22 Dec Bitcoin isn’t the bubble. Everything else is.
Bitcoin isn’t the bubble.
Everything else is.
Excess value is being stored/saved where it shouldn’t.
Assets are valuable either because they’re scarce (hard to make more of) and large networks of people want or need them (gold, land, easy to remember web addresses, trademarks, desirable art, bitcoin, even well managed fiat) or because they generate income (businesses, rental properties, bonds, loans, tax payers, employees, your own ability to work and get paid).
The stock market has become distorted because everyone has realized that cash is trash and savings accounts yield 0 interest. So, we’ve all started dumping our savings into the market to preserve wealth. This is increasingly detaching the market value of stocks from reasonable expectations of income generation relative to the asset value. e.g. how many years will it take to recoup your initial investment and then some from dividend payouts? Some people are starting to think that index fund investing is the next big bubble to pop. I don’t know if I’m convinced of that yet, but it’s a compelling narrative.
Meanwhile, assets that are scarce and in demand are constantly under attack by human ingenuity to make them less scarce or less in demand.
- We’re mining more gold in absolute numbers every year than any point in human history, at 2% per year. Asteroid/deep sea mining on the horizon might mine it even faster.
- We’re starting to use land more efficiently. Vertical farming. Lab grown meat. Remote work + digital social revolution. Dense housing. Seasteading. etc.
- Web namespace has expanded with new top level domains. Apps don’t even need a URL.
- It’s always been hard to detect conterfeit art. 3d imagining and other technologies are probably making it harder.
- Fiat is getting inflated away as the money printer goes brrrrr.
I could go on. This is not to say these things won’t continue to have value, because they will. They all still have utility. But they’re commodities. Commodities aren’t good stores of wealth, because humans will never stop trying to figure out how to eliminate scarcity, and we’re really damn good at it.
Bitcoin is the only perfectly scarce thing to ever exist. It achieves this because it’s scarcity isn’t rooted in the physical world. It’s scarcity is memetic. It’s scarce because we all agree that it’s scarce. Anyone is allowed to try and fork it to make it less scarce, but they’re fighting game theory and a swarm of cyber hornets that will engage in the raging meme wars over digital gold supremacy that will leave attackers broke. Better to just buy some bitcoin and join the party.
And because it’s perfectly scarce, it can absorb excess value that’s currently over inflating other assets beyond their reasonable value. But, in order to fulfill this purpose for 8 billion humans, it needs to be worth $10s or $100s of trillions, not $450 billion.