Bitcoin’s Legacy Will Be Short-Lived

DRIGGS, IDAHO – I first heard of bitcoin in 2012. The moment I saw it, I knew it was going to be a big hit in the marketplace.

But today, I think it’s “over the hill,” so to speak.

Now, I know some very smart people will disagree with me. And that’s ok.

But my working hypothesis is that the bitcoin price peaked in December 2017 amidst a furious speculative fever and it is now slowly returning to obscurity…

More below.

Our Western Mountain Bolthole

Greetings from our bolthole in the Great American West…

We’re taking a break from our travels. We’ve rented an Airbnb in the Rocky Mountains. We’re going to spend the winter here, getting dumped on by snow.

Yesterday, we were invited over to the house of some local residents. From their back porch, we had a great view of the mountains…

Back to bitcoin…

What Defines Good Money

All this week, we’ve been making the case that bitcoin is going to $0. (Catch up here, here, and here.)

To put things into context, we’ve been unfolding a little island economy. And yesterday, we watched nails come to be accepted as money in our imaginary economy…

People confidently accepted nails as money because a) they were more convenient to use in trade, and b) it was clear to skeptics that nails would always have value in the marketplace as a construction material.

Side note: This is exactly how gold and silver came to be used as money, over billions and billions of transactions throughout history.

They were more convenient for trading than, say, cows or furniture. And it was clear that they’d always have value in the marketplace for dentists, jewelers, architects, engineers, artists, etc.

Now let’s compare bitcoin…

Perfect Experiment in the Greater Fool Theory

Like nails (or gold), bitcoin is more convenient to use in trade than cows and furniture. That’s a good thing.

But unlike nails (or gold), bitcoin has no primary use as a physical material. So how can anyone confidently accept it in barter when no one uses it in industry?

They can’t. Accepting bitcoin is the same thing as taking a leap of faith.

So in my opinion, bitcoin is just a speculative vehicle… like a gambling game… and the most perfect experiment in Greater Fool Theory mankind has ever devised.

(The Greater Fool Theory is an explanation for the rising price of an asset beyond its intrinsic value. It suggests people will sometimes pay irrationally high prices for assets for the simple reason they imagine there’s an even greater fool coming behind them to pay an even higher price.)

We might call bitcoin a “digital token” or “digital paper,” which is why governments around the world are all embracing its concept. (Unbacked digital tokens are the perfect companion to their unbacked paper currencies.)

But it’s not money.

The question is: Can the bitcoin price rise from here?

Sure. But if you study investment manias throughout history, you’ll know that once a speculative fever breaks, the price of the asset doesn’t recover its all-time high again for many years… if at all.

I’ll never forget standing in line at Starbucks in December 2017 and listening to two pensioners in front of me talking about bitcoin.

That was the moment I knew bitcoin had years of misery awaiting it…

– Tom Dyson

P.S. There’s another huge flaw in bitcoin I haven’t mentioned.

In the same way certain animals and plants that serve humans (dogs and corn, say) have an evolutionary advantage over those that don’t serve humans…

…money commodities that serve governments have an evolutionary advantage over those that don’t.

That’s because governments use their control of money to extract wealth from the marketplace (via inflation). There’s no way they’ll willingly give up this power, especially now.

Expecting bitcoin to gain wide acceptance is the same as expecting governments to freely surrender their powers. Not going to happen.

So in sum, bitcoin has neither the industrial value of gold, nor the value for the ruling class of state-issued paper currency. It’ll never work.

P.P.S. The bitcoin “transportation” network consumes gargantuan amounts of power. By some estimates, the bitcoin network consumes more power each day than Switzerland. It’s absurd to me that small packets of electrons – a fundamentally useless material of infinite abundance – command so much wealth from the marketplace. Surely we can invent a better payment network than bitcoin?

P.P.P.S. One final thought… Gold evolved as money one barter at a time over billions of exchanges. Bitcoin was “invented” one day. As such, a very small number of early hoarders (they’re known as whales in the bitcoin community) control a very large percentage of the float. (I’ve read that something like 90% of all the bitcoins ever mined are owned by just a handful of individuals.)

