Is Bitcoin too good to be true?

Last week I asked my subscribers to send in their questions. The very first one to arrive caught my attention:

Do you also sometimes stop and think - is bitcoin too good to be true? Given the absolute magnitude of what it might become… —Johannes

Overhype

There's no lack of over-hyping Bitcoin. It even comes in flavors.

Moon-math is probably the most popular flavor.

I get that price predictions are fun and tempting, but some are just ridiculous. For example, people are still reposting this 2021 "prediction" from Fidelity —without mentioning the context of the piece (BTC may go to $1B but then a burger would probably cost $500).

Over time you learn to take these predictions with a handful of salt, sometimes the huge, mesmerizing numbers come with cerebral explanations in an attempt to infuse gravitas into their claims, the Power Law being the latest in an illustrious line of "infallible" models.

I'll admit I haven't done a deep dive on the power law (nor do I have plans to). While it sounds interesting and may be directionally correct, the only person I trust to use math and science to predict future human behavior is Hari Seldon.

There have been many predictive models for BTC's price, they've all been broken at some point, I expect the same will happen to the power law. If you try to use it to trade I expect you'll wind up regretting it.

Speaking of price predictions that are too good to be true —this goes double for those that have nearby dates attached to them:

Now, I like Samson and think he's a smart dude. I also agree with him directionally —it seems reasonable to me that BTC will be valued around $1M within a decade. But one year?? Nah. Even if we get a bull-run with a blow-off top (like we had in 2017) and BTC spikes to $1M for five minutes before "crashing" down to $200k, is that meaningful?

Spending two years near $200k while saying "we were at $1M for an instant" sounds as fun as the 2018-2020 bear market, not very.

Moving on to our next flavor: "hyperbitcoinization" —BTC will absorb the entirety of fiat and become the coin of the realm for the entire globe.

Another amusing thought-experiment, reminiscent of the 90's when Mac vs Windows seemed to be locked into a Highlander-like "there can be only one" scenario.

Turns out the world is pretty big and there's room for more than one apex-predator, I don't believe fiat has to die for Bitcoin to fulfill its purpose nor do I think it wise to with for the quick death of fiat —as Bitcoin is not ready to onboard billions of people and the death of fiat would probably involve horrible convulsions.

What matters to me is that the option of Bitcoin be available to anyone. The more this is true, the more we are winning. People will opt in at their own pace.

Our next flavor of overhype is…

The Supercycle — a scenario where Bitcoin enters something like a perpetual bull-run because everyone wakes up to Bitcoin and loses interest in shitcoins. Sigh.

Sorry, the super cycle is absolutely not going to happen (and shitcoins won't disappear overnight), even though it is now known it's a huge circle-jerk

Human nature changes slowly, BTC is on its way to becoming less fringe but is still far from mainstream understanding / acceptance let alone adoption. Much of the media coverage is still unfavorable and biased.

To close this section, yes overhype in Bitcoin is absolutely real and if you buy into it these wild expectations you'll be disappointed.

Underhyping

Still, without waving our arms around too much, I believe it's fair to say the future looks bright for BTC and there's plenty to be hopeful about.

Global allocation to BTC is still minuscule and has a lot of room to grow.

The ETFs have brought BTC out of the kiddie-pool in terms of liquidity. We are now in a lake that connects to the ocean, a few bigger sharks are now starting to sniff around…

but corporate adoption is only just getting started.

No one is likely to catch up to Microstrategy but their playbook becomes increasingly hard to ignore.

And if Bitcoin fails to be the highest performing asset within a certain time period (and turns out to only be the second or third best-performing asset), I hope you'll still be able to forgive yourself.

If you understand what it means to own BTC you'll be less fixated on price predictions and more focused on the peace of mind it gives you to own a something that preserves and grows your long-term purchasing power without the headaches of counterparty risk.

Nation-State adoption is still in its infancy and mostly quiet, but it has started.

And we don't need the whole "BRICS will adopt to BTC" hype either.

Yes, it would make sense but no, that doesn't seem to be happening. BRICS nations seem to be shoring up their gold-reserves to make themselves less vulnerable to the inherent and unavoidable counter-party risk in owning dollars

The future is already here, it's just not evenly distributed —William Gibson

Slowly but surely, the window of opinion is shifting.

Finally, there are still real challenges ahead for Bitcoin, block-template centralization being one of them —the fact that very few "hands" get to control what gets put into a new block. I slightly disagree with Steve's posture (below) where he says BTC is a slave to Central Banks. I would say centralization increases the risk of that happening, but not that this is the current state of things.

Fortunately a new model, proposed by Ocean Mining is not only helping block formation decentralize, it's also generating more revenue for miners.

In closing, I think Bitcoin is not too good to be true, if you build up your understanding and ability to calibrate the "news" —which is full of outlandish claims. The prospects for Bitcoin are bright even if the most bullish scenarios don't come to pass.

Next week I'll be writing about another question I got:

"I was researching Bitcoin stuff on Chat GPT and it said it's just one of many applications of Blockchain. Do you still think everything "blockchain" is a scam, are you still as much of a maxi as always?

This question is timely for me as last week I met a some newcomers at a couple of live events, some of them got their start through a blockchain course which included BTC as well as various shitcoins.

Do you have a Bitcoin question you'd like me to answer? ask below:

PS. Johannes, I hope you found this answer helpful.

Fiat News

Cuts

As I mentioned 2 weeks ago, rate cuts (or the expectation of) have often been met with drops in the stock market, this time has not been the exception.

And one of the many indicators people lean on to try and predict a recession (the yield curve inversion) is now suggesting a recession is at hand.

This is not hard to imagine as we've come out of a very rare zero-rate environment which distorted the markets. Walgreens is one example…

But far from the only one. Reality may take time to catch up with the markets, but it always does eventually.

When you ratchet up the debt problems to federal government levels your eyes start to water.

A reminder on just how large a Trillion is:

And if you'd rather have a visual for it, here you go:

So, the US owes $35T in straight debt plus another mind-boggling $218T in unfunded liabilities.

One thing that can make things even worse is dogmatic, bone-headed policies. Ask Germany, the poster-child of bone-headed dogmatic policies:

So, let's be grateful that a few in the US media are now starting to push back against dogmatic, boneheaded policies.

I expect choppy waters to continue through the elections. Holding some sats through the turbulence helps me keep my sanity.

Price News

Bitcoin Surfing

Bitcoin went snorkeling last week and remains well below the Water ($63.9k) level. The Board (at $59.5k) could provide some support, but we may have to wait 'til October to find the energy for an upward push.

Dip Fishing

After breaking the $60k support Bitcoin tried to bounce back before falling below the $56k support, which it's currently trying to recapture. If it fails we could see $50k again.

Calm Chart

August closed red and September is likely to be the same if history is any guide. September has usually been good for bargain hunting in Bitcoin.