
Winklevoss 500k Bitcoin Argument - Reechik
https://winklevosscapital.com/the-case-for-500k-bitcoin/
======
arcticbull
Block reward rate: 6.25BTC. 144 blocks are mined per day. Coins are sold by
miners to pay for their power and operating expenses. This means
6.25x144x500000 = $450,000,000 per day is how much new money would need to be
brought in to keep the price stable. Per day. That works out to
$164,250,000,000 in new money per year to keep the price stable.

The more expensive bitcoin gets, the more new money has to be brought in to
prop the price up.

At $500K per coin $164B per year in welfare is extracted, burned up and
wasted. That's the only math you need to do, tbh, when estimating future coin
value.

This is just pumping by the world's biggest bag holders.

> ...and printing money like a banana republic.

And yet, inflation is likely to achieve an effective rate of 0.44% this year.

~~~
nnx
Their timeline is "the next decade" ... by that time, Bitcoin will have
proceeded two more halvings, which means the issuance rate will be only
1.5625BTC per block, so only about $40B per year is needed to reach
equilibria.

Regarding inflation, the Fed has just confirmed yesterday their intent to
increase it, they will for the first time not fight against inflation going
more than 2% yearly over a period of time even...

All this money printing will end up in inflation at one point, which is also
the only way to ever repay all that debt.

~~~
arcticbull
> Regarding inflation, the Fed has just confirmed yesterday their intent to
> increase it, they will for the first time not fight against inflation going
> more than 2% yearly over a period of time even...

Their issue right now is they're tracking towards 0.44%, not 2% as they
intend. Their goal is to increase inflation _towards 2%_.

> All this money printing will end up in inflation at one point, which is also
> the only way to ever repay all that debt.

This is a common misconception among armchair economists (and a great point
against Bitcoin, too). The issue we're facing right now is that the velocity
of money has been reduced, causing deflationary pressure (not inflation). This
is typical in recessionary environments, and not at all desirable. Satoshi's
will notwithstanding.

Further, as long as the expansion of the broader economy outpaces the growth
in deficit it doesn't actually need to be paid back. Also, more than half of
US debt is domestically held.

~~~
ro-_-b
I believe it is not fair to only take into account consumer price inflation
instead of asset price inflation. Asset price inflation in the US & Europe has
been massive lately. BTC is obviously an asset and therefore the inflation
that is relevant for the future valuation of an asset IMO is asset price
inflation

~~~
arcticbull
Asset price increase is not inflation, which is literally defined relative to
CPI. If we're going to talk about economics we should use broadly accepted
definitions yeah?

> BTC is obviously an asset...

Hold on now. Nobody seems to agree on that.

~~~
ro-_-b
if you look at how expensive gold is you would typically compare it in
relation to other assets such as real estate or the S&P 500 and not to CPI.
that's at least how I would make up my mind when is a good time to buy
sell/gold. Gold/precious metals are an asset class and BTC/crypto-assets are
an emerging asset class IMO also I think it is not fair that central banks
only focus on CPI and not asset price. for me as a millennial it matters a lot
that real estate price in central Europe are today 2x compared to what they
were 10 years ago. also rent is mostly not reflected correctly in CPIs

~~~
arcticbull
> IMO also I think it is not fair that central banks only focus on CPI and not
> asset price.

I can't figure out why it's not fair, though. All that matters with asset
prices is whether they go up or down, not their absolute value. The whole
_point_ of assets is they go up. Your complaint is they, what, went up "too
fast" or that you weren't in when they did?

> ...for me as a millennial it matters a lot that real estate price in central
> Europe are today 2x compared to what they were 10 years ago.

Well, inflation accounts for I suspect a whole lot of that. Inflation since
2010 is just shy of 20% for the USD. I'm unfamiliar with central European
pricing so I can't comment on that specifically, however it might surprise you
to know that in the US, on an inflation-adjusted dollars per square foot
basis, houses cost exactly the same as they did in the 1970s. They're just
twice as big now. [1]

> ...also rent is mostly not reflected correctly in CPIs.

In what way?

