The Bull Case

THE BULL CASE


Potential Price Valuation

“The best profit-maximizing strategy is to own the fastest horse [..]. If I am forced to forecast, my bet is it will be Bitcoin"
- Paul Tudor Jones, Billionaire Hedge Fund Manager

The bullish case for Bitcoin, price wise, is that a bitcoin could have a price in the millions or much more in the long term. Of course, this is partially speculation but with great merit that grows in legitimacy each passing day.

Bitcoin price by Coinlib

Bullish scenarios for Bitcoin include:

  • growth from the gold and commodities market
  • growth from the real estate market
  • growth from the stock and bond market
  • growth in the store of value market
  • growth in the reserve asset market
  • growth in the currency market
  • continued inflation and hyperinflation in all countries
  • introduction of negative interest rates
  • continued corruption and growing dis-trust of certain central entities
  • the growing incentive to protect your wealth coupled with the shrinking choices to be able to truely do so
  • the era of moving to digitize everything
  • new generations being internet and digital native

Many of these markets are valued in the trillions or tens of trillions and Bitcoin in early 2020 had a market cap of around $160 billion USD meaning we are still very early in Bitcoin adoption. Remember, Bitcoin is global - adoption that is happening in one country is also occurring in all other countries. Bitcoin protects your wealth better than anything that ever existed and it has an asymmetric upside. We are at the point in time where it is financially irresponsible to not have exposure to Bitcoin especially if you have a fiduciary duty.

Bitcoin Price History

“It's been a great month for Bitcoin but it's also been a great year, 3 years, 5 years and 10 years [..] and it's been the single best performing asset category in every one of those periods [..] Everybody is going to want to own at least some bitcoin"
- Bill Miller, Highly Acclaimed Investor & Fund Manager

Since Bitcoin was released in 2009, it has had 3 notable bull cycles. The cycles peaked in 2011, 2013 and 2017.

  • 2011: the price peaked at $31.91 USD and corrected to $2.
  • 2013: the price peaked at $1242 USD and corrected to $206.
  • 2017: the price peaked at $19, 783 USD and corrected to $3272.
Bitcoin Logarithmic Price Chart.
Source: 99bitcoins.com
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Volatility

“Rather than seeking to create a Chinese-style digital dollar, Joe Biden’s nascent administration should recognize the benefits of integrating Bitcoin into the U.S. financial system"
- Niall Ferguson, Highly Acclaimed Historian & Milbank Family Senior Fellow at the Hoover Institution.

Bitcoin is known to be volatile but anything that is new, small and early is going to be volatile. That's normal and to be expected.

Bitcoin is still a baby in money terms - it has only been around since 2009 and was relatively unknown until 2013. Established monies have been around for hundreds or even thousands of years.

Because of this, it's still in the price discovery phase and will be for the forseeable future. It doesn't have that multi-trillion dollar liquidity yet.

But despite Bitcoin being early and small, it sometimes had glimpses of instances that had less volatility than highly established things such as gold, oil, NASDAQ, Dow Jones, silver, Apple, Amazon, Microsoft, treasuries, etc.

Also, contrary to popular belief, the price volatility is not just necessary but required for the adoption phase of Bitcoin. This volatility is what brings in new interest, users, investors, liquidity and builders into the space in cycles. It also clears out the scammers, opportunists and weak hands when the bear market hits them hard.

People should only fear volatility that trends downwards. Bitcoin's price volatility has been trending "upwards and to the right" since day 1 for over a decade now.

Digital Scarcity

“If the gold bet works, the Bitcoin bet will work better"
- Stanley Druckenmiller, Highly Acclaimed Investor & Fund Manager

Bitcoin is the only asset on this planet that is truely scarce and one that is not subject to the controls of a central entity.

Bitcoin is scarce because:
  • there is a fixed supply of no more than 21 000 000 bitcoin
  • No more bitcoin can be created once the max supply has been issued

The jist of it is, Bitcoin has a fixed supply and no central entity can change that to add more. When demand outweighs the supply, the value of bitcoin increases.

