The Bad Things that could Happen to Bitcoin

00:02 hey everyone so here's a video by 00:04 popular request about the bad things 00:06 that could happen to bitcoin or what 00:07 could throw it off track or knock it off 00:10 the rails all of that so I'm going to 00:11 cover probably the top 10 things that 00:13 come up um so let's start with number 00:16 one uh first off when people hear about 00:18 Bitcoin they think this is you know too 00:20 good it can't possibly be real and then 00:23 uh you know once they figure out it is 00:24 their first concern is usually that the 00:26 government will ban it um first of all 00:28 technologically there is no way for the 00:30 government to ban Bitcoin uh China has 00:32 already tried to do that and people are 00:34 still using it all over China and just 00:36 technologically it's a decentralized 00:38 distributed system so it would be as 00:41 difficult as Banning the internet and in 00:42 the case of Bitcoin it would even be 00:44 much more difficult because the 00:45 structure of the Bitcoin Network means 00:48 if any company or sorry if any computers 00:50 are running it anywhere then the Bitcoin 00:53 Network by definition is online and it's 00:55 basically technologically impossible to 00:57 ban so that being said the government 00:59 could regul Bitcoin and they could make 01:01 it harder to use this was uh much more 01:04 of a concern prior to the approval of 01:06 the Bitcoin uh ETFs exchange traded 01:09 funds that happened in January of this 01:11 year 2024 uh after they approved the 01:14 Bitcoin ETFs it was essentially the 01:16 government's stamp of approval that said 01:18 this is a legitimate asset class you're 01:20 officially allowed to own this you're 01:21 allowed to trade it you're allowed to 01:23 you know have it in a brokerage account 01:25 all of that so the the probability that 01:28 Bitcoin will ever be banned uh is really 01:31 has effectively dropped to zero um and 01:33 it was close to zero prior to now but it 01:36 really is effectively zero now the 01:38 government could still make it harder to 01:40 do what's called self- custody meaning 01:42 where you hold it yourself rather than 01:44 uh on coinbase or on Fidelity or black 01:47 rock or something like that uh so for 01:49 people like me who do not want to trust 01:52 any platform which means you know once I 01:54 accumulate enough Bitcoin I move it from 01:56 coinbase to something like bit key for 01:59 example but unless you have just a ton 02:01 of ton of ton of Bitcoin uh that's not 02:03 something you have to worry about until 02:04 it's a substantial part of your net 02:06 worth um but anyway the government could 02:09 make that harder to do uh which would 02:11 force more people to to store it on 02:13 coinbase or Fidelity or Black Rock but 02:15 the probability that the government's 02:17 going to like ban Bitcoin or ban you 02:19 from owning it or holding it is just 02:21 almost I mean it's effectively zero at 02:23 this point plus uh the courts would 02:25 almost certainly side with on the side 02:28 of Bitcoin so even the probability if 02:30 the government did try to ban Bitcoin or 02:32 make it you know illegal to self- 02:34 custody or something like that I just 02:35 don't see any way that the courts would 02:38 uphold that meaning I think from a a 02:40 legal perspective with regard to the 02:42 government whether the J you know the 02:44 the executive branch or the legislative 02:47 branch I think the probability that 02:49 things bad happen to Bitcoin in a way 02:51 that you know significantly affect this 02:53 price because it's illegal to own in the 02:54 United States I just think is 02:56 effectively zero so that's number one on 02:