[1] [https://fee.org/articles/new-homes-today-have-twice-the-
squa...](https://fee.org/articles/new-homes-today-have-twice-the-square-feet-
per-person-as-in-1973/)

~~~
ro-_-b
"OOH, when included, is typically the biggest component of the CPI. However,
many coun-tries exclude OOH from their CPIs on the grounds that it is too
difficult to measure. Inparticular, the harmonized index of consumer prices
(HICP) in the European Union (EU) cur-rently excludes OOH." [1]

OOH stands for owner-occupied housing. I am aware of the fact that the US
accounts far better for housing expenses in its CPI than Eurozone countries
do.

[1][https://epub.wu.ac.at/7039/1/WP285.pdf](https://epub.wu.ac.at/7039/1/WP285.pdf)

------
patatino
I always thought my parents should have seen the potential of Microsoft and
Apple back in the day. But what potential did I see?

1999: I was a teenager, so no stocks for me

2009: In my early twenties, no cash, not interested in the stock market

2020: Saw the potential of recovery, most money already tied up (house,
stocks)

The tech companies pulled the stock market back up. The future will be in
tech. So I'm not betting against tech. I do not care much about arguments, I
just buy some bitcoin because I think technology is the future. Is it
blockchain? I don't know, don't care, but sure I'm not gonna miss it.

Almost all people are bad at making future forecasts. So I don't.

~~~
arcticbull
> I just buy some bitcoin because I think technology is the future. Is it
> blockchain? I don't know, don't care, but sure I'm not gonna miss it.

That's a dreadful reason to invest.

There's literally a universe of things you could be investing in, from literal
tulip bulbs to shovels to Apple. You should have some thesis before you throw
money at things.

~~~
patatino
I have, it‘s technology, like I wrote. I‘m also invested in other
technologies.

~~~
arcticbull
"It's technology" means nothing. The wheel is technology. The only thing
anyone's invested in is technology.

You need a thesis for why you think this technology is going to yield a return
in excess of the S&P, otherwise you should be invested in a risk parity
adjusted pairing of the S&P and treasuries. No thesis <=> reckless investment.
More like gambling, tbh.

Unabashed FOMO is not an investment thesis.

I don't mean to be mean -- and I know they're not super popular with the folks
on this board -- but this kind of thing is why we have accredited investor
rules.

~~~
patatino
I actually don‘t need a thesis, I can just expose myself to a new technology
with a tiny portion of my net worth just like that.

If that doesn‘t fit your criteria of what someone can do, it‘s ok, I can live
with that.

~~~
arcticbull
You absolutely can, nobody's stopping you (unfortunately), I'm just saying
that its (a) not a good idea unless you know why you're investing in something
and (b) you came out saying that you were investing in crypto not because you
knew anything about it but because it was "technology" and FOMO. There are
_so_ many technologies out there, I don't see why you're not invested in all
of them, except for FOMO. If I knew you personally we'd have a long talk about
investing.

~~~
patatino
I never said I know nothing about it, please don't put words in my mouth. I
said I don't know if blockchain is going be a technology that will win in the
future and I'm not gonna guess why it will or not. Why? Because I could do
both. I see technology with potential I take a stab at it, simple as that. I
don't need to convince myself into being a "believer" in it.

And the thesis why I think technology can outperform the S&P500 I already
answered, technology companies are the ones which turned the stock market
around, therefore I think technology companies will outperform the S&P500.

I'm thankful for your financial advice, but I'm good.

~~~
arcticbull
Bitcoin is not a technology company it’s a technology. It’s like saying I’m
investing in the wheel, and stocking up on a bunch of wheels. Or in my
opinion, investing in egg salad sandwiches.

~~~
patatino
Why would it need to be a company? Is gold a company? People trade it, people
store it. I can do the same with bitcoin, not with egg salad sandwiches.

~~~
arcticbull
Over half of gold is used for industrial and jewelry applications. Exactly 0%
of bitcoin has non-criminal, non-speculative use.

------
onion2k
I'm sure it's a coincidence, but the Winklevoss brothers claim to own ~1% of
all Bitcoins mined so far, and a price of $500,000 would value their fortune
at almost exactly the same as Mark Zuckerberg's net worth ($96b).

I would love for them to have chosen $500,000 for that reason.

~~~
gkoberger
Wow. It's crazy how many millionaires I know because of Bitcoin... and if you
take all of them combined, plus every single bitcoin out there, the total
($118bn) is only slightly more than Zuckerberg alone. That's a lot of money he
has.

