Well, here we are…
Back in January 2023, I sent out a dispatch to imy Field Notes readers asserting that the cryptocurrency market had seen its lows for the bear market and the move from that point would be higher.
Back then, I specifically called out three crypto coins: bitcoin, which was flirting with $23,000; Ethereum, then in the $1,600 range; and Solana, about $23 at the time.
And now?
Bitcoin just crushed all-time highs. Ethereum is flirting with $4,000 again. And Solana, meanwhile, is up nealry six-fold to more than $130.
Not a bad call. Hopefully, some Field Notes readers heeded the advice back in January 2023.
Today’s dispatch plays off of the new bull market in crypto…
As I write this, news is afoot that BlackRock’s new bitcoin ETF has recorded multiple days of inflows exceeding $1 billion…
That’s monumental.
It stems from the fact that the SEC in early January finally approved a particular type of bitcoin ETF.
Since then, so much money has flown into those ETFs that there’s talk that within just two years, they’ll hold more money than all the gold ETFs—which have been around for two decades.
All of which raises a fundamental question—one that’s been asked many times…
Is bitcoin money?
Lots of debate there, for sure.
Naysayers laugh at the idea. Those in the know (like, say, moi) laugh at the naysayers because of their arrogant ignorance.
But let’s take this to a more practical, quasi-scientific level, and rate bitcoin against the concept of “sound money.” How does bitcoin compare?
Or phrased another way: What are the requirements for sound money?
Let’s consider…
- Durable.
Bitcoin is computer code. It never wears out; never needs replaceing.
So long as a single computer exists in the world, bitcoin lives on. That’s durability.
- Divisible.
Bitcoin is the most divisible currency on the planet. The dollar splits into 100 pennies. An ounce of gold splits into 28.4 grams… but a gram is so small, you couldn’t carry it around without risk of loss, and how would you make change?
Each bitcoin is divisible into 100 million “satoshis.” Even at $1 million per bitcoin, a satoshi would be a penny.
Moreover, bitcoin is digital, so spending fractions of a bitcoin—those satoshis—is simple.
At any price, a bitcoin is divisible into an easily spendable unit.
- Consistent/fungible.
One bitcoin is no different than any other bitcoin.
You can’t see it like you can see a dollar, sure. But so long as your crypto account says you own X amount of bitcoin, you can spend it just like you’d spend fiat money.
- Convenient.
No currency in the world is as convenient and as portable as bitcoin.
No one can easily travel with or cross international borders with large sums of physical cash, like, say, $100,000.
But I can take or send bitcoin anywhere in the world. I can put $100 million worth onto a thumb-drive-sized device and carry it all over the world and no one is the wiser. I can deposit bitcoin into my crypto account in the US and access it anywhere in the world that has an internet connection.
And I can move the value back and forth between crypto and fiat with a few simple clicks online.
- Intrinsically valuable.
The previous four requirements are irrefutable.
But intrinsic value is where the only legitimate debate can occur.
Some will argue vehemently that bitcoin has no intrinsic value. That’s it’s simply computer code.
Right. But why does the modern dollar have true, intrinsic value?
The buck used to be backed by gold and silver at various times, giving it true intrinsic value. For half a century now, however, it has been backed by nothing. Those who say it’s backed by the good faith and credit of the United States government are deluding themselves into a false sense of security.
Congress over the last several years has threatened to hold the currency hostage in budget fights, and any fiat currency that can be impacted by political threats and infighting is not, by definition, a sound currency.
Simply put: The dollar has no definable, intrinsic value. Certainly not like there is in a bushel of wheat, or a piece of land, or a bar of gold.
There is only a mass belief that a particular piece of green-tinted linen is valuable because society says it is.
But when government can—and does—print dollars by the trillions at the push of a few computer keys, then that is prima facia proof that the intrinsic value of a dollar is somewhere close to zero and is certainly negligible.
Of course, bitcoin is also based on a belief that it holds value. But at least with bitcoin, there is no person, no entity, no government or agency that can create more than the 21 million that will ever exist.
And while bitcoin is wildly more volatile than any fiat currency, that volatility will evaporate over time as the currency matures and as more and more people, governments, and businesses incorporate it into their daily finances. That day is coming.
For now, though, I’ll give the nod to the dollar here, only because the mass delusion of its value is global, and that is not yet the case with bitcoin.
But make no mistake: The dollar’s value truly is a fiction predicated on a delusion.
The moment a dollar crisis strikes (that moment is 100% guaranteed, by the way) the value of greenbacks will crater because there is no intrinsic-value safety net below. There’s just history’s largest mountain of debt and a political class that feels no obligation to act in a responsible way.
In that moment, you’re going to see bitcoin take the wheel and drive.