Bitcoin Bubble Myth – Debate Excerpts (Joel Bomgar and Chris Hunter)

00:00 ladies and gentlemen bubbles have three 00:03 characteristics they tend to be a single 00:06 cycle boom than bust relatively short in 00:09 duration and crash back down to the 00:11 Baseline which is either zero or the 00:14 inflation adjusted place of where they 00:16 were before the Boom the Dutch tulip 00:19 Mania was like this so was the housing 00:21 bubble so was the dot bubble and so was 00:24 pretty much every other bubble ever so 00:28 what about Bitcoin well Bitcoin is 00:29 actually hard to the price Cycles 00:31 because it's increased such radically in 00:33 value over time so we're going to use a 00:35 logarithmic scale to look at what it 00:38 looks like on a price cycle where you go 00:40 from zero to a dollar then to $10 100 00:43 it's called the logarithmic scale which 00:45 is often used for assets with this level 00:47 of upside so in the first price cycle 00:50 Bitcoin went from about 5 cents up to 00:53 $32 back to $2 now if we were having 00:56 this debate in 2011 you could be 00:58 forgiven for believing it two of the 01:01 three criteria of a bubble except that 01:03 it landed at a price that was 40 times 01:06 as high as the five cents that it 01:08 started at what happened next it didn't 01:10 go to zero it went up to $1,200 came 01:12 back to 92 meeting now none of the 01:16 criteria of a bubble then what did it do 01:18 well it zoomed up to $199,000 down to 01:21 3,200 meeting once again none of the 01:24 criteria of a bubble 35 times the 01:27 previous low price then it zoomed up to 01:31 $69,000 down to $115,000 once again 01:34 meeting none of the criteria of any 01:37 historical bubble we have ever seen 01:40 bubbles look like the bottom left of 01:42 this chart they do not look like the 01:44 orange line so what does look like that 01:47 orange line well it turns out every high 01:49 value Asset that has ever become a 01:51 trillion dollar industry or asset looks 01:53 just like that on a logarithmic chart 01:55 Apple Amazon Netflix even gold when you 01:59 zoom out goes through the same pattern 02:02 and all of these assets do it for the 02:03 same reason the marketplace is trying to 02:05 figure out how big of a deal is this 02:08 asset how big of a deal is this industry 02:10 and what role will this commodity 02:12 technology or company impact in the 02:15 global world bitcoin's doing the same 02:18 thing for the very same reason which is 02:20 the opposite of how any bubble in human 02:24 history has ever behaved so why is it 02:27 valuable well for the first time in 02:30 history we have a borderless predictable 02:33 and scarce monetary asset so what do I 02:36 mean borderless because Bitcoin is 02:39 decentralized it's not controlled by any 02:41 country company or anybody and that 02:44 means Bitcoin is not like Fiat 02:47 currencies which is nothing but a bunch 02:49 of fifs all over the world and 02:51 borderless because you don't have to 02:53 have the government's permission to 02:54 cross a border with more than 02:56 $10,000 Bitcoin is a decentralized and 02:59 borderless currency that is valuable 03:02 because the world has never had a 03:04 universal worldwide currency that worked 03:06 like Bitcoin Bitcoin is also predictable 03:09 absolutely completely unlike the Federal 03:12 Reserve where even the experts get it 03:14 wrong every time and having a money that 03:16 is absolutely predictable is a very 03:19 valuable characteristic also Bitcoin is 03:22 scarce truly scarce there will never be 03:24 more than 21 million Bitcoin ever as 03:28 opposed to Fiat which is as in 03:30 as a politician's promises so Bitcoin is 03:34 the first truly scarce currency the 03:37 world has ever had and that is 03:39 incredibly valuable so when you sum that 03:42 up we have a borderless predictable and 03:44 scarce monetary asset unlike anything 03:47 the world has ever seen before and it's 03:49 doing exactly what you would expect it 03:51 to do on its way to more than a trillion 03:53 dollars which is where it is today north 03:56 of a trillion dollars solving the real 03:58 world problems of the need for a 04:00 borderless predictable and scarce 04:02 monetary asset so is Bitcoin a bubble 04:05 that is the question and Bitcoin meets 04:08 none of the criteria of any historical 04:11 bubble