{"id":170583,"date":"2024-04-15T13:05:34","date_gmt":"2024-04-15T19:05:34","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=170583"},"modified":"2024-06-15T04:44:31","modified_gmt":"2024-06-15T10:44:31","slug":"why-you-should-reject-bitcoin","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/why-you-should-reject-bitcoin","title":{"rendered":"The Rational Investor&#8217;s Case Against Bitcoin"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5528426861\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC8328880726\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><em><span data-preserver-spaces=\"true\">I don\u2019t invest in Bitcoin because I am betting on the continuation of Western civilization, not its collapse or decline. If I did believe my government would collapse, I\u2019d invest in guns, ammo, and canned corn. And if I believed that Bitcoin could peacefully replace my country\u2019s currency, I\u2019d still rather own real estate, businesses, stocks, or other alternative assets than a currency like Bitcoin.<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">At $1.3 trillion in market capitalization as of April 2024 and a price of $65,000 per Bitcoin, enthusiasts of the cryptocurrency, who I will refer to going forward as \u201cBitcoin Maximalists,\u201d may think that they have another conclusive proof point validating their thesis.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I say not so fast. I\u2019m writing this article because I believe:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Bitcoin Maximalists are unable to communicate their thesis plainly and simply.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Bitcoin Maximalists dismiss those who do not invest in Bitcoin as uninformed.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Please note that this article is not about cryptocurrency in a general sense\u2014there are many coins in existence, many with unique and specific theses behind them. This article is only about Bitcoin and the theory and belief set behind those who give it value.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I have encountered remarkably few well-rationalized challenges to Bitcoin\u2014probably because there are so many problems with Bitcoin as a serious long-term investment that most knowledgeable investors stop learning more about the Bitcoin Maximalist philosophy long before being able to describe it in well-formed detail. Why bother unpacking the whole school of thought over hundreds of hours when they\u2019ve already decided to invest in something that creates value, like property or businesses?<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">With no challenges to the Bitcoin thesis from people who even know what the thesis is, Bitcoin Maximalists may feel that the only opposition is from the ignorant.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This, in my view, is a serious problem.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Could it be that a dangerous echo chamber has developed, where a thesis that&nbsp;<\/span><em><span data-preserver-spaces=\"true\">literally is grounded in a bet on the collapse or decline of Western Civilization&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">goes unchallenged, simply because most smart opposition never bother to go deep enough down the rabbit hole?<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Let\u2019s diffuse this echo chamber. Or pop the bubble.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Investors:&nbsp;<\/span><em><span data-preserver-spaces=\"true\">Stop&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">saying that you don\u2019t invest in Bitcoin because you don\u2019t understand it. Read this article, and start saying that you don\u2019t own Bitcoin&nbsp;<\/span><em><span data-preserver-spaces=\"true\">because&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">you understand it.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I did the research on Bitcoin. I internalized the worldview, and I admire it. Not only that, but I can tie together the Bitcoin Maximalist\u2019s deep-rooted belief in the Austrian School of Economics: skepticism of centralized government power in general, their belief in the value of hard money, Bitcoin as digital cash, and its special symbiosis with the blockchain.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I&nbsp;<\/span><em><span data-preserver-spaces=\"true\">admire&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">the thesis and worldview. Bitcoin maximalism isn\u2019t just a pathway to quick riches for adherents\u2014it is literally participation in moving society forward to a better world.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Core Bitcoin Thesis: The Ultimate Form of \u201cHard\u201d (Inflation-Proof) Money&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin Maximalists believe that inflation is a prime evil in today\u2019s society. Grounded in the \u201cAustrian School of Economics,\u201d Bitcoin Maximalists believe that inflation is a secret tax on the people that fuels government excess. Inflation steals wealth from workers and savers, forcing people to earn their money twice\u2014once through labor and again by investing.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Inflation has led to the suffering of the people and the overthrow of governments since the dawn of civilization, they will point out. The exceptions, the good times, have been primarily or exclusively when money was hard.