Bitcoin: The Bull & Bear Case — and where it’s going

Bitcoin

The Bull Case

Paul Tudor Jones’ Thesis (Institutional Investor)

1. Bitcoin is a hedge against global monetary inflation

• Global spending will likely increase over the next 20 years
• Average national debt will continue to skyrocket, no signs of austerity in sight
• Global disasters and the COVID pandemic intensifies spending

2. The financial world is moving towards cryptocurrencies and crypto assets

• Bitcoin has the distinct advantage of being the first crypto currency/asset
• It’s impossible to put a valuation on Bitcoin, but its current valuation compared to other assets and the global market seems too low (gold mkt cap is at ~8–9 trillion)
• “The most compelling argument for owning Bitcoin is the coming digitization of currency everywhere, accelerated by COVID-19.”

Michael Saylor & MicroStrategy’s Thesis (Corporation)

1. Fiat, and specifically the U.S. Dollar, is headed for ruin and will soon lose its global reserve status as a currency
2. Bitcoin is fundamentally “harder, faster, stronger” as a currency or monetary network

• “Bitcoin is the scarcest asset”

3. The future of currency is digital, echos PTJ’s thesis

Kevin Rose’s Narrative Thesis (Individual)

1. Bitcoin, at its core, is a kind of narrative — a story

• Bitcoin’s value rises when more people “believe” (invests) in the story
• The longer Bitcoin lives, the stronger the story grows

2. Embedded within Bitcoin’s story, are various narratives that individually are compelling in their own right.

• An asset as a hedge against inflation
• An asset that is more desirable (qualitatively) than any existing asset
• The digital cryptocurrency of the future
• A digital cryptocurrency that already works

The Bear Case

The Outlaw Thesis

1. Bitcoin trading/holding is banned or heavily taxed by the USFG & various other governments

• The threat of criminal prosecution means institutional investors and corporations can no longer hold Bitcoin — triggering a massive sell-off that induces panic among some Individual Investors leading to a massive bubble burst
• Bitcoin doesn’t go to zero — but its’ valuation remains very low because of the inability of the larger market to access it
• Bitcoin’s fundamental story of Revolution is shattered

2. There is a great depression or an equivalent economic disaster that requires the USFG to intervene

• The USFG intervenes by producing more fiat but the inflationary effects are too great and the stimulus effects are too low which only serves to fuel the disaster
• People are fleeing en masse to Bitcoin, as the USFG is unable to control Bitcoin, the dollar is quickly losing its value and prices are rising — the USFG is forced to ban Bitcoin to restore confidence in the dollar

The Catastrophe Thesis

1. Bitcoin faces some unforeseen major obstacle, revealing a fundamental limitation in its underlying technology

• Everyone jumps to another cryptocurrency that is better, triggering a massive sell-off and the price crashes
• Rising transaction times and fees are a source of major conflict — which is why Bitcoin has had various hard & soft forks

The Dollar Coin Thesis

1. The USFG creates an alternative digital currency

• It has most of the properties that Bitcoin has (mainly its digital qualities) and is sanctioned by the Federal Government
• The U.S. Dollar (Fiat) is pegged to the value of this digital currency, creating a new global monetary standard
• This causes a mass exodus from Bitcoin to Dollar Coin

Conclusion

In the short-term (<5 Years) → Bitcoin’s value will continue to rise.

1. Institutional Investors and Corporations will continue to start investing in Bitcoin or hold Bitcoin as an asset.
2. Bitcoin’s story gets stronger and more mainstream as awareness grows
3. The Net number of die-hard holders (individual investors) continue to grow.
4. The USFG may see it as a threat but will be unable to do anything about it as there is a lack of consensus and sense of urgency.
5. No other cryptocurrency will overtake Bitcoin as the majority of investors are investing because of its various stories not because of a fundamental understanding of its underlying technology.

In the long-term (>20 Years) → Bitcoin’s future is still uncertain.

1. A black swan event likely occurs that could either accelerate Bitcoin’s adoption or decelerate it.
2. It’s hard to know how various governments respond to the rising adoption of cryptocurrencies.
3. Bitcoin will likely survive but the price at which it survives is hard to tell
4. Even the state in which it survives is hard to tell, we may be forced to adopt a new Bitcoin version in a potential hard fork

tl;dr I own bitcoin and I will continue to buy it.