we've ever seen in history or is 04:15 it an ideal monetary asset that just so 04:17 happens to check every single box for 04:20 everything you would want for a new 04:22 monetary system for the world the answer 04:25 to that question is Bitcoin a bubble is 04:28 obvious 04:30 many new technologies throughout the 04:32 ages have been grossly misunderstood at 04:34 first humans are not very good at 04:36 managing change and we tend to mock 04:38 things that we do not understand let's 04:40 look at two historical examples 04:43 electricity and the internet 1879 Thomas 04:47 Edison invents the modern electric light 04:49 bulb and the decades thereafter 04:51 electricity was ridiculed in the public 04:54 here we have a cartoon from the late 04:55 1800s newspaper op EDS of the day called 04:58 electricity the devil in the wall today 05:01 nobody would question the utility of 05:03 electricity for lighting Refrigeration 05:05 air conditioning to power robots 05:07 computers machines and more the internet 05:11 was gifted to us publicly in 05:13 1983 15 years later in 05:16 1998 Paul Krugman famously said the 05:20 internet's impact on the economy will be 05:22 no greater than that of the fax machine 05:24 this Yahoo won a Nobel prize in 05:26 economics you know what also happens to 05:28 be 15 years old right now Bitcoin all 05:32 seminal Technologies throughout human 05:34 history are only understood properly by 05:37 the general population in 05:39 hindsight Bitcoin is one of the most 05:41 important Technologies ever invented for 05:44 Humanity on par with fire and the wheel 05:47 and the printing press and yes 05:49 electricity and the internet in terms of 05:51 its import to humanity question 20 years 05:54 from now this will be obvious to 05:55 everybody but today let me give you a 05:57 fundamental framework to help you 05:59 understand why I know this this with 06:00 certainty Bitcoin is both an asset and a 06:04 network simultaneously if you go to your 06:06 computer you can duplicate many things a 06:08 favorite photo a file a document you 06:12 cannot duplicate Bitcoin the asset it is 06:14 a digital Bearer instrument much the 06:16 same that dollar bills are physical 06:18 Bearer instruments so with both Bitcoin 06:20 and dollars if I give them to you or you 06:23 take them from me or I misplaced them 06:25 they are gone that is Bitcoin the asset 06:27 but at the same time Bitcoin is also a 06:30 Network this is what is difficult for 06:31 people to get their heads around we have 06:33 billions of dollars of Bitcoin miners in 06:35 other words worldclass data centers 06:39 powering the most powerful bit or 06:41 computer network ever seen by history 06:43 and they are voluntarily running at 06:45 Great expense the Bitcoin protocol 06:49 software before we get to that why are 06:51 they doing this let's talk about Henry 06:53 Ford one of the Great American 06:54 businessmen of all time 1921 New York 06:57 Tribune top of the fold 103 years ago 06:59 Henry Ford says if you want to stop all 07:01 wars you would have a currency based 07:04 upon kilowatt hours well you know what 07:06 folks that's exactly what we have today 07:08 with Bitcoin Bitcoin miners running the 07:10 Bitcoin protocol convert electricity 07:13 into monetary value what is this Bitcoin 07:15 protocol that I speak of it is free and 07:17 open source software so it's very 07:19 different than software that you would 07:20 get from say Microsoft or apple that you 07:22 both have to pay for and is a black box 07:24 you have no idea how the code works the 07:26 Bitcoin protocol software by contrast is 07:28 free for any human being to view audit 07:31 and use and part of what's written into 07:34 the code is a hard cap on Supply no more 07:37 than 21 million Bitcoin can never be 07:38 issued absolute scarcity what does this 07:41 all mean Bitcoin is the most beautiful 07:43 form of sound money ever invented it is 07:45 unseizable if you want to be you can 07:46 truly be your own bank it is 07:48 uncensorable nobody can stop a Bitcoin 07:50 transaction unlike Visa or venmo or your 07:52 bank who can censor any transaction they 07:54 want and it cannot be inflated away like 07:57 politicians do with fiat currency 07:59 because they can never resist the Allure 08:01 of the Central Bank printing 08:03 press why is this important 250 years 