I made 45% in the stock market
during the last 3 years, which I considered a pretty decent return. However, that only lasted until I found out
that Steven made 250% in Bitcoin. Seriously, I’m way smarter than that guy, but if I don’t get on
the crypto-train now, am I going to be left behind? Bitcoin is rat poison squared. Bitcoin is the future. Bitcoin is probably the worst bubble since
the tulip-craze in the 17th century. No, in fact, it’s worse, at least tulips look and
smell great for a while. Bitcoin is the ultimate
greater fool’s game. What? Nah, don’t listen to that guy, he’s just mad because
he missed the rally and doesn’t understand the technology. Bitcoin is the next step in digitization. We digitized newspapers, videos,
meetings, and relationships. Now we are going to digitize money. Have fun being poor Mr. Bear. Common guys, you are just giving me
your opinions right now.
If you really want to help me, you must promise to try to
remain calm and rational. Please? Fine. Have it your way. Mr. Bull, can you tell me why Bitcoin deserves
to have a $500 billion valuation currently, almost the same as PayPal,
Visa & Mastercard combined? Or, better yet, why it deserves to be
valued even higher than that? After all, I want my invested
money to grow. Hahaha, $500 billion valuation! Well, if Mr. Bear can just shut up for a second,
I’ll answer that question for you.
Mr. Bear … please? Fiiiiine … Thank you! Allow me to talk a little bit
about the bigger picture. Money come and go, and the adoption of one monetary
standard over another is the rule rather than the exception
throughout history. Salt, cattle, wampum belts, seashells, coins made of precious metals, we’ve seen all these things come and go. Now crypto is replacing fiat money. Why? Because we have advanced to a stage
where this is technologically feasible, and because people have grown tired of
the current monetary system. Western governments have
raised inequalities and devalued the currency of the people for way too long. Our current financial system reminds me a
little of that marshmallow experiment at Stanford in the 1970s. Do you mean the one where kids got
an additional marshmallow after 15 minutes if they managed to not eat the first one? Yea, only that our current politicians would
punish the kids that managed to wait by removing their marshmallow. That’s what they’re doing when
they keep printing money. They punish the people who are
saving in the national currency by making what they saved
less valuable through inflation. It’s time to change that, and Bitcoin is decentralized and so, it cannot be controlled by any government or any other middleman.
It is controlled by us, the people. It’s the most democratic
currency ever invented. Man, there’s so much that I do not
agree with here, but go on. What do you mean Mr. Bull, why is there no inflation in Bitcoin? In Bitcoin, Satoshi Nakamoto
invented digital scarcity. There’s a capped supply of
21 million coins, and code and incentives will
ensure that it stays that way. Finally, individuals have a lifeboat
in the form of a technical solution that can help them escape the financial
clout of the government they live under. So, you are saying that Bitcoin is
superior as a currency, and that people will value it
because of that? Yes. Bitcoin will be adopted by
the people, bottom-up. As it does this, it will overtake the value
of the fiat currencies that it replaces. For example, the US M2 money supply, which pretty much means
all dollars in circulation right now, is valued at around $22T. All cryptocurrencies combined are
valued at approximately $1T, not even a twentieth of that. Bitcoin, as you said before,
is valued at around $500b.
It’s the tip of the spear of
the crypto universe. There’s a massive upside here, moon-potential for the future. Hah, that’s a lot of nonsense right there. Excuse me? I think both Mr. Bull and I know that scarcity
in supply isn’t the only thing determining if a currency is useful or not. What other properties are
important do you mean? Well, for starters, I think that it should be
generally accepted everywhere and that it should be fast, cheap,
and easy to use. Also, it should not fluctuate
too much in value. On all these aspects, Bitcoin has some improvements to do
before I’m convinced of its usefulness as a currency.
Let’s start with the fast & cheap part. Right now, transactions on
the Bitcoin blockchain are being executed approximately
every 10 minutes that’s how often one
new block is created. Each block can contain 1 MB of code, and together, these two constraints
make it so that currently, 3-7 transaction can be made every second
in Bitcoin, something like that. Am I correct here Mr. Bull? I know where you are going with this,
and you are wrong. You focus way too much on
where we are right now. Do you think anyone looked at
internet 1.0 and said: “wow, this thing looks amazing, I bet that everyone will spend almost
all their time online in 30 years?” No! Just let me finish, okay? Visa does something like 250 times as many
transactions a day as Bitcoin can handle each day at maximum. Let’s say that you want to grab a cup of
coffee and you want to pay in Bitcoin and use the Bitcoin blockchain. Not only would you have to wait
for a new block to be mined for the owner of the coffee shop
to verify your transaction, which would take a few
minutes at minimum, but you would also have to pay something like
$2 on average for this transaction.
