Three
Fast forward slightly further still and we entered a lull, the crypto winter. Adoption stalled. New recruits were needed to keep the Number Go Up™️ technology fueled. Enter Microstrategy, Grayscale, Tether, and all of the related shenanigans. This is not a ponzi scheme! Don’t buy the Tether FUD! Digital scarcity! Virtual gold!
In order to keep the game going, the bitcoin community needed to let go of the principled philosophical underpinnings of liberation and privacy and double down on the quasireligious belief in a future where every satoshi buys you a nice gentleman’s suit. WAGMI!™️ (We are going to make it!) Either you’re in (read: saved, chosen, choose your membership word.) or you’re out.
In the name of Satoshi Nakamoto,
and the HODL spirit,
Ramen.Narrative Latest
Fast forward to today and a thousand ETFs bloom. The unwashed masses and traditional Wall Street firms can own fractional shares or load up in size on this new asset class. You can put crypto-salvation directly into your 401k or your grandma’s IRA. Whatever you do, just buy more, but for a new reason: fees.
A Coin of Principles
A person whose principles are subject to change when they come under pressure has no principles at all. Bitcoin adherents hilariously promoted anonymity in its early days despite the entire blockchain being completely in the public domain. Blockchains are very forensically navigable data structures which is why this is hilarious. If I were a crime-fighting agency who wanted to make a honeypot to catch bad actors, I’d be proud to have invented and popularized something like blockchain.
In the very brief speedrun of reinventing banking, bitcoin has come full circle. Now that it has gone mainstream, it no longer exists as a concept. It has become just another security that will generate fees for Wall Street. Ashes to ashes. Dust to dust.
The promises of liberty or financial nirvana it might have provided are no more relevant than the faint echoes of a carnival barker after the caravan has left town. The admonishments that Nocoiners™️ should HFSP™️ have gone from a roar to a whimper. HFPT™️ (have fun paying taxes) is more like it.
The Price is the Product
Bitcoin did not bank the unbanked. Bitcoin did not revolutionize payments. Bitcoin did not become a savings vehicle for the masses. Bitcoin is and always has been a casino chip. You made lots of money? Great! That money was won from others who lost exactly that same amount, creating nothing of value. Oh, and how do you measure the value of your bitcoin takings? Yeah, US dollars.
The carrying cost of bitcoin is still negative as all of those servers solve math problems to keep it alive. The only way that works is if the price keeps going up. The only way the price keeps going up is to recruit new HODLers, ad infinitum. That is why the ETFs were born. This is Bitcoin’s Alamo. If the ETFs don’t generate new inflows from big money players, it's over.
Bitcoin doesn’t even need a real crisis to shake its religious adherents awake, it just needs a persistently lower price. How robust can such a thing be? What is the price, below which even HODLers lose their faith? Now that big money players can short and option the new cohort of mainstream instruments in size, how quickly could the price move in either direction?
Bitcoiners™️ care about one thing: getting rich. Bitcoin is a call option on human greed, nothing less, nothing more.
There is a beautiful, albeit circular logic to the whole thing. If the price goes up: see, we told you! If the price goes down: we’re so early, you have to get in now! Any theory can be applied, so no theory applies. Just buy it. Join us or die poor. This was never about any philosophical or technological ideal. It is now and always has been a cult of greed. Wall Street collects the alms.
Yes, and?
If it’s true that the point of bitcoin is that it has a price, maybe that is actually enough. Its proponents raise this as a sort of “yes, and?” by claiming that bitcoin is worth what someone else is willing to pay for it, which is absolutely true. It has a price, therefore it has a value, rather than the other way around.
If its value derives from its price, then bitcoin is a kind of fiat currency — crypto fiat, if you will. That’s not an indictment, by the way. Fiat currencies have had, and are having, a great run for more than a generation. In another piece, maybe I’ll put together an argument for why replacing one fiat with a another fiat is not an obvious step forward. For now, I’ll just say that the price as the product works until it doesn’t. When it finally doesn’t (if it doesn’t), then it will not do so, very quickly. The convexity of extremely convex options-like instruments cuts both ways. If it can rocket to the moon, it can rocket back to earth.
Caveat cryptor.
None of the contents of this essay, or any of my communications, should be considered investing advice.
I like your writings but super lazy article. Anyone can see how toxic the Bitcoin/crypto community is. Tell me about proof of work, the upcoming halving, Middle East investments into mining, etc. You saying it’s another fiat currency shows your true lack of knowledge of the subject. In this context, if it’s not proof of stake, it’s probably not fiat.
Unfortunately, discussing Bitcoin can be like punching into the wind. So I understand your frustration on the subject and the discussions you might have had with Bitcoiners. On the surface you appear right. But if you do a deep dive into mining, proof of work, history of money, attributes of money, scarcity, etc you’ll find Bitcoin is the better monetary system. I don’t think it’ll happen overnight and probably not in my lifetime and probably not as a result of the death of fiat. Therefore, I do not care about price nor making money on it. It’s for the grand kids.
It absolutely is a philosophical difference. The fiat system we have coupled with our unelected bureaucrats (WEF, Fed, IMF) have made many losers and few winners. Not through actual work, but scheming and politicking. I don’t want that for my kids and Bitcoin is my only vote against “the system”.
At the end of the day, Bitcoin is a better, more free monetary system. All other cryptocurrencies and “crypto” offerings are Ponzi schemes
Agree with you to the extent that bitcoin is digital fiat currency and probably the primary driver is greed, and has been for a long time. I would quibble with saying everyone who is in it is in it for greed. There are still anarchist true believers as well. But the fundamental problem with bitcoin is that it has inherent scarcity but not inherent use value. So it meets only half of the requirements for a viable currency. And half of good enough, is: not good enough.