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And until the digital age, the best example of hard money was gold. Gold is a good example of hard money because it cannot be printed by a central bank. It cannot be made or unmade, as proven through centuries of failed attempts at alchemy. It has a finite supply and is difficult to mine. Furthermore, it can be easily smelted into small increments, never rusts or corrodes, and can, therefore, store value for eternity.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And, when societies use hard money, like gold, Bitcoin Maximalists and those from the Austrian School of Economics argue, the good times roll. The people flourish, innovation accelerates, and trade prospers.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Recently (in the last 60 years), to their dismay, most of the world has transitioned to fiat currency or \u201csoft\u201d money, like the U.S. dollar. With the money supply controlled by central banks like the Federal Reserve, there is nothing but fallible human judgment preventing government excess and money printing that will destroy wealth and lead to devastating human suffering.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Enter Bitcoin. It\u2019s designed to be the ultimate form of hard money. Digital cash\u2014gold, but better.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Like gold, there is a finite supply (21 million Bitcoins can ever be mined). And like gold, Bitcoin is expensive and difficult to \u201cmine\u201d (more on this later). Bitcoin can be broken down into tiny increments\u2014100 million \u201csatoshis\u201d (named for Bitcoin\u2019s anonymous inventor) make up one Bitcoin.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, unlike gold, Bitcoin has the added advantages of digital transaction and a remarkably immutable, secure, and transparent ledger called the blockchain, which is a special, purpose-built technology exclusively for Bitcoin (Bitcoin Maximalists typically are not proponents of widespread adoption of blockchain technology &#8211; they think it is purpose-built&nbsp;<\/span><em><span data-preserver-spaces=\"true\">only&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">for practical application as a ledger for Bitcoin transactions &#8211; more on this later). Participants in the blockchain compete to solve ever-increasingly complex technical problems that require more and more computing power. These problems are hard to solve but easy to verify as correct once solved.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Those who solve these challenges, which verify transactions on the blockchain, are rewarded with Bitcoin\u2014hence the term \u201cmining.\u201d This creative system allows for Bitcoin and the blockchain to be decentralized.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This is key to the Bitcoin thesis\u2014there is no Fed chair or government figure verifying transactions and accounting for the currency. Bitcoin and the blockchain don\u2019t need a government or any individual to endure and thrive. This currency can exist independently of any centralized power structure.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And this leads us to our core thesis: As governments and societies that currently use fiat currencies succumb to the temptation to inflate their way out of their problems one by one, the people will turn to a better form of money. Governments and societies will be forced, one by one, to adopt Bitcoin as money, and in the not-so-distant future, Bitcoin will be money, for all or most, people in the world.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Thus, the long-term future value of Bitcoin is essentially that of all the world\u2019s outstanding currency. It will replace all dollars, yuan, euros, yen, and more. This leads to a long-term market cap that is tens of trillions of dollars\u2014maybe hundreds of trillions of dollars.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And what\u2019s more, Bitcoin Maximalists believe that this is good for society\u2014that the common man will experience unimaginable benefits from this transition, innovation will flourish, the economy will stabilize, and that without inflation to worry about, the common people will consume less, leading to happier, more productive, and more sustainable living. They believe that governments will be forced to enter into sustainable fiscal policy, and those that can\u2019t will dissolve and reform.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That\u2019s the thesis: Invest in Bitcoin, watch \u201cthe man\u201d collapse, make a nearly infinite return, do good for society, and watch humans thrive.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It\u2019s awesome! It\u2019s&nbsp;<\/span><em><span data-preserver-spaces=\"true\">cool<\/span><\/em><span data-preserver-spaces=\"true\">. It\u2019s&nbsp;<\/span><em><span data-preserver-spaces=\"true\">admirable<\/span><\/em><span data-preserver-spaces=\"true\">. I completely respect the Bitcoin Maximalist intention. I admire the thought, detail, and intricacy of Satoshi Nakamoto (inventor of Bitcoin). It\u2019s really fun to learn about and a wonderful exercise in thinking about money from a different perspective.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I also respect the largely libertarian viewpoint that grounds and drives many of those who subscribe to the maximalist thesis. Too much government is often an issue, and decentralization is often better than centralization. I believe that the realization of their vision could be a great thing for humanity or at least a worthy experiment on the path to progress.