In worst case you would stand in that
coffee shop on April 21st 2021, when prices spiked at almost
$63 per transaction. That’s one hell of an expensive
coffee Mr. Bull. You are talking about making transactions
on the Bitcoin blockchain, but you are excluding both the potential use of
third parties and off layer technology. You know that I can use PayPal
to pay with cryptos right? True, but in that case, you are effectively trusting
someone else to do the job of central banks you are back at having a middleman
that can potentially do you harm. Because if the dollar or any other fiat
currency doesn’t work to fuel this layer, which it does in the case of
PayPal by the way, some other “app-issued”
money must be created. And this money cannot
exist on a blockchain, because in that case, it will just run into
the same problems as Bitcoin has. You can’t get away from the fact that decentralized
blockchains are not geared towards speed.
Nah, I just think that you are a bit
unimaginative here. Moreover, it is ill-suited as a currency
because of its highly volatile price. Tell me this Mr. Bull, would you be willing to rent my apartment
and sign a contract that says that you will have to pay in Bitcoin? I don’t find your apartment
too attractive Mr. Bear, so I probably wouldn’t want to
pay you even in fiat I’m afraid. Ha ha ha. Have it your way. Pretend that someone is renting out
a place you are interested in then. Would you be willing to write
a 12-month contract which states that you should pay them
a fixed amount in Bitcoin each month? Hmmm, I think you are trying to
set up some sort of trap here.
What’s you point? Just answer the question. No. Okay, well I think most people would, just
like you are now, be very hesitant to do that? Why? Because they don’t want to sign an agreement
using a currency that is as volatile as Bitcoin is. Imagine paying the equivalent of $1,000
in rent the first month of the year but ending up having to pay
$3,000 during the last month. That’s how volatile Bitcoin is! Long-term contracts are quite
standard in the business world. I really do not think that any of
them are done in Bitcoin. Again, you are too focused on
where we are right now, this volatility could go
down in the future as Bitcoin is wider
accepted as a currency. Besides, even if it has these
deficiencies that you’ve stated, it is well worth the trouble given that at least you don’t lose
money every day by hodling it.
Look at a place like Venezuela. These people would have traded the complete
annihilation of their currency for the volatility of Bitcoin
at the drop of a hat! Even the strongest fiats,
such as the American dollar, have lost almost 95% of its value
during the last 100 years. How stupid does one have to be
to hold on to it for the next 100? What? Who would hold on to cash over the long term
as some sort of investment? I put most of my paycheck towards the stock
market or in rental properties as soon as I get it I don’t sit around holding cash on hand! Great! And what are your returns on those
investments during the last 3 years? How much did you say
you had in LUNA again? Man, that’s low.
Sorry … too early? Wait, wait, wait! I’d really love to talk about your
views on Bitcoin as an investment, perhaps even without it becoming
an important currency, but can we just finish the discussion about Bitcoin’s user-case as a currency first? Yea, I have a few more comments that
I know Mr. Bear won’t be able to refute. Have you ever tried sending
money abroad Mr. Bear? No, I don’t think I have. There are billions of dollars being
transferred in “remittance” each year, meaning, from a foreign worker
back to their homeland. The IMF expected the number
to be $596b in 2017. And let me tell you, it’s better to
strap money to an envelope than it is to go through the
traditional banking system, if you’d want to, for example,
send money to Indonesia. Have you ever tried to send
money on a Sunday? Or on any day for that matter, after 5 pm? Well, yes. That didn’t work out so well, correct? Because apparently God wants even
money transfers to be paused on the sabbath. Well, I think a lot of people find
this very inconvenient.
And guess what? Bitcoin solves these problems. Transactions on the Bitcoin blockchain do not
care if an American is exchanging money with a fellow American or if a Swede is exchanging money
with someone from India. Moreover, the transactions
can be made 24-7-365, meaning, at any time. You say Bitcoin is inefficient
for buying a cup of coffee, but it can be used to solve
a $596b remittance problem. I think you are right about this one. However, I think that when
you put this in perspective to what the currency is
valued at right now – about $500b – you’ll see that something is off.
You said $596b of transfers? Visa’s transactional volume was approximately
20 times that during the last 12 months. And Visa’s market cap is still
lower than Bitcoin’s. I want to get back to what I think is
one of your core arguments. You say that Bitcoin is digital scarcity, that it cannot be inflated. However, you seem to forget that new cryptos
are being created every day. Bitcoin’s code is out there, an exact replica can be created,
just with another name. So … isn’t there inflation really? What do you mean Mr. Bear? Are you saying that if more cryptos are created,
they compete with Bitcoin? Exactly.