~~~
4gotunameagain
Nobody is worth this kind of money, nobody can produce this much wealth, and
nobody should control an amount of wealth larger than the gdp of at least 120
countries.

~~~
mas3god
Its not up to you, its up to human society, and human society has decided
their bitcoin is worth that much.

~~~
XMPPwocky
Just asked around and turns out we haven't, actually.

------
lalaland1125
The real issue with Bitcoin and the reason why it is different from other
assets is that there is no actual source of value. A good way of thinking
about this is trying to consider the values of various assets if the
government was about the make it illegal to trade them.

A house for instance would still be valuable because you can live in it.
Facebook stock would still be valuable because it represents ownership in a
real company that generates profit.

Bitcoin however is useless if you can't trade it. There is literally no reason
to own Bitcoin except to eventually sell it to someone else.

~~~
ogogmad
You could say the same thing about gold throughout much of history. The value
of Bitcoin (and historically, gold) is in its stock-to-flow, its fungibility,
its divisibility, and so forth. Its use case is mainly as a potential store-
of-value, and perhaps even as a medium of exchange.

~~~
arcticbull
Yes, the big difference is gold, once extracted, doesn't cost 0.5% of the
entire world's electricity supply to perform 7 transactions per second, which
also generate 98g of e-waste each. You can perform a practically unlimited
number of transactions per second with gold.

Either way, both aren't particularly useful as currency because rigid
deflationary currency is bad. Deflation creates inequality, and preserves
inequality over time. Rigid currencies are unable to respond to shocks. They
are also unable to adapt to the addition of new market participants (births).

Give me one good reason why your dollars that you earned in exchange for goods
and services should be worth more tomorrow than they are today?

~~~
bigiain
> You can perform a practically unlimited number of transactions per second
> with gold.

But but but - there's a hard upper limit!!! There's barely 3x10^19 atoms in 1
gram of gold! /s

(Obviously we could trade electrons, protons, and neutrons on a side chain to
scale transactions up by almost 3 orders of magnitude...)

~~~
arcticbull
To be fair, we actually tried the side-chain model when the dollar was backed
by gold :) the crypto folks are just speed-running the history of finance. I
don't wanna spoil the surprise, but of course, it ended poorly.

~~~
bigiain
I guess there's a good analogy connecting "floating the dollar" and "stable
coins" somewhere. " _These_ crypto coins are 1:1 backed with US Dollars!
Except when we arbitrarily decide they aren't any more! Watch the invisible
hand at work!!!"

~~~
arcticbull
Or when international law enforcement decides they're not because 30% of the
backing dollars are the proceeds of money laundering. Then you pretend it's
fully backed anyways, raise an LEO just because, and move on because crypto.
Ah, I do so love the future.

------
tom_mellior
The numerical part of this argument is... nonexistent? The only time the 500k
figure appears in the article is at the very end: "Said differently, the price
of bitcoin could appreciate 45x from where it is today, which means we could
see a price of $500,000 U.S. dollars per bitcoin."

OK, so where does this factor of 45x come from? It comes from the immediately
preceding sentence: "If we are right about using a gold framework to value
bitcoin, and bitcoin continues on this path, then the bull case scenario for
bitcoin is that it is undervalued by a multiple of 45."

Right. What is a "gold framework"? They don't say. There are some ramblings
about asteroid mining and Elon Musk bringing gold back from Mars, which will
"crater the price of gold". This is unclear, but I _think_ they are trying to
suggest the gold price dropping to near 0. Which seems nonsensical, since
nobody will mine the asteroids if they can't expect a good return on their
effort.

Aaanyway, back to the 500k: We do get this right before the "gold framework"
sentence: "Today, the market capitalization of above ground gold is
conservatively $9 trillion."

OK. So I _think_ the reasoning they are hinting at goes something like this:

    
    
        - the gold price will fall to near 0
        - the $9 trillion dollars currently invested in gold will all be invested in Bitcoin instead
        - the supply of Bitcoin is limited at 21 million
        - $9 trillion / 21 million Bitcoin = $429k / Bitcoin, which = $500k / Bitcoin if you squint hard enough
        - the above checks out if you assume a "real" supply of 18 million Bitcoin because some are lost
    

I question most of the points listed above.