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There is no evil. No mal-intent. No lack of intelligence. Bitcoin maximalists are zealous, yes. But, there is a true belief underlying that eagerness that is grounded in a theory that I can empathize with.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">My Rejection of This Thesis&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">That said, I reject the thesis. Here are my core issues with it:<\/span><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">At the end of the day, Bitcoin is intended to be a store of value, a (digital) currency. I\u2019m an investor. I don\u2019t \u201cinvest\u201d in currency\u2014I keep the minimum amount of currency needed to secure short-term liquidity needs and sleep well at night, and invest the rest in cash-flowing assets, including businesses, real estate, or debt\/bonds backed by businesses and real estate. Even in a world with \u201chard\u201d money, I would put my capital to work, trying to create real (inflation-adjusted) wealth, not allow it to collect digital dust.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">I believe in the United States, its people, economy, government, and military. I do <\/span><em><span data-preserver-spaces=\"true\">not&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">believe that it or its currency will collapse or decline in a relative sense in my lifetime. I believe that I will earn, spend, and pay taxes with dollars, not Bitcoins, for the duration of my life. Not only that, but I believe that this will be true for everyone I know, for all my children, and for all of their future descendants for many generations. <\/span><span data-preserver-spaces=\"true\">I have and will continue to happily bet against people who believe that the U.S. will fall by investing in low-fee index funds of U.S. publicly traded companies, and will happily and passively continue to absorb the wealth of those who predict doomsday and decide to take other bets.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">If I believed the United States government and the U.S. dollar would collapse or decline materially on the world\u2019s stage, I would invest in a bunker and a lifetime supply of canned corn, guns, and ammunition, not Bitcoin.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">If I did believe that the United States government and the U.S. dollar would collapse without ending my way of life as we know it, I\u2019d bet on another government-controlled currency or future cryptocurrency replacing the dollar, and per my first point, would still rather own real estate and businesses than currency.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Bitcoin has numerous fatal flaws that I feel make it an extremely unlikely candidate for a future state reserve currency. In the extremely unlikely event that the world adopts something like a Bitcoin Standard (that\u2019s the title of a great book written by a very smart Bitcoin Maximalist named Saifedean Ammous, by the way, and I highly encourage you to read it), I believe that future iterations of Bitcoin, namely future cryptocurrencies that do not exist yet, will resolve those issues. <\/span><\/li>\n<\/ol>\n\n\n\n<p><span data-preserver-spaces=\"true\">Many people will disagree with these beliefs. That\u2019s their prerogative. <\/span><span data-preserver-spaces=\"true\">Just know that&nbsp;<\/span><em><span data-preserver-spaces=\"true\">if you buy Bitcoin, you are betting on America and Western civilization\u2019s collapse or decline. You are betting on world currencies being replaced and that Bitcoin will be the major or only replacement.<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Too many people say, \u201cI don\u2019t invest in Bitcoin because I don\u2019t understand it.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That\u2019s unhealthy.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This contributes to the echo chamber. Each time another ignorant person dismisses Bitcoin, it only adds fuel to the Bitcoin Maximalism fire. And that\u2019s unhealthy. We need both people who invest in Bitcoin because they believe the West will fall and those who don\u2019t invest in Bitcoin because they don\u2019t agree with its thesis.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That\u2019s a healthy dynamic.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So, don\u2019t say that you don\u2019t invest in Bitcoin because you don\u2019t \u201cget it\u201d anymore. Change your stance to the following:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">I don\u2019t invest in Bitcoin because I am betting on the continuation of Western civilization, not its collapse or decline. If I did believe my government would collapse, I\u2019d invest in guns, ammo, and canned corn, not a digital currency. And even if I believed that Bitcoin could peacefully replace my country\u2019s currency, I\u2019d still rather own real estate, businesses, stocks, or other alternative assets than a digital currency like Bitcoin.<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And, again there will be plenty of people who will take the opposite stance and think governments will fall one by one and be replaced with Bitcoin. As I said, for me, that means they are not competing with me to purchase real estate or U.S. broad-based index funds, a happy situation for me as I pay a slightly lower price each time I invest.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you haven\u2019t already stopped, you can stop reading now. My core thesis has been conveyed.