You are missing a very
important point here. Much like a picture of the Mona Lisa isn’t
the real thing, shitcoins aren’t Bitcoins. You know, there’s an unlimited
supply of rocks out there but people still churn through
them to reach the gold. There are incredible
network effects in place, making it nearly impossible
for any other crypto to overtake Bitcoin’s dominance. Just look at the price! While tons of cryptos have been
created during the last few years, just like you mention, Bitcoin has only increased in value. I agree that there are network effects in place
which may make it difficult to replace Bitcoin but you can’t have it both ways. FIAT has the strongest
network effects around. If you think that network effects are
most important, then fiat will reign. If you think that technology is
most important, then other cryptos, or something else entirely
for all that I know, can replace Bitcoin. Bitcoin is not as energy efficient as any crypto
that uses proof of stake instead of proof of work, it is not as anonymous/secure as others, it cannot handle as many transactions
per second as some, the list goes on and on.
I think you overestimate the power of
these “network effects” a little bit. They don’t make anything undefeatable. Myspace was a network, and
had a first mover’s advantage. VHS was kind of a network. CDs. What about Nintendo64? Everquest someone? The crypto space right now is
like Game of Thrones, and I think no one knows yet if Bitcoin is a Ned Stark
or a Jon Snow. We must stop pretending that you think
about Bitcoin as a currency Mr. Bull. The median transaction value
on the Bitcoin blockchain is somewhere in the region of
$500-$700 currently. That’s not money spent on
everyday purchases. Per definition, you do not HODL with diamond hands the currency
you are using for your day-to-day expenses. Jesus. You really lack imagination. What if, perhaps, Bitcoin is an investment
right now and a currency in the future? Did you think about that possibility? We should probably introduce a counter for
every time you say the word “future” just to show how much you like
to rely on it in your argumentation. I think that was the 5th time already? Okay, okay guys, can we please try to
stay away from each other’s throats? I’ve heard both sides now on
the currency part.
What? Common, I haven’t even mentioned that the
mining of Bitcoin requires more energy than the whole country of Australia! If we want to expand the usage of
this devourer of electricity, we may as well say bye bye
to the Paris Agreement and any other plans we have
for preventing climate change. Do you think today’s politicians will go easy
on a wider adoption of such a currency? Stop, stop. I think I know who I agree more with, but I want to hear your thoughts
about Bitcoin as an investment. Whether or not it will become
the leading currency of the future, is it a good investment
for the next few years? This is one of the amazing
properties of Bitcoin.
While I and Mr. Bear don’t really
seem to be able to agree, in my opinion, there’s a non-zero probability that
Bitcoin will become an important currency of the future. BUT, there’s a second option too. This is that Bitcoin will overtake gold as
the hardest asset around – the one asset that investors turn to
for protection against inflation. Bitcoin is digital gold. And indeed, there’s massive moon
potential for the future here too. The market cap of Bitcoin is currently
just 1/20 of the market cap of gold. That’s a massive upside. Bitcoin and gold are NOT used for the same
purposes, not even by investors. Quite a bit of gold is being used in industry
and let’s not forget about jewelry. Unlike Bitcoin, gold has
a clear user-case. Bitcoin’s only user-case is speculation. Look at the percentage of turnover of the total
market cap of Bitcoin and compare that to gold.
You’ll see how much speculation
there is in the currency. What data are you looking at? Mr. Bear cannot disagree with facts. And the fact is that Bitcoin is UP. Whether it is the number of transactions, the market participants, the computing power, the number of institutions, the number of corporations, the number of retail investors, every single one of those datapoints suggests
that adoption of Bitcoin is increasing.
Let me tell you a little story. Imagine that you are a turkey
who lives on a farm. Every day you are being taken care of
by the family who owns the farm. For 1000 days they’ve kept you
safe and well-fed, and for every passing day, you are becoming more and more convinced that these farmers must be
the greatest creatures alive! Then, suddenly, on day number 1001, it’s Thanksgiving, and the farmers suddenly
aren’t so kind anymore.
I’m not particularly surprised by the fact
that more and more people are joining this, what I would like to call, crypto-mania. The Bitcoin story becomes more and more
believable for every day that passes, but I think that eventually, a lot of people will realize that
they have been turkeys. Just ask the last buyers
during the Tullip mania, those who purchased something like
JDS Unipahse during the dotcom bubble, or the final buyers of
LUNA for that matter.
It looks very attractive to join
the Bitcoin-train right now, but what happens when overnight
Lamborghini stories are replaced by “I extended my mortgage and
now I’m broke” stories? Then Bitcoin must have a user-case
which it can rely on, because the speculative
demand will be gone. You are not exactly the first person who
suggests the death of Bitcoin Mr. Bear. Many others have been dismissing it
and they’ve all been wrong. I’m getting the impression that you need to see
a user-case for something to be valuable, but I think that you are missing
something here. People assign value to things,
not the other way around. It doesn’t always have to be
100% rational, in fact, many times it isn’t. Fiat is not worth anything in itself, it’s the trust that people give to it
that makes it valuable. It’s simple supply and demand. If the number of people who want to get in
exceeds the number who want to get out, Bitcoin will rise in price. You are correct about that, but this applies for ANY asset
with a limited supply.