------
artfulhippo
_If both depositors and borrowers get it — depositors through higher interest
rates and borrowers through lower interest rates — then it’s called dual
interest rates. If lenders and shareholders get it, then it’s quantitative
easing. If the people get it, then it’s helicopter money, and so on._

 _Winners and Losers_

 _Regardless of what channel the central bank uses to inject money into the
economy, the winners and losers are the same: borrowers will be rewarded at
the expense of lenders and depositors._

Who seriously believes that all ways of distributing new money have the same
winners and losers? Who seriously believes that quantitative easing and
helicopter money / UBI have the same winners?

Why is this essay anything else than yet another hodler pumping their bags?

------
Hamuko
Have Bitcoin supporters shifted their goal from making Bitcoin a viable
currency to making Bitcoin a value store? Because I'm not seeing that in this
article.

The problem with Bitcoin as a value store is the value it has. I'd argue that
the current Bitcoin value is based on speculation and not on anything
concrete. Oil and gold obviously have very concrete practical uses, since we
can use them to make our cars move, our houses warm and our computers do
something.

US Dollar obviously is less concrete since its value is based on people
agreeing that it has a value - but it has a very large backing. Obviously
there's a country where 300+ million people have agreed that the US Dollar has
value and you can find someone to trade in your dollars all around the world.

Also, I'm not completely impressed with the comparison between gold and
Bitcoin. First of all, fixed scarcity? Is this actually a good thing? And is
Bitcoin actually scarce? How does hard forking affect the scarcity? And is
there a reason why any singular fork of Bitcoin is the one and true
cryptocurrency? Because if there's something with no scarcity, it's
cryptocurrency in general.

"Software durability" also is pretty funny. I don't consider software all that
durable. How much cryptocurrency has been stolen through software exploits, be
it within a cryptocurrency itself or via some adjecent software, thus far?

Portability and storage for Bitcoin also sound pretty good at first. However,
if you're thinking about a value storage, is portability actually that good?
If I want to store $500k as an asset, I don't actually want it to be that
portable since I don't want anyone else be taking it. $500k in gold is like 8
kg, so at least it's not something that someone can sneak out or take from
across the world. And a safe or vault have costs associated with it, that's
what I want for value storage.

~~~
zelly
> How much cryptocurrency has been stolen through software exploits, be it
> within a cryptocurrency itself or via some adjecent software, thus far?

In 2010 Bitcoin had a critical bug (integer overflow) which resulted in
hundreds of millions of BTC being created. At the time the network was small
enough that users accepted the patch for it which forked the chain.

In 2018 another inflation bug was found by a Bitcoin Cash developer who was
kind enough to fix it instead of take advantage of it himself.

Bitcoin is just software. Lots of people involved in Bitcoin don't know
anything about software and treat it like a religion. Bitcoin can barely do a
few transactions per second even when it's main use case is leverage trading
on exchanges. I'm sorry but that'll never be how you take over the world's
payments.

Instead of innovating on the software, the Bitcoin cult just declares it
"done". I like Bitcoin but the community has actively sabotaged the project.
It looks like the one world currency will be Libra (or similar) instead. Maybe
that's not such a bad thing.

~~~
andy_ppp
The normal banking system also runs on software and yes mistakes happen all
the time, every day...

~~~
tifkap
But these can and will be fixed (by banks, the legal system, etc)

------
kart23
Sorry, the article does not make one mention of stability. This is arguably
the most important value of any money store, the peace of mind that what you
have today will be worth the same tomorrow. The dollar is stable because it's
instability means the very collapse of society and government.

>Bitcoin is not just a scarce commodity, it’s the only known commodity in the
universe that has a deterministic and fixed supply. As a result, bitcoin is
not subject to any of the potential positive supply shocks that gold (or any
commodity for that matter) may face in the future.

This doesn't mean a thing and I would argue isn't true. 4th generation Toyota
Supras are also a fixed supply, yet the value of these cars has fluctuated
wildly and will continue to. There won't be a single new 4th gen Supra
produced. I would argue vintage cars are the most similar asset to bitcoin.
Since like cars, some bitcoin is continually lost and destroyed every day.
Like bitcoin, cars are simply worth whatever someone is willing to pay. The
market for cars is not logical, it is purely emotional. Yes, toyota supra
prices will likely not collapse anytime soon, since they look cool and there
are less and less examples every day. But anyone making an argument that
bitcoin is an effective money store needs to consider all the things that can
go wrong, and cannot argue that bitcoin is anything better than gambling. The
market is not logical, since the market is simply people, and thats the first
assumption that is wrong here.