08:07 ago our country was founded in part on 08:08 this notion that we could separate 08:10 Church from the state with Bitcoin for 08:12 the first time in human history we had 08:14 the possibility of separating money from 08:16 the state and this has profound 08:18 implications Bitcoin is 15 years old was 08:20 intentionally launched at the height of 08:22 the great financial crisis and during 08:24 the past 15 years with Bitcoin we have 08:26 been seeing the birth of an entirely new 08:29 Financial system system with the Bitcoin 08:30 protocol as the Bas layer last time I 08:32 checked birth in nature is both volatile 08:35 and violent it is not a smooth process 08:37 and so with Bitcoin we see the birthing 08:39 of this new system expressed in the 08:41 metric of the old system dollar price 08:44 it's gone down 70% or more four times 08:46 over it's going up and to the right 08:47 Forever on our algorithmic scale because 08:49 it is one of the most important 08:51 Technologies ever invented for human 08:53 Freedom Bitcoin is not a bubble with 08:56 Bitcoin we are seeing the birth of a new 08:58 system that is critical for human 09:00 Freedom all right so how do you value 09:03 Bitcoin we know it's an ideal monetary 09:05 system we know it's not a bubble 09:06 according to the data but how do we 09:08 value it well Ark invest and the 09:11 chartered financial analyst Institute 09:13 are the two best resources to get 09:15 exactly what is the right price how do 09:17 you model it and all of that they put 09:18 forward four models we have time to look 09:21 at two Network effects and Market size 09:23 so meta's law is how you value something 09:25 that has Network effects whether it's a 09:27 Telegraph telephone the internet 09:28 anything that becom more valuable when 09:31 people connect to it and it says the 09:32 value of a network is proportional to 09:34 the square of the number of users so as 09:37 the users go up linearly the value of 09:39 being on that network with everyone else 09:41 that's on there goes exponentially so if 09:44 Bitcoin has less than 100,000 users in 09:47 2011 which it did and the price was $1 a 09:50 coin and the number of users increases 09:53 to more than 27 million today which it 09:56 is far in excess of that you would 09:58 expect when there's a 10:00 270x increase in the users for there to 10:03 be a 74,000 X increase in the value of 10:06 being part of that Network which is 10:08 roughly where we are with regard to 10:10 bitcoin so you again you can square that 10:13 270x you get 73,000 Xtra you can look at 10:16 27 million users squared as compared to 10:18 100,000 users squared so if you don't 10:21 like that approach you can also go to 10:23 Ark invest their 2023 Big Ideas report 10:26 page 65 and they will lay down in very 10:30 specific detail exactly how you value 10:32 Bitcoin exactly where they get those 10:34 numbers exactly how they come to a price 10:36 of somewhere between 258,000 and 1.48 10:39 million in the year 2030 they will 10:41 answer all of that for you in exactly 10:43 the detail you want to see it's all 10:45 there there are plenty of models online 10:47 and as far as what makes Bitcoin 10:48 valuable for the last years everything I 10:51 buy is with Bitcoin with the coinbase 10:53 debit card everything and well everybody 10:55 who's using US Dollars their money is 10:57 losing value in the longterm overtime 10:60 I am using money that is increasing in 11:02 value over time that is valuable it is 11:05 an asset it is a network and it is a 11:08 protocol all at the same time Bitcoin is 11:10 a public database every transaction is 11:12 out in the open here's an analogy for 11:14 you if I go back to my hotel room and I 11:16 create an email address Yad yada Gmail 11:19 and I send you a nasty email from that 11:21 Gmail address you're not going to have 11:22 any idea who came who it came from the 11:24 FBI can figure out in 28 seconds who 11:27 sent that email if they want to that I 11:29 was the generator same thing with 11:31 Bitcoin it's a public Ledger it's the 11:32 last thing that people will use for 11:35 nefarious activities that's what they 11:36 use dollars for you hear that bitcoin's 11:38 not scalable again this is a complete 11:40 misunderstanding of the technology look 11:42 at our our banking system we have this 11:44 thing called