Why would you rather own Bitcoin than
a rental property in New York? Or stocks in a company with
a product that you love? Isn’t that … obvious? Because real estate and stocks don’t have
the same potential as Bitcoin does, just look at the graph! You don’t have to take my word for it though. Paul Tudor Jones, Stan Druckenmiller
and Jim Simons are in Bitcoin. Even huge institutions such as Goldman Sachs is
starting to show an interest in it. Hold on, hold on. You are talking about trading here; These people usually do not hold
their positions for the long run.
That’s a huge difference. Warren Buffett once bought
3,500 tons of silver, and I can promise you that
he didn’t do that because he thought that silver would
outperform the stock market in the long run. In the end, Bitcoin is
an unproductive asset, and the fact is that unproductive assets just haven’t been such great
investments historically. If you purchase 1 ounce of gold and
put it under your mattress and then bring it out 50 years later, it will still just be 1 ounce of gold.
On the other hand, if you buy, for example,
an apartment in New York, you can rent out the place and
receive monthly payments, and you still own it 50 years later,
just like you do with the gold. Do you understand the difference? Productive assets just have a more
favorable structure as investments. I don’t know how this matters? Why would I care if I get my returns in
the form of a monthly cash payment or in the form of price appreciation? Or both? It’s the total return that matters, meaning price appreciation
PLUS cash payments. Well, the difference is that if you only rely on
price appreciation in your investment case, you have just one way out. That’s selling higher to someone else. Selling to an even greater fool. If you look at Bitcoin holders as a group, they haven’t earned anything, ZERO. They’ve only been trading money
with each other. For every seller there’s been a buyer,
and vice versa. With a productive asset you have
a heads – I win, tails – I don’t lose much situation.
If you don’t want to buy my Apple stock
at a higher price than I paid for it, that’s fine with me, because I can also just
sit back and collect the dividends. Let me give you two historical examples of
the returns of some famous unproductive assets. The most famous one is of course gold. A little more than 2000 years ago, during Julius Cesar’s reign
in ancient Rome, a legionnaire had to give up approximately
4.6 months of work for 1 ounce of gold. Today, the median full-time working man in
America must give up only 0.3 months. In other words, gold is much less valuable today
in terms of labor than it was back then. You’ll see a similar story if you compare
the average American worker in 1900 with the average American worker in 2019. The 1900 person had to work for
0.45 months for an ounce of gold and the 2019 person had to work
for just 0.25 months. That’s NEGATIVE returns for these
long-term time horizons. Even a really superior unproductive
asset like a Van Gough painting hasn’t returned so much
over a century. I just don’t see why cryptos would become
the first to beat this lame track record.
How about everything there is
divided by 21 million? Is that a good enough return for you? What do you mean Mr. Bull? I think there’s a non-zero probability that
central banks will adopt Bitcoin as their main currency in the future. If this happens, it could reasonably overtake
the value of currencies and gold, and then everything would be valued
in a limited number of Bitcoins. As human productivity grows, the value of each Bitcoin will
just continue to grow as long as GDP does. Everything in our society would be priced
in this limited number of coins, and as the proceeds grow,
so does the value of Bitcoin.
This just sounds highly speculative to me. Do you know what Ray Dalio says? “Those who live by the crystal ball
will eat shattered glass.” Your investment case is built on
dodging a ton of bullets, all while hitting quite a few jackpots. You are saying that something which is only
used in a few thousand transactions a day will take on and beat the most
important currency in history? That’s a little like saying that a 6-year-old
who scored his first goal will be the next Messi.
Bitcoin aspires to become the
unquestionable global currency. Some aspirations become true … My love has come along [Singing] … but most of them do not. When you entered this competition, did you really believe that you could become what you are standing on there, the American Idol? Yes sir. Well, then you are deaf. I just think that I can find more favorable odds
by searching for individually mispriced companies in the stock market. Bitcoin is one of the greatest tools ever
invented for the advancement of human liberty. There are three eras of currency: Commodity based, politically based, and now, math based. Bitcoin is like the internet – it connects strangers around the world
without a need of a middleman. Would you go back in time and invest
in the infant internet if you could? I most definitely would. I think I know what to do now, thank you guys.
Whether Mr. Bull or Mr. Bear is right cannot
be answered with certainty at this point. Only the real world will tell us
how things unfold in the end, but I’d love to hear
your thoughts. Who won this debate? Did someone miss an important point? Make YOUR case in the comments. Cheers guys!.
