Bitcoin: It Still Sucks

Now Josh Brown, aka the Reformed Butthead, is hyping Bitcoin after it has already doubled. As usual, Josh is late to the party. And if his past predictions are any indication, this is a top for Bitcoin and it will probably fall to $7k or lower soon. In fact Bitcoin has already fallen from a peak of $19,700, when Josh published his article, to $17,700 as of writing this, so the indicator to always do the opposite of what Josh says, is already working.

Even though I was wrong in 2018-2019 about Bitcoin falling below 3,000, I still maintain my original stance which is that Bitcoin is a crappy investment and should be avoided. Bitcoin will likely fall to 10k, than break $20k. Bitcoin, unlike stocks, does not generate shareholder equity in the form of dividends, buybacks, or retained earnings, and therefore is much more like a commodity than a stock. This also guarantees, as I said in September, Bitcoin will be a bad investment, as commodities always are, even if Bitcoin has done well in the short-term. The fact Josh recommends Bitcoin and doesn’t understand this fundamental distinction between a stock and a commodity, does lend much confidence in his ability to manage money and judgment.

People may brag about their short-term Bitcoin gains, but stocks and ETFs such as Tesla, Palantir, TECL, TQQQ, FNGU, QQQ, PayPal, Mastercard, Amazon, and Facebook have actually surpassed Bitcoin in year-to-date gains (600% for TSLA vs. 160% for Bitcoin) but for the foreseeable future offer far better returns, I predict. If the goal is to make money, which for most investors I would assume it is, Bitcoin (and other cryptos) is a loser. That is why on Twitter, Reddit, 4chan, and message boards, etc. you can hardly find any stories of people making substantial sums of money with crypto in spite of Bitcoin being above $18,000 At best, it is some guys bragging about turning $500 into $1000. The same for gold and other precious metals: when was the last time you ever saw someone brag about making a lot of money buying gold or silver. But tons of posts such as on r/wallstreetbets of people making 5, 6, or even 7 figures with FANG stocks and stock options.

Some did get rich buying Bitcoin in 2010-2015, back when it was very low, but we’re talking very few people, whereas online there are way more people getting rich with stocks and options. I reckon that the majority of speculators buying Bitcoin are trying to get-rich-quick and do not care about libertarian politics or ‘fighting the fed.’ Being that Bitcoin is much more like a commodity than a stock, and that commodities have a long history of delivering piss-poor returns relative to stocks, those people would be better-off buying stocks. People who bought Bitcoin in late 2017 are still losing money; the S&P 500 and Nasdaq have surged since then.

Cryptocurrency destroys wealth in for form of inflation due to new coins being issued. Even though cryptocurrency is touted as a hedge against inflation and the purported collapse of the US dollar, cryptocurrency is inherently inflationary due to the continuous supply of new coins that are digitally minted. Most of the projects from 2013-2018 are dead (remember NameCoin?) yet the total dollar crypto market capitalization of coins has not fallen much. How come? Because new projects have replaced the dead, old ones, yet all those investors in old projects have lost money. Crypto requires a continuous stream of new, dumb money to prop up new, dumb scam projects. Much like sediment rock, those new projects rest upon a graveyard of dead ones below it. I remember on Twitter some idiot who has a large following bragging about how Bitcoin’s market cap had surpassed its 2017 highs, yet Bitcoin was 10% lower. So in other wards, he was celebrating being diluted. Yeah, these people are pretty dumb.