Every time I hear a crypto-booster explain the value of Bitcoin, it begins to feel more and more like a hustle to me.
Look, I am not here to bash crypto or anyone who invests in it.
This is an asset I have been researching for a little while now, and I am trying to justify an investment in some crypto assets. An old adage in investing is to never “invest in things you don’t understand.”
I have an even simpler philosophy:
Never invest in an asset, where the value proposition of that asset can’t be easily explained and defended.
That’s where I am at with crypto. I have yet to hear a simple explanation and defence of that explanation under scrutiny as to why the crypto market is worth trillions of dollars.
A prime example of this is on full display in this episode of the “Masters in Business” Podcast.
It’s a great discussion, but if you want to get into the juicy stuff, skip to 14:35.
Where the host (Barry Ritholtz) pushes back on professor Campbell Harvey claim that
“Finance has not evolved in the past 100 years.”
This appears to be one of the central arguments as to why Bitcoin and other crypto-assets are so valuable.
Barry pushes back and lists some of the many changes finance has seen in the past 30-50 years, such as ATMs, the ability to send money around the world for a few dollars, being able to buy stocks for $0, and the ability to go to dinner and use a cash app to split the bill 5 different ways.
Professor Harvey’s response to being able to buy stocks for $0 by saying, you still need to wait for 2-days for trade to settle and officially “own” the stock.
Barry’s response to that is the same thing I was screaming into my phone: I don’t care if I need to wait for 2-days for the trade to clear.
Yes, it would be “nice” (I guess) for the trade to instantly clear, but does that incremental improvement justify a trillion-dollar market cap?
I continue to keep an open mind but have yet to hear a compelling and rational argument to justify the current valuations of crypto assets. So, stocks, bonds, real estate, and cash it is for me for the time being.
Until next week.
Cheers,
Ben