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Next, I\u2019ll get into the weeds about Bitcoin, the blockchain, and its technical and other challenges that I feel make it an improbable bet as a future world reserve currency. I will also attempt to debunk some of the commonly used examples of why Bitcoin\u2019s takeover is inevitable and why it is such a good risk-adjusted investment.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Mostly, I write to preemptively combat the inevitable accusations from Bitcoin people that I didn\u2019t do enough homework and don\u2019t understand what\u2019s going on here. I get thinly veiled incredulity from Bitcoin Maximalists when I tell them that I did my research, and because of that research, I don\u2019t invest. They truly just can\u2019t believe it.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Bitcoin\u2019s Technical Shortcomings and Design Challenges&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin is not a perfectly designed future state currency. It has many (in my opinion) fatal flaws that make it, at best, an interesting, thought-provoking experiment on the journey to forming a perfect form of money.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin is not just a potential store of value. It would be deflationary, perhaps significantly so, in a truly long-term sense if the vision of a Bitcoin Maximalist was realized. For example:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Bitcoin&#8217;s supply is ultimately finite. According to Bitcoin optimists, the last Bitcoin will be mined in 2140.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">This deflationary problem would compound as keys are regularly lost, and the actual amount of Bitcoin available for liquidity would gradually shrink in a truly long-term sense.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Many Bitcoin \u201cinvestors\u201d store their keys on physical flash drives, which they then secure. These are invariably lost, stolen, or forgotten over time.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">I am not aware of any democratic or capitalist civilization that has endured with a deflationary currency over a long period of time.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Also, Bitcoin transactions are expensive and impractical for day-to-day uses. For example:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Transacting Bitcoin currently costs the equivalent of $1-$3 on the blockchain.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">The world does not possess, and will not possess for the foreseeable future, enough computing power for the Bitcoin blockchain to process anywhere near enough transactions to allow Bitcoin to be used as day-to-day currency. If widely adopted, the price to transact Bitcoin on the blockchain would skyrocket.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Referred to as the &#8220;Bitcoin scalability problem,&#8221; the Bitcoin community has proposed and implemented various mechanisms to attempt to deal with this problem, each of which has pros and cons. True decentralization and mass payment processing are still a long way off, if it ever comes, despite increasingly clever mechanisms to cope with this challenge.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Playing that out, the world operated on a gold standard for many years. The U.S. government accumulated a huge portion of the world\u2019s gold and then moved off the gold standard. There is no reason that this same scenario couldn\u2019t recur similarly with Bitcoin.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin is a poor substitute for currency for most practical purposes going forward. Here\u2019s why:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Until further notice, Bitcoin will likely be extremely volatile, with huge price fluctuations both in nominal terms relative to the dollar, and in real terms in its ability to purchase real goods and services. Only true believers with iron stomachs would save up for a home down payment or college fund, for example, by buying Bitcoin.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Bitcoin is not widely accepted as payment for goods or services, and must be converted into another currency first. I do not accept Bitcoin in return for my services at work or as rent, and I cannot easily use Bitcoin to purchase goods and services, nor pay my taxes.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Those rare individuals or companies who do choose to accept Bitcoin as a form of payment have, in some cases, learned the hard way that the U.S. government requires one to pay taxes on $100,000 in income received via an equivalent amount of Bitcoin in dollars, even if the Bitcoin is worth less (or worthless) when the tax bill comes due in April of the following year.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">In addition, Bitcoin is an environmental concern:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Bitcoin mining consumes an incredible amount of energy. A large portion of the world\u2019s population wouldn\u2019t be aligned with adopting a currency with such large environmental consequences.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin\u2019s shortcomings are solvable in future cryptocurrency iterations\u2014a bet on Bitcoin is a bet against innovation, and specifically, a bet against a future cryptocurrency that can solve Bitcoin\u2019s shortcomings:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Software updates and other variations on the blockchain can mitigate some of these issues, which means that there will be a perpetual flow of better theoretical alternatives to Bitcoin.