~~~
qes
> cannot argue that bitcoin is anything better than gambling

my net worth sure could

wanna bet that's true in the aggregate as well?

------
segmondy
The entire thing with bitcoin that I don't get is that the owner's need to
trade it for fiat currency at the end. So long as fiat currency is part of the
play I don't see the value. It needs to exist without fiat currency. Govts and
the central banks around the world have no power without being fiat, they need
to be able to print as much as they can, and they demand for taxes in fiat. So
you will eventually have to sell your bitcoin even if you most of your
transactions in it, you will need to sell some and buy money to pay taxes.

The Feds "saved the economy" with the massive QE, Trillion dollars stimulus.
What could they have done if currency was all bitcoin?

------
jlnthws
What about security / hacking threats?

Say I have precious metal in safes at some banks, good luck to steal it from
me overnight. Now imagine people get a digital wallet on their smartphone.
It's now easier to rob them of their lifetime savings, in the stealthiest
manner ever. Surely easier than to mine the asteroid next door. Software bugs,
hardware backdoors, social engineering, or just not understanding how it
works... even the most tech savvy is at risk.

~~~
oblivionorange
What kind of madman would walk around with their entire life savings in a hot
wallet on their smartphone? That would be nearly as irresponsible as carrying
your entire net worth around in a backpack.

------
dnprock
The problem with gold is not unlimited supply. Humans have mostly colonized
planet Earth. It has become increasingly difficult to mine gold. Average Joe
can no longer mine gold with a pickaxe. Gold mining now requires large capital
expenditure. Space mining also requires large capital investment.

The problem with gold is centralization. Large capital investment prevents
smaller players to participate. Nation states also monopolize the existing
gold supply. New gold from space is likely going to end up in central banks'
reserve.

Bitcoin faces the same problem with centralization. The hard cap makes Bitcoin
even easier to manipulate. Nation states can pump and dump retail investors
out of the game. Don't fight the Fed. If the Fed decides to enter the Bitcoin
game, investors are going to lose. Once nation states monopolize the Bitcoin
supply, we're back to the same situation like gold. Making decentralized money
is not that easy. Bitcoin alone cannot fix everything.

------
Reechik
Interesting perspective.

------
simula67
There is something missing from this argument: How is Bitcoin a store of
value?

~~~
nly
Nothing, putting aside that it's too volatile to be a 'good' store of value,
the US could wipe out Bitcoin very quickly:

1\. Introduce FedCoin - a compatible fork of Bitcoin pegged to the US dollar
by the Fed.

2\. Ban all US companies and citizens from buying, selling, exchanging, or
trading in, alternative cryptocurrencies (such as Bitcoin).

3\. Set the initial Fedcoin difficulty lower or comparable to Bitcoin, but peg
the initial price higher in USD (the Fed can do this because they can print
unlimited dollars).

4\. Watch as every Bitcoin mining operation on the planet leaves Bitcoin in
droves to mine FedCoin.

5\. Watch as all but the diehard US holders of Bitcoin sell, causing the price
to crash (further disincentivizing miners)

This isn't entirely dissimilar to how the US destroyed the Gold market to
hoover up all the Gold in the early 20th century.

~~~
naveen99
No need to setup another fedcoin. They can just pump and dump bitcoin directly
at will like they do with gold. they could short it to oblivion whenever they
want, and accumulate as much as they want whenever they want.

~~~
tcbawo
Imagine a state actor that develops quantum computing technology, then
proceeds to mine and sell massive amounts of cryptocurrencies into the market
in order to destabilize and destroy any value.

------
nnx
"Software is eating the world and gold is on the menu."

Nice way to put it.

------
johnwheeler
Worthless article

------
codecamper
sell tesla buy bitcoin!

------
CameronNemo
Man is talking about how asteroid mining will destroy the value of gold... Has
he heard of quantum computing? Would sure hate to see the bitcoin network fall
to it...

~~~
ogogmad
Quantum computing would only undermine the digital signature part of Bitcoin -
but allegedly quantum-secure algorithms for digital signatures have been known
since the '70s. You can use Merkle Signatures for instance.