To put things into perspective, there are double the number of millionaires than there are bitcoin. If every millionaire wanted to own bitcoin, they could only own less than 0.5 bitcoin each, mathematically speaking. In reality, it's far less.

To amplify the effect of Bitcoin's scarcity, over 88% of all bitcoin have already been issued and it's predicted that 1-3 million bitcoin are already permanently lost. Additionally, a large portion of bitcoin are thought to be stored in long term storage. For example, in 2020 over 10,000,000 bitcoin have not moved for over a year. That's over 50% of the current supply in existence today (2020). This could be a cause and effect of more people grasping at what bitcoin is.

Below is the popular stock to flow model created by @100trillionUSD. Stock to flow measures the Bitcoin price based on the amount of circulating bitcoin and rate of new bitcoin being added to circulation.


Stock to Flow Model. Click for a live version.
Source: digitalik.net
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Quantitative Hardening / Halving Events

“Bitcoin can possibly evolve into a global asset"
- Larry Fink, CEO of Multi-Trillion Dollar Asset Management Company BlackRock

Every country uses a monetary policy that involves something called quantitative easing. This is when a central entity controlled by a handful of people create large amounts of fiat currency out of thin air for "reasons" when they see fit. Did you know that in 2020, it's been estimated that the U.S. printed over 22% of ALL circulating US dollars that are in existence?

Everyday people lose in this situation because:

  • cost of living increases
  • purchasing power of our money decreases
  • work wages doen't keep up
  • we have economic crashes that further hurts the everyday person
  • the printed money isn't going into our pockets. It's being used for unknown things such as bailing out high-valued companies that mis-managed their finances.

In Bitcoin, it has a predictable issuance schedule of new bitcoin coming into circulation. The issuance cuts in half every 4 years. There has been 3 quantitative hardening events so far, one in 2012, 2016 and 2020. The 2020 halving, reduced the issuance from 12.5 bitcoin per 10 minutes to 6.25.

Buying Bitcoin

“Bitcoin could replace gold."
- Rick Rieder, CIO of Multi-Trillion Dollar Asset Management Company BlackRock

Many people don't see Bitcoin as an investment, they use it as a long-term savings technology to store generational wealth.

Why? Because you are selling your fiat for Bitcoin. You are trading something that is infinite for something finite. It's the only provably scarce asset in both the physical and digital realm other than your time. You are storing your wealth in the worlds most secure, self-soverign bank that exists on this planet.

What should you do with your bitcoin? The easiest and most successful thing to do has been to simply secure your stash and just hold it for a decade plus. It's that simple.

Find a service to purchase bitcoin here!

Tips
  • You can buy a fraction of a bitcoin. For example, you can buy $20 worth of bitcoin.
  • Buy responsibly.
  • Store Bitcoin on your personal wallet.
  • Some services have an auto-buy feature called DCA.
  • Don't day trade, just HODL. A sell is a taxable event and you most likely can't time the market.
  • Don't watch the price if you can't handle it, it will most likely have volatile moments for the forseeable future.
  • If you're still asking "what should I buy?", you still don't get it.
What is an altcoin?

Flowers

An altcoin is either a literal copy & paste of Bitcoin's code base with altered parameters or a coin with a new experimental code base. In both cases, the common sales pitch is that they claim to be "better" than Bitcoin in some way. Unfortunately, over 99% of altcoins are a scam.

"Better" is usually a claim to being "faster" than Bitcoin. However, this very attribute of "instant transactions" completely nullifies the only important usecase of a blockchain: digital immutability.

To achieve "fast" on a blockchain, you must sacrafice decentralization and if it isn't decentralized, it isn't immutable or secure and the blockchain becomes just another paypal like system but much less effecient and secure. And if it's just another paypal like system, there is nothing special about it. Every direction you move towards in a coin's design has a trade-off and sacrifices something. There is no such thing as magically adding an attribute that does not have a consequence in the general function of the coin.

