Remember Bitcoin?

Today is my last day of riding in South Carolina at George Hincapie’s Hotel Domestiqe.

Yesterday George took us on a great ride. He posed with me along the way:

I could not keep up with the strong riders in my group who spent most of the time pushing hard with George, but he did ride a few km with me and it was a fantastic day of cycling.

On the first night, my end of the table got talking about Bitcoin. I started the conversation because I was sitting with 4 senior executives from various large gold companies in Canada and after a few drinks was pondering their demise. I was interested in what the reactions would be and reactions I got.

Because I do not do a great job of explaining Bitcoin and the Bitcoin Blockchain, I turned the conversation into a very high level discussion and said I would share a great explainer and research notes.

Just last month Wences Casares, CEO of XAPO, wrote a great essay titled ‘The Case for A Small Allocation to Bitcoin‘. I think anyone with an open mind will really enjoy the essay as he lays out the risks and rewards.

My favorite quotes:

How can something that constantly crashes go from $0.05 cents to $4,000 you ask? If you want something to go from $0.05 cents to $4,000 and fool everybody into believing that it is failing, do it with as much volatility as possible.


How can Bitcoin fail?

Bitcoin can fail in many different ways. It could be taken over by a bad actor. It could be displaced by a better platform. It could be hacked. And Bitcoin can probably fail in many ways that we cannot imagine yet. Because Bitcoin does not have any intrinsic value, and because it’s value depends on a social consensus which is a sort of collective delusion, in my opinion, the most likely way in which Bitcoin could fail is a price panic. If we all decide at the same time that we think Bitcoin is worthless, then it will be worthless. It is a self-fulfilled prophecy. If the price of Bitcoin were to plummet to zero or near zero, even if the platform remained intact, its reputation would suffer immensely and it could take a generation to rebuild that credibility. This could happen if people buy amounts of Bitcoin they cannot afford to lose, for example if people invest their retirement funds or their kids’ college funds into Bitcoin, and as the price goes does down they are forced to sell, pushing the price further down and forcing others to sell. So, in my opinion, the biggest risk to Bitcoin is people investing amounts they cannot afford to lose.

I am in the Wences camp that people in a position to invest allocate 1 percent of their assets to Bitcoin at current prices. I am overexposed to Crypto myself through private investments (hedge funds, Etoro, Robinhood, Coinmine, Civic) but have bought a few coins back directly as well.

I hope this essay helps you get a better understanding. It definitely helped me.