The VERY simple bear case for bitcoin (2024)

Disclaimer: Before I begin and before I get trashed by the crypto mob, I should say that I’ve been a bitcoin owner since 2012, was an early investor in ripple, changecoin, help run CoVenture Crypto…and even helped launch a digital gold currency. I believe in the power of the technology and the power of a store of value, but this is my attempt at understanding both sides of the coin (get it)

Every day I get asked by more family and friends if they should invest in crypto currencies. It’s getting to the point where I feel compelled to share the other side of the story given how much blind faith I see being trusted in FOMO.

1. Where’s the tech? — we are 8 or 9 years in this journey and there is still not even 1 enterprise or consumer application that we engage with regularly that leverages the blockchain. Given its been almost a decade since the start and the speed at which you can start enterprise and consumer applications has grown tremendously, it’s surprising that not more is built. I’m pretty sure 8 or 9 years after the launch of the public ISPs, we had numerous consumer and enterprise applications used or could imagine using. While it’s easy to say that this is the internet in 1990, there are millions of non-tech people who know about it, believe in it and yet nothing has materialized yet. I have people tell me that the blockchain will replace every passive industry, but I think we forget that an inefficient process or industry can be dis-intermediate with the EXACT same automation technology we already have. Because something is inefficient doesn't mean the blockchain is the right solution. So yes SWIFT sucks, real estate titling is slow and insurance claims are sloppy, that doesn’t mean the blockchain wins.
2. The currency angle is dead — early on we heard the use case for bitcoin would be remittance and currency. I think that argument has died. It’s pretty much well understood that NO country wants a parallel currency they can’t control. Gold is a great analog. Gold already has 5,000 years of history where every culture, religion and society ascribes value to it (all attributes bitcoin would love to have). Yet almost no countries treats it like currency. Governments exert significant control by controlling the fiat we all use (taxes, printing, shrinking etc). That is not something that they will let go of. Moreover, given the cross border nature of currency, it requires massive cooperation among governments, something I wouldn't bet on.
3. Satoshi must be in a perpetual smh mode— it’s incredibly ironic and sad that the largest and most well funded startup in the space is Coinbase — the crypto equivalent of a bank (#loveyouguysthough)! The Companies that help you hoard currency and not use it are the ones valued the highest in this economy. This is EXACTLY what Satoshi didn’t want. We just recreated the financial system all over again. The people getting rich now are the same Wall Street traders, market makers and funds that dominate our securities markets…and the same systems that Satoshi so badly wanted to dis-intermediate. The world’s financial system is not global and keeps out literally billions of people (for credit or other reasons)…every single person can own crypto, yet it’s now being profited by the same type of institutions (different skin, same function) it was meant to challenge. The point of btc was not to not make people rich, it was to change the system.
4. Markets don’t go up vertically / Making Money isnt Easy— this is just fact. When your facebook feed is filled with your friends not in the tech world talking about trading crypto currencies, you’re probably nearing the point of euphoria.

5. Fake News — I find that the industry suffers from fake news on 2 accounts

a. Press Releases do not = revenue — Every day you see the currencies jump in price because they’ve announced a partnership with a big bank or tech company. But that doesn't mean revenue. In fact, when you peel the onion you find that almost all these companies have done almost no business with these announced partnerships. Ask the banks how much money they transact on the blockchain, ask IBM how many people are actually developing core business processes on a distributed ledger.

b. Valuation- this might be the most egregious thing I've seen. People compare the valuation of bitcoin to the value of the Nasdaq in 2000, the money supply of certain countries, the market caps of banks…it’s all silly. There is no real analog and it’s not different then analysts making valuation calls on pets.com in 1999 off eyeballs. The idea that we can predict the valuation of something that goes up 20x in a year is just ignorance.

6. The price going up doesn’t mean you were right — I think of the most bearish signals for this market is that everyone thinks that they were right about the blockchain because btc (and the other cryptos) have gone up in price. The price of a crypto currency does NOT mean that the actual technology worked. I think if you stepped back and asked yourself, how has the blockchain (or any of its analogs) changed society, the welfare of humanity or even the most basic inefficient systems we live with, you’d be hard pressed to find an area of change.

So yes…we’ve all made a lot of money hoarding and trading, but at some point the technology, protocols and applications underneath these assets must actually prove some utility. Otherwise, we’re just waiting for the next incremental buyer to buy the hope you bought into, without any evidence of that hope manifesting.

“Nothing sedates rationality like large doses of effortless money” — Warren Buffet

Next I hope to publish my attempt at the Bull case :)