It's Not Investing, It's Gambling

Let's try to keep it real, when you buy an altcoin you are gambling. You see tens or sometimes hundreds of random altcoins listed on an exchange. You don't know what any of them do, how any of them are different from one another, who was given a very large stake of coins for free, how many coins will ever exist, etc. If you are one of the few that does research an altcoin, all you will find are other people that pretend to know what they're talking about and you're probably not technical enough to truley understand anyways.

If you bought an altcoin it's because you saw a cheap price and wanted to test your luck.


Creating An Altcoin Is Non-Trivial Now

Everyone and their mother can create altcoins now and it's only getting easier.

Bitcoin is open source which means that anyone can copy and alter the code to create their own coin - enter the altcoins, a.k.a. shitcoins. Altcoins are mostly all scams with a few experiments. There's now thousands of altcoins and 99.5% of them have no utility except for an attempt to make someone a quick buck. Experimentation is great but pre-allocating a ton of the coins to you and your buddies and pumping your bags strictly for profit when your experiment has absolutely no use-case, security, decentralization, network effect, competent developers and is destined to fail is not only disgraceful but rampant in this space now. If it is an experiment, it should be treated like an experiment - the goal is to change the world. If it is something truly remarkable it will sell itself and catch on organically.


Altcoin Proponents - They All Spew The Same Junk

Many altcoin proponents spend their time preaching to others on how their altcoin is the next Bitcoin - "it is faster, cheaper and it can do everything imaginable!" Most people are not informed about the limitations or purpose of a blockchain. Fast payments to buy coffee aren't new or special. In fact, a blockchain isn't designed for that and because of how it works, it actually destroys the security model and purpose of a blockchain: digital immutability. It just becomes a useless, boring and ineffcient payment system. The main ingredient that makes a blockchain special is decentralization and using a blockchain for coffee payments removes this.

Tons of altcoin teams out there build a cookie-cutter website, build up a small cult with puppets, pay off some pundits, spend some money on an advertising team and voila you have the next Bitcoin! In addition, they all have a small central team of developers and a leader of the project.

The "next Bitcoin" motto has been around for over a decade now. Unfortunately, some new people fall for it all the time and get burned. The loud-mouth scammers or bag holders pretend to believe it and can sound convincing. But they are just pumping their own bags. Once you have been around these altcoin proponents for long enough, you begin to realize they are all the same and it will most likely continue for a while longer (maybe forever but to lesser effect). They are feeding off of the uneducated and the greedy. One day you should be able to spot these people and altcoins quite easily.


Different Shitcoin, Different Bull Market

Altcoins have been around in every bull market cycle. Each new bull market cycle has more new shitcoins than the previous bull market and the top 10 (nevermind the top 100) altcoins from the last bull market are no longer the top 10 or top 100 of the next bull market. It's a very fast game of musical chairs.

The last round of altcoins have to compete with the "new and improved" altcoins of tomorrow. We are already seeing this process take place as the 2017 bull market unwinds. Focusing on the top 10 altcoins, they are all flip-flopping and swapping their lead spots in the top 10. Most trend towards $0 over time and every altcoin loses their value in terms of bitcoin. Remember, when Bitcoin's price corrects after a bull market, you can bet the altcoins are going to crash much harder and are not guaranteed to come back. If Bitcoin goes to $0, everything is going to $0. Most altcoins from previous years you probably haven't heard of because they are completely irrelevant now.


Fake Market Caps

As time went by and altcoin after altcoin piled in - we have learned that market caps are a very poor method of calculating a coin's dominance in the overall ecosystem because it's an endless sea of useless altcoins are constantly being added. Many of the altcoins have a token supply in the hundreds of millions or billions. We don't even know what the supply cap of some of the top altcoins are! With these large token supplies, the project just needs to sell 1 token for $1 and if the altcoin has 10 billion tokens, it now has a market cap of $10 billion dollars. In addition, most websites are mixing in Bitcoin with things that aren't even cryptocurrencies to determine their numbers, further invalidating the metric. These issues have rendered the coin dominance metric pretty much useless now.

Many of the altcoins had a pre-mine with a set allocation of coins for founders, developers, etc. Sometimes there are even covert pre-mines that break the supposed hard limit cap of the project (the latest example is bitcoin private). Some other projects have weird time locks on a large amount of the token supply or a pre-sale before the project is public.