the Federal Reserve and 11:46 dollars get settled at fedwire nobody in 11:48 this room has access to fedwire most of 11:50 you probably don't even know what 11:51 fedwire is but postor War II we built 11:54 our banking system in layers we have 11:57 commercial Banks and then we have things 11:58 like a and Swift and wire transfers and 12:02 ATM networks and credit cards and 12:05 peer-to-peer systems like venmo and 12:06 PayPal right the internet was built in 12:08 layers in 1983 if you had the top 12:10 internet technologist in the world and 12:12 put them in a room and said show them 12:14 what the internet today most of them 12:15 would say not feasible but we 12:17 bastardized tcpip I say that in a 12:20 positive fashion in a way where we built 12:21 LS on it to do things that people never 12:23 could imagine Bitcoin the Bas layer is 12:25 fast not slow you need to compare 12:27 Bitcoin to fedwire right fed wire 12:30 transactions clear in days I can send a 12:32 billion dollars around the world in 10 12:34 minutes right Bitcoin is insanely fast 12:37 compared to dollars not slow and we're 12:39 going to build layers on top of Bitcoin 12:41 just like we built layers in the 12:43 commercial banking system for this Brave 12:45 New World and you want Bitcoin because 12:47 it's decentralized and not controlled by 12:48 the government as we enter a relatively 12:50 dystopian future thank you would Bitcoin 12:53 be easier to use for buying and selling 12:54 if there was no capital gains tax on 12:56 bitcoin on transactions yes absolutely a 12:58 lot of people are worried about that 12:59 coinbase with the coinbase debit card 13:01 makes it super easy for you because it 13:02 does it all for you in the background it 13:04 calculates all of that but yes a lot of 13:05 people are concerned about that like if 13:07 I buy something with Bitcoin that's 13:09 appreciated do I have to pay taxes on 13:11 that the answer is yes but somewhere 13:12 like coinbase does all the work for you 13:14 and makes it simple but yes and in El 13:15 Salvador where it is legal tender you 13:17 don't have to worry about that or in 13:18 Prosper where it's legal tender you 13:19 don't have to worry about that darpin at 13:21 the precursor to the internet was 13:22 created in the late 1960s the public 13:24 internet was given us in 1983 1998 15 13:28 years into the internet everybody 13:29 thought it was a toy Paul Krugman Nobel 13:32 prize winning Economist says it's going 13:33 to have no utility more so than the fax 13:35 machine right they were all wrong give 13:38 it some time it's going to evolve and 13:40 that gets back to the final chart that I 13:41 showed you Bitcoin is emergent it is 13:44 going to emerge this is what people 13:46 can't get their head around into a store 13:47 of value over time it will further 13:49 emerge over the decades ahead into a 13:51 global money the Breakthrough of Bitcoin 13:53 is digital scarcity we've never before 13:56 had something that was digital that you 13:58 couldn't copy paste and make an unlim 13:59 amount of the fact that we need a 14:01 monetary system that is digital because 14:04 things like gold don't move across space 14:06 and time and borders fast enough and 14:08 efficiently enough to be a monetary 14:10 system for the world and we found that 14:11 from the past which is why gold got 14:13 taken away for example so the 14:15 Breakthrough of blockchain technology 14:17 which is specific to bitcoin is digital 14:19 scarcity the ability to have a digital 14:22 money that you can send anywhere in the 14:24 world at any time with no ability for 14:26 anybody to block it or censor it that is 14:28 a mass massive breakthrough that people 14:30 have been working on for decades and 14:32 nobody figured it out until the 14:34 invention of Bitcoin as far as spending 14:36 Bitcoin directly again use a coinbase 14:38 debit card the value is using a currency 14:41 that the government doesn't print more 14:42 of and therefore is not in a constant 14:45 state of losing value like how insane is 14:48 it that we have a currency that is 14:50 supposed to lose 2% of its value every 14:52 year and generally loses 3 four 5 6 7 8 14:55 9% they print six to s% more money every 14:58 single year like it's insane that we're 15:00 expected to use that as money that's 15:02 insane Bitcoin fixes that