In today’s Money Morning…an ignorant swan…patience isn’t just a virtue, it’s value…there is still plenty of money to be made…and more…
Is this it?
Is this finally the last gasp of Bitcoin [BTC]?!
Of course not.
In fact, this past month almost feels like déjà vu. As if I’m reliving January and February 2018 all over again. Right after the last bitcoin boom and bust.
And as Lachlann has expertly explained over the past two days, it is thanks to a lot of the same old threats. Particularly when it comes to China’s supposed crackdown on miners. Which is something we’ve seen them try to orchestrate countless times before.
Who knows, though, maybe the CCP will finally oust them this time.
But, even if they do, that’s not enough to kill bitcoin. In fact, as Lachy concluded, it could turn out to be the best thing to happen to bitcoin in quite some time.
That hasn’t stopped the critics from kicking the crypto community when they’re down though. Looking to score some points with hackneyed rhetoric that often boils down to a simple ‘I told you so’.
All it simply reminds me of is the quote from ancient Greek playwright, Aristophanes:
‘Youth ages, immaturity is outgrown, ignorance can be educated, and drunkenness sobered, but stupid lasts forever.’
I’m sure almost all the bitcoin doubters would throw this quote right back in my face though.
And somewhat surprisingly, one of these doubters is famed economist and author Nassim Nicholas Taleb…
An ignorant swan
If you’re unfamiliar with Taleb’s name, he is the man who coined the term ‘black swan’. A type of unforeseen and rogue event that dramatically changes the world.
For example, Taleb suggests something like the 9/11 attacks is a perfect example of a black swan event. A totally unpredictable, yet extremely impactful, part of modern history.
And in case you’re wondering, the current pandemic is apparently not a ‘true’ black swan. It was and had been predicted (in an abstract sense) by a few people for some time.
But I digress…
The reason I bring up Taleb today is because he has decided to air some of his grievances about bitcoin. Reinforcing his reversal of opinion on this technology. Because a few years ago Taleb was a bitcoin believer.
That all changed earlier this year when Taleb decided to call bitcoin a failure. As well as confirming that he was selling some of his bitcoin holding, right around the time it was first peaking at around US$50,000.
So, despite his views, Taleb almost certainly profited from bitcoin.
However, it seems those earlier comments weren’t enough, because Taleb released his own five-page paper on why bitcoin is a bust. Comically titled ‘Bitcoin, Currencies, and Bubbles’.
A relatively short but deliberate attack on all of his grievances with the preeminent cryptocurrency. And while I don’t have time to go through all his points one by one, his main points are:
- Gold is a better store of value
- Bitcoin could be replaced by a superior technology
- It is too volatile to become useful
Now, for the first two points, I think Taleb is simply being disingenuous with his argument. Here is his rationale for gold’s inherent superiority as a store of value, for instance:
‘Gold elicited an aesthetic fascination and had been used as jewelry and store of value from such demand for more than two millennia before it became, literally, a currency or before there was such a thing as a currency.’
Which is effectively saying that gold has value because people have liked the fact that it is shiny for over 2,000 years. And because bitcoin doesn’t have this same storied history throughout human history, it is unfit to replace gold…
The funny thing is Taleb’s second argument against bitcoin — technological obsolescence — is exactly the counter to his first. After all, what is bitcoin if not the latest innovation for a new store of value.
As for whether it will or could be replaced, sure, it is possible. But right now, it is the best choice because it has proved to be resilient. And better yet, unlike gold, its digital nature means it can be upgraded and iterated upon with new improvements.
Patience isn’t just a virtue, it’s value
At the end of the day, whether you want to buy into Taleb’s arguments or not, it is his general tone that annoys me the most. And don’t get me wrong, I have a lot of respect for Taleb, I think he is a smart guy.
But when it comes to this bitcoin attack, I think it is his own intelligence that is getting in the way. He, like many others, just can’t buy into the idea of something so new and untested replacing assets or systems that have existed for decades, or even hundreds of years.
And this, I believe, is the biggest issue with bitcoin’s critics.
They can’t see it succeeding unless it reaches a critical mass of adoption/usability. And they don’t believe it will reach this critical mass because it will never have the same legacy and trust as an asset like gold or fiat currencies.
Effectively, it is the perfect paradox.
To that I would say, just give it a chance.
We’re just 12 years into what could be one of the most transformative technologies money has ever seen. And keep in mind, paper or fiat money as we know it was invented in 11th century China, but only became truly feasible as a global monetary standard by the 20th century.
In other words, it took roughly 900 years from creation to predominance.
I don’t think bitcoin will take that long, after all we’ve seen how far it has already come. But it will need a little more than a decade to win over the vast majority of users. And that, dear reader, is the point that you really need to take note of.
Because if you are worried by the recent volatility in bitcoin, remember, it is because you’re in the early stages of a much bigger change. One that has already minted plenty of wealth for plenty of people — but by no means has reached anything close to its full potential.
Time is what bitcoin needs to grow, and to prove itself.
So while critics like Taleb may not be willing to give it that time, those that do will likely prosper from it.
In the meantime, though, if you’re looking for a way to potentially make even more money from cryptocurrencies, you can use the volatility to your advantage. It is precisely what our resident expert Ryan Dinse does.
And tonight, he’s going to walk through exactly how he does it. So I would highly recommend tuning in for that. Check it out, and book your spot, right here.
Because whether you’re in bitcoin for the long or short term, there is still plenty of money to be made as this novel technology grows in stature.
Editor, Money Morning
PS: Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.