You can quote a Bitcoin price all you want, but without dividends, coupons or predictable cash flows, you can’t truly value it, only price it. Real asset classes (stocks, bonds, real estate) generate cash you can discount.
Bitcoin?
It’s driven by hype, momentum and mood swings, just like collectibles or niche currencies.
So let’s stop pretending it fits alongside equities or bonds in a long-term portfolio. Treat Bitcoin as a high-beta trading play: buy if you expect a short-term pop, sell if you don’t. It’s a speculative side bet, not a foundational asset class.
Thank you, great take, appreciate it! MicroStrategy will very likely tank seriously (given now also leveraged) when we get the next (usual) Bitcoin 60-80% drawdown:
If one were to value a currency in terms of (1) the jurisdictions in which it can be used to transact, and (2) its loss of value over any 5-10 year period in its history, then on those two bases bitcoin is doing pretty well relative to other currencies.
One way to think about the value of a currency is to consider the value of bonds denominated in that currency. What would the required interest rate be on a 10-year bitcoin-denominated bond and how would that differ from a 10-year dollar-denominated treasury note? I imagine the bitcoin-denominated bond would have a higher required return due to historical 1-year price volatility, plus uncertainty about its future viability. But perhaps the inflation component of the nominal return would be lower, maybe even negative, due to its lack of monetary inflation.
“PayPal and Coinbase, both of which hold large amounts of bitcoin, would fall into this carveout, since both companies have business that requires that holding.”
And how did Coinbase handle the North Korean hackers’ theft of millions of dollars worth of bitcoin from its clients’ wallets? It downplayed the amount stole, and it delayed accurate reporting of the thefts so as to prepare a defense against lawsuits.
Too many aspects of crypto currencies are false claims. Just three: 1) it’s not a currency, two cryptocurrencies are traceable, third blockchain is based on “trust” (see Coinbase above).
If any public company in which I’m invested states it plans to invest in Bitcoin or another cryptocurrency, I’ll sell my shares and run as fast as possible in the opposite direction.
You can quote a Bitcoin price all you want, but without dividends, coupons or predictable cash flows, you can’t truly value it, only price it. Real asset classes (stocks, bonds, real estate) generate cash you can discount.
Bitcoin?
It’s driven by hype, momentum and mood swings, just like collectibles or niche currencies.
So let’s stop pretending it fits alongside equities or bonds in a long-term portfolio. Treat Bitcoin as a high-beta trading play: buy if you expect a short-term pop, sell if you don’t. It’s a speculative side bet, not a foundational asset class.
Thank you, great take, appreciate it! MicroStrategy will very likely tank seriously (given now also leveraged) when we get the next (usual) Bitcoin 60-80% drawdown:
https://x.com/Maverick_Equity/status/1868399701122572657
https://x.com/Maverick_Equity/status/1526170608823767041
If one were to value a currency in terms of (1) the jurisdictions in which it can be used to transact, and (2) its loss of value over any 5-10 year period in its history, then on those two bases bitcoin is doing pretty well relative to other currencies.
One way to think about the value of a currency is to consider the value of bonds denominated in that currency. What would the required interest rate be on a 10-year bitcoin-denominated bond and how would that differ from a 10-year dollar-denominated treasury note? I imagine the bitcoin-denominated bond would have a higher required return due to historical 1-year price volatility, plus uncertainty about its future viability. But perhaps the inflation component of the nominal return would be lower, maybe even negative, due to its lack of monetary inflation.
“PayPal and Coinbase, both of which hold large amounts of bitcoin, would fall into this carveout, since both companies have business that requires that holding.”
And how did Coinbase handle the North Korean hackers’ theft of millions of dollars worth of bitcoin from its clients’ wallets? It downplayed the amount stole, and it delayed accurate reporting of the thefts so as to prepare a defense against lawsuits.
Too many aspects of crypto currencies are false claims. Just three: 1) it’s not a currency, two cryptocurrencies are traceable, third blockchain is based on “trust” (see Coinbase above).
If any public company in which I’m invested states it plans to invest in Bitcoin or another cryptocurrency, I’ll sell my shares and run as fast as possible in the opposite direction.
I forgot: This was a very good post. Thank you for writing it.
I forgot: This was a very good post. Thank you for writing it.