Bitcoin Is The Next Bitcoin - The End

World class developers, protocol specialists, top cryptographers, cypherpunks and pioneers (some of who aided in the creation of the internet) have and continue to think of every aspect of Bitcoin over and over again - attack vectors, trade-offs, scaling, supplemental technologies, privacy, game theory, fungibility, etc.

A passenger of an airplane should not tell the pilot or engineer how to fly or build an airplane. Protocol engineering is no different. Everything that Bitcoin does, it does for a very important and technical reason. Bitcoin takes a slow and "do not break things" attitude for protocol changes - the utmost importance for a protocol dealing with over 200 billion dollars worth of value. Having gone through all that - if Bitcoin needs to implement a secure, innovative, thoroughly tested code from an altcoin it can be integrated. Bitcoin is code. It is adaptable. Bitcoin is the next Bitcoin. The media has claimed Bitcoin is dead over 300 times now - yet it's still here and thriving. Attacks on Bitcoin only make it more resilient. There's a reason why Bitcoin is called anti-fragile. So be warned, dabble in altcoins at your own risk. Some people need to touch the stove and get burned to learn.

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More Reasons to Avoid "Investing" in Altcoins

  • extremely illiquid
  • Manipulated and fake market cap valuations
  • High token amounts (some are in the tens of billions)
  • infinite, unknown or broken token supply limit
  • Centralized network, has a leader and a marketing team
  • Designed under a false narrative like fast payments or decentralized world computer
  • Insecure in more ways than one
  • Each altcoin risks being replaced by the so called "next Bitcoin" in a few months
  • High pre-mined allocation of tokens
  • Pump and dumps
  • Incompetent developers, little to no developers and/or disloyal developers
  • Buggy code
  • Experimental
  • Absolutely no use case
  • Alts trend toward $0 in the long term
  • All altcoins lose their value in terms of bitcoin return relatively quick and permanently
  • Developers / pundits misunderstand or intentionally ignore the limitations and purpose of a blockchain
  • They're all just penny stocks
  • Easy for big holders to game the market in their favor because it is so illiquid and large quantities of coins were pre-allocated for free
  • In the past decade, the top 50 altcoins have come, gone and swapped spots
  • "The next Bitcoin" motto has been around for over a decade
  • 99% of traders lose in the traditional markets, 99.9% of traders lose in this space.
  • If you day trade (buy, sell, then re-buy), you most likely just created a taxable event.
  • very short period of time to act on price moves
  • an altcoin can literally lose all value in less than 1 hour
  • Altcoins have a "move fast and break things" methodology which is counter-intuitive to being used as a system where reliability is the utmost importance.
  • Bitcoin is not the first attempt to make a better money or solve digital immutability. Many attempts failed in the past, all mostly from being centralized. In other words, Bitcoin is not "MySpace".
  • Buying altcoins isn't diversifying and it doesn't make sense. Altcoin prices are correlated with Bitcoin and are amplified when Bitcoin's price goes down. Also, diversifying is for someone that doesn't understand the space.
  • People buying altcoins aren't looking to add them as a long term asset in their portfolio. They are looking for short term gains in their currency and will eventually dump them all.
  • There are thousands and thousands of altcoins now. A service can list an endless wave of altcoins. When does this stop? Altcoins die all the time and exchanges have to remove and replace altcoins all the time.
  • Each altcoin added to a service requires the company to run the node of each coin in their backend plus additional code. This requires additional company resources. In addition, each coin needs to be individually maintained and checked for security vulnerabilities, fork events, etc.
  • Just adding 1 altcoin to a service increases the attack surface of the service's code. Now imagine adding 10 or a hundred altcoins. Altcoins are a security risk to you and the company.
  • An honest and organic start like Bitcoin is near impossible for altcoins now. People know too much and will game every aspect of the altcoin. The proof is in the thousands and thousands of altcoins that have already been exploited out of greed.
“The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way.”
Janet Yellen - Former Chair of the Federal Reserve