Friday, October 25, 2024
5 Common Bitcoin Myths: Debunked
Bitcoin is a Ponzi Scheme
A ponzi scheme by definition is robbing peter to pay paul and offering nothing of value to the marketplace. No product… No service… No tangible benefit to the consumer…
Simply a middle man redistributing money from new investors to old ones and taking some off the top for himself. Peter gets robbed by Bob guaranteeing him a 10% return on his money and using his initial capital to provide the 10% return already promised to Paul. But now for Peter and Paul to receive their 10% return, Bob must rob more people to use their initial capital to pay them out.
The more people Bob rob’s, the more he must rob in the future to keep it going. Until inevitable collapse. Again, never offering anything of real value, just a promise of guaranteed future returns.
Now, the ponzi schemers are shouting… EXACTLY.
That’s Bitcoin…
But they're wrong.
No one is promising a return on Bitcoin. No one is asking for one, because they don’t need it. There’s no middle man, marketing team or slimy, smooth talking CEO swindling hard earned money from vulnerable seniors. There’s no central authority benefiting from the further adoption of Bitcoin. The sole reason people buy Bitcoin is because of the tangible, real value it offers the marketplace.
There is no guarantee.
It is the only fixed supply asset in existence. It is the only asset that can’t be censored or confiscated by authorities. It’s the only asset that can be transferred across the world, inexpensively in minutes without another institution's permission. It’s the only asset that can be publicly, easily verified. It’s the only asset that truly offers you freedom from a system that oppresses the many to benefit the few.
No one forced it on anyone… It’s been chosen by the market because of what it is, the problem it solves, and the value it offers those who own it.
That’s not a ponzi scheme, that’s revolutionary technology.
Bitcoin Has No Intrinsic Value
What is the intrinsic value of the US dollar? What is the intrinsic value of gold? What is the intrinsic value of Google or Amazon?
If you ask these questions to the same people spouting that Bitocin has no intrinsic value, you’ll hear crickets. Nothing. Silence.
When thinking through this stuff it’s important to define the terms we’re using. Intrinsic means belonging naturally. Does a $1 bill have value that “belongs naturally” - no. Does gold have value that “belongs naturally” - no. Value is subjective and determined by market participants for that thing. “Well I could melt down this gold ring and sell it for X.” Cool, the “intrinsic value” of that gold ring is still determined by the market participants who are placing their own determination of value on the gold itself.
In finance, people often use the term intrinsic value to refer to the “true” or maybe even book value of a company like Google.
But if we zoom out, what “intrinsic” value does a company like Google have to a grandpa with plenty of wealth, freedom, health, and loving relationships. None. Even if he could buy the entire company for $100, he wouldn’t. Why would he? He doesn’t care to spend his time dealing with that.
So what I think people actually mean by intrinsic value is the lowest amount of money someone within the active market for that asset would pay for it. And when we acknowledge that, “belonging naturally” doesn’t fit.
The only thing on this planet with intrinsic value is human life, because we were created in the image of God. Nothing else.
What is Bitcoin’s intrinsic value? You’re right, it has none. But the active market participants currently value 1 Bitcoin at ~$67,000.
Does intrinsic value even matter? If you agree with my take, no.
There’s 2.4 Quadrillion Satoshis - Bitcoin Supply is NOT Fixed
I can’t believe we are still hearing this in 2024, but I heard Peter Schiff use this as an argument against Bitcoin in his debate with Jack Mallers recently.
His point was that because the total supply cap of 21 million Bitcoin that will ever exist can be divided down into 2.4 quadrillion satoshis, Bitcoin does not actually have a fixed supply.
That’s like saying 1 large Papa John’s pizza could solve world hunger if divided up into enough pieces. Just because something is easily divisible, does not mean you are increasing the total supply of that thing by cutting it into smaller parts.
No matter how many teeny tiny pieces of 1 large pizza you manage to cut it into, the total amount of pizza you have isn’t changing.
I genuinely don’t understand how that doesn’t make sense. But I hope that this classic Bitcoin analogy used for many years makes sense.
Bitcoin is Too Volatile
Bitcoin is too volatile for what? To buy with a short term horizon, sure. To use as a medium of exchange? Ok, but bitcoin never needs to be used as an everyday medium of exchange to be valuable. And the volatility of bitcoin is diminishing over time and will eventually smooth out if it becomes universally adopted. At the point, maybe it is used as an everyday medium of exchange and unit of account on goods and services.
Let’s also zoom out… Bitcoin is a relatively new, paradigm shifting technology. It’s also the only decentralized, completely digital money we’ve ever encountered in our existence. It’s the only fixed supply asset ever. Of course it will have significant volatility. For the most part, the world is still trying to figure this thing out.
Honestly, many bitcoiners are still trying to figure out where this fits in the future. Is it a store of value? Is it money? Is it both? So, it’s understandable that the average person still doesn’t understand it or allows their emotions to drive their decisions around it.
Bitcoin is the best asset for long term generational wealth. Think long term. Look at Bitcoin for what it is, not the day to day, month to month, or even year to year price action. Think in 5-50 year time periods.
Bitcoin Doesn’t Do Anything
Doesn’t do anything? What do you expect it to do? It’s a store of value and medium of exchange. It’s sound money. Money that cannot be corrupted by the state. Money that cannot be debased. Money that cannot be censored. Bitcoin doesn’t do anything? Bitcoin protects the value you have provided to the world through your time and energy. Bitcoin prevents you from being devalued by central bankers. Bitcoin is the greatest technological breakthrough of my lifetime.
Even then, it’s less about what bitcoin does and more about what Bitcoin allows you and me to do. And that likely leads to a worldwide transformation.
Conclusion
There are numerous arguments against Bitcoin that have been easily disproved for years, yet Bitcoin haters continue to throw them out with their heads held high embarrassingly proving they don’t actually understand. The next time someone throws out these common Bitcoin myths feel free to share my perspective with them. After all, Bitcoin could help them improve their future, so it’s worth the time and energy to gently help them understand.
Are you unsure about your future financial plan? There are many what ifs that could arise, are you prepared? Do you have an estate plan that incorporates bitcoin well? Have you thought through how to minimize taxes on your assets over your lifetime? Not confident in your self custody setup? We can help you put all the pieces together into one clear, confident financial plan that helps you sleep well at night knowing you are making all the right decisions for yourself and your family. Schedule a call with us today.