<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">There is no such thing as a truly \u201ctrustless\u201d marketplace. Even when I transmit Bitcoin to someone, I trust that they will then deliver whatever I am paying them for. A government must enforce contracts. And to enforce contracts, a government must have physical power.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin will not prevent the booms and busts of modern economies nor end fractional reserve banking. One can perform fractional reserve banking on any currency. Cryptocurrency investors learned this the hard way over the last several years as the industry relearned painful lessons that U.S. financial markets experienced in the early 20th century.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The vision of true decentralization and trustless transactions is unlikely to be realized or necessary. While governments have collapsed and will collapse, the new governments or societies that emerge will not necessarily turn to Bitcoin.<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">In the extremely unlikely event that the United States government and civilization crumbles, the most likely new currency is another fiat currency, not Bitcoin.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Militaries or large majorities determine who holds power, not minority groups with grand visions (unless they obtain military power).<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">A collapse of Western Civilization might well mean the end of globalization. The blockchain is dependent on peer to peer connection. Could Bitcoin mining infrastructue survive a true deglobalization event?<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Additional Considerations and Common Talking Points Related to Bitcoin<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are lots of arguments and talking points Bitcoin enthusiasts bring up. Here is my rebuttal to many of them.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">According to Bitcoin Maximalists, the blockchain is single-use technology that powers&nbsp;<\/span><em><span data-preserver-spaces=\"true\">only<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;Bitcoin&nbsp;<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">The blockchain is essentially a ledger\u2014an accounting record of all Bitcoin transactions from the beginning of time. Anyone can, at any time, go into the blockchain and see who currently holds Bitcoin and the entire history of transactions. Anyone who joins the Bitcoin network gets a public address and private key\u2014people send Bitcoin to someone\u2019s public address, and one can use their private key (password) to send Bitcoin to someone else.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Once someone tries to send Bitcoin, the rest of the network collectively verifies the transaction. Instead of having a person, like a banker, accountant, or central government official, verify that the sender does indeed have the Bitcoin they are trying to send, the rest of the network does this through a technical process called proof of work. Essentially, the network competes to solve very difficult problems that require a lot of computing power to prove, but once proven, can be verified easily by the rest of the network.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And why does the rest of the network compete to verify transactions? Because they are rewarded with Bitcoin. This process of expending ever-increasing amounts of computing power to verify Bitcoin transactions on the blockchain is what makes Bitcoin so secure. To \u201chack\u201d the blockchain, someone would need unimaginable computing power\u2014more than at least 50% of the computing power currently being devoted to mining Bitcoin.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As a result, transactions on the blockchain involving Bitcoin are as secure as almost anything you can imagine in the digital world. This is also why Bitcoin mining consumes so much energy output\u2014more than 27,400 Terawatt hours, which is more than many small countries.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">A true Bitcoin Maximalist is not also a proponent of the myriad applications of blockchain technology that you may have heard floating in the annals of Reddit subs or tech forums. The immense computing power that goes into mining (and thereby securing) the blockchain is, in their view, wasteful and insecure in all applications outside securing the Bitcoin blockchain.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In any application of blockchain technology, there is always a risk that overwhelming brute force can take over the blockchain and rewrite history. This situation &#8211; called a \u201c51% attack\u201d is when miners get control of more than half the blockchain\u2019s mining power and manipulate the ledger. This is possible in any true blockchain, but unlikely when so much computing power is devoted to Bitcoin from so many different global locations.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">One can imagine, for example, why a true decentralized blockchain would be an extremely costly or extremely vulnerable way to keep medical records or title records\u2014a massive amount of computing power would be needed to ward off potential 51% attacks, and there is no true profit motive to incent long-term, perpetual defense.