Why would anyone confidently accept bitcoin in barter, knowing these whales exist, just waiting to dump?

Like what you’re reading? Send your thoughts to [email protected].

A reader appreciates Tom and Dusty’s Dyson Family Ramble video… another is touched by the story of Tom’s hat flying away in Glacier National Park… and one suggests a new hat for Tom…

Reader comment: Hello from Butte, Montana. Enjoyed watching the video of Tom and Dusty. This is awesome and glad you’re doing these. Looking forward to seeing more. Dusty looks happy and really looks up to you. Life has to be so good for your beautiful family. God bless. P.S. Your new living quarters look nice.

Reader comment: So… The wind blew your hat clear off your head and sent it far, far away. That was the most wonderful sign from the world of spirit. You simply don’t need that crutch anymore. You have created your own inner strength and light, your own fine moral compass, your own luck (Labor Under Correct Knowledge).

You have found true love with your family. The hat is no longer important as it was a constant reminder of a time of despair in your life. It was indeed time for the wind to blow it away. Celebrate!

Reader comment: I’ve been following your travels for several months and saw that you lost your hat right after you reached Driggs. I have a suggestion for a new hat. You should look into getting a Tilley Hat. I’ve had a Tilley myself for over 10 years, and it is one of the best values anywhere.

The label inside the Tilley Hat says the following: “This is the Tilley Hat. It is the best outdoor hat in the world. It floats, ties on, repels rain, and mildew, won’t shrink, and will be replaced for free if it wears out. (Yes, put it in your will.)” I lost mine when I left it on a Denver bus and called them. They sent me a new one at no charge. You can order one by calling them at 1-800-ENDURES. You will love your Tilley Hat as much as I love mine! I guarantee it.

Meanwhile, others see the happiness Tom has discovered in his family… suggest a church to check out… and talk about the small-town pushback Tom mentions…

Reader comment: Tom, what a happy, precious family picture you posted of your wife and children bonding as they were . Know it gives you great happiness to see them and to be together in bed doing homework. It spoke volumes of the love your family has for each other. Am so happy for you, especially after you shared your struggles in the past. Now you are able to cherish your wife and family so much more. A deep joy that cannot be described with words. Your adventurous posts are a joy to read.

Reader comment: I’ve been following your adventures. Thank you for the great pictures. I have five children and did a lot of camping when our children were growing up. I’m glad you were able to spend the time with them that you did, because they grow up way too fast, as I’m sure you’re aware. The reason for my email is that you got my attention when you mentioned that you were going to find a Christian congregation in your new home.

I would like to suggest that you visit my church online. We are very family-oriented and do our best to live by Bible standards. You can learn much about us on our website. Enjoy your new digs, in Driggs. 🙂

Reader comment: I have followed your Postcards From the Fringe for some time now. Following my earlier encouragement to visit, I was so happy to see you make a trip to Moab earlier this summer. Truly a different world. I was equally surprised/pleased to see you settle in Driggs for the winter.

If you’d like to know more about real estate in the area, [my friend there] is a very good resource. I chose to invest in real estate in the area via a partnership investment. He recognized the value of the Driggs/Victor area over a decade ago, when the billionaires were crowding out the millionaires from Jackson and “regular working folk” needed a place to live that was within driving distance of their jobs in Jackson.

Reader comment: We live in a not-very-remote (or secret) ski resort and real estate is doing the same as in Driggs. Local agents can’t remember it being this good (for them). Prices are soaring and it is having the same effect on all those locals who live and work here, and keep things going for those who don’t have to work! We would all sell at these prices but there is nowhere to go and jobs not readily available. I suspect there will be some push back at the “newcomers” just as you have mentioned. Everyone wants a piece of paradise.

Tom’s note: As always, thank you for your messages. Please keep writing us at [email protected]. We love hearing from you!