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Incidentally, this is one of the key convictions of a Bitcoin maximalist that I agree with. I do not think that true decentralized blockchain technology has a long-term application, at least as a secure way to record transactions, apart from Bitcoin or another dominant future digital currency.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Bitcoin\u2019s Sharpe ratio is not proof it is a good investment&nbsp;<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">A&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.forbes.com\/advisor\/investing\/sharpe-ratio\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Sharpe ratio<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is a way of measuring the returns of an investment relative to its risk. Bitcoin maximalists will point to Bitcoin\u2019s Sharpe ratio from inception to today as an incredible risk-adjusted return.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Don\u2019t let someone use this gem of an argument and get away with it.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Any asset that goes from a value of 0 to 1 has an infinite Sharpe ratio. Because Bitcoin went from $0 to $65,000 following a more or less geometric curve over the past 15 years, Bitcoiners are able to conveniently point to any five-year-plus timeline and point out an absurd Sharpe ratio. Come on.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The El Salvador experiment<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">In September 2021, El Salvador became the first, and still the only, country on Earth to make Bitcoin legal tender. This was a great victory at the time for Bitcoin enthusiasts\u2014a clear point that the future of a world dominated by Bitcoin as the form of digital currency was on its way.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Two years later,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.marketplace.org\/2023\/11\/08\/has-el-salvadors-bitcoin-gamble-paid-off\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">less than 1% of Central Bank remittances were in Bitcoin<\/span><\/a><span data-preserver-spaces=\"true\">. Turns out the locals don\u2019t really accept Bitcoin, and you will absolutely need alternative forms of currency to enjoy a visit to the country\u2014though in some places, folks (mostly tourists) can enjoy the experience of using Bitcoin to pay for highly marked-up goods and services.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This experience has been widely documented, including by Bitcoin enthusiasts. The experiment isn\u2019t exactly a shining example of how an economy thrives once Bitcoin is adopted as legal tender. I\u2019ll bet El Salvador will adopt a different currency for its people within the next five years.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Its current valuation is not proof that it has made it and is inevitably on its way to global domination as money itself&nbsp;<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Related to the previous point, Bitcoin is currently trading at close to all-time highs. A single Bitcoin at the time of this writing will trade for $65,000, implying a market cap of close to $1.3 trillion. Many Bitcoin people will respond to challenges with the snarky and aloof comment that their investment is up some XXXX% in a few years.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">\u201cNumber go up\u201d is not a compelling argument, and investors should roll their eyes in return. The question is what to do&nbsp;<\/span><em><span data-preserver-spaces=\"true\">today&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">about Bitcoin.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That a digital asset that generates no cash flow is trading at all-time highs is not an endorsement of value\u2014it is, in fact, the opposite, an indication of risk.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">One point&nbsp;<\/span><em><span data-preserver-spaces=\"true\">for&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">Bitcoin: Contrary to popular belief, Bitcoin is not ideal for criminal activity&nbsp;<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Many people who are uneducated on cryptocurrency associate Bitcoin with the dark web, illegal activity, guns, and drugs. While this may have been the case several years ago, Bitcoin is, in practice, not a very good tool for criminals.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Because the blockchain is so secure and such a good public record for transactions involving Bitcoin, it has proven to be a relatively easy way to track money related to criminal activity. While you can\u2019t necessarily identify someone based on their public address, authorities can use pattern matching and flows of funds to zero in on criminals.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are numerous documented cases of authorities tracking down drug dealers by using patterns and movements of Bitcoin through the blockchain.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So, while there will always be illegal activity with any currency, Bitcoin is not the supposed safe haven for criminals and drug lords that many who are not familiar with it may assume.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">I believe I thoroughly understand the core of the Bitcoin thesis, and that I not only understand it, but deeply empathize with it. And I believe that I can get inside the mind of a Bitcoin Maximalist and not only understand, but agree with the rationale behind it and even admire them for the purity of their vision and true passion behind their beliefs.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Bitcoin isn\u2019t dumb. It\u2019s deeply sophisticated. And adherents to Bitcoin Maximalism really believe that the adoption of Bitcoin is both profitable for them and good for society as a whole.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That said, I still reject their thesis. And I will admit\u2014I did own a single Bitcoin for a time. I held it for a period in 2020-2021 while going through the first iterations of learning about Bitcoin and cryptocurrency. And I did make a cool profit on my brief \u2014perhaps six months\u2014period of ownership. I also felt kind of cool.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I have since sold my entire position and now own zero.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For most people, I believe there is no reason to allocate any percentage of one\u2019s portfolio to Bitcoin. But there will be those who truly believe or the \u201cjust-in-case\u201d people who, due to FOMO or empathy with the Bitcoin Maximalist vision, will ascribe a non-zero probability to not just the collapse of world governments and currencies one by one but to Bitcoin, and not a future or alternative cryptocurrency being the replacement currency.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And to those, I offer only this:&nbsp;<\/span><span data-preserver-spaces=\"true\">Treat Bitcoin like a currency, not an investment. It\u2019s intended to be a store of value.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The logical thing to do, if you believe in Bitcoin Maximalism, as I don\u2019t, is to reallocate a portion of the cash position you are comfortable with among various currencies or stores of value.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For example, if you had $120,000 in cash, you might allocate $40,000 to USD, $40,000 to gold, and $40,000 to BTC. This might achieve the goal of preserving wealth. But, again, I believe it is more likely that it runs the risk of a near or complete wipeout in value in the long run and extreme volatility in the short run.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I can admire the Bitcoin Maximalist vision and argument while dismissing it as a literal bet on the collapse of Western civilization. I can admire the Bitcoin Maximalist vision and cleverness of Satoshi Nakamoto\u2019s invention while also soberly contemplating the technical challenges of Bitcoin.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I believe that Bitcoin\u2019s long-term value is $0.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I do&nbsp;<\/span><em><span data-preserver-spaces=\"true\">not&nbsp;<\/span><\/em><span data-preserver-spaces=\"true\">believe there is a 1% chance, or a 0.1% chance, that it will become a world reserve currency and, therefore, will not multiply the future value of all currency by that probability to justify the current or even a small market capitalization for Bitcoin.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Again, even if I turn out to be dead wrong and the Bitcoin takeover does happen without the collapse of my way of life as I know it, I\u2019ll just start collecting my dividends and rental income in satoshis instead of dollars. The real value (in terms of the ability of that collected rent and dividends to purchase food, clothing, and shelter) of those income streams will remain relatively constant, regardless of which currency is flowing through the underlying assets.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019ve read this far, I thank you for taking the time. And remember:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">I don\u2019t invest in Bitcoin because I am betting on the continuation of Western civilization, not its collapse or decline. If I did believe my government would collapse, I\u2019d invest in guns, ammo, and canned corn. And if I believed that Bitcoin could peacefully replace my country\u2019s currency, I\u2019d still rather own real estate, businesses, stocks, or other alternative assets than a currency like Bitcoin.<\/span><\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Now, let\u2019s discuss in the comments section.<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_75752d7362cc70d34bfa3722667e23e3\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_be234415b2db0227f13cb56155dee929\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div id=button-custom-event-block_d3df6e477a9da7156c989deced09c0f3 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/why-you-should-reject-bitcoin&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/why-you-should-reject-bitcoin&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>I don\u2019t invest in Bitcoin because I am betting on the continuation of Western civilization, not its collapse or decline. If I did believe my government would collapse, I\u2019d invest [&hellip;]<\/p>\n","protected":false},"author":1676,"featured_media":170587,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4433,7119],"tags":[],"class_list":["post-170583","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/170583","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1676"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=170583"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/170583\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/170587"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=170583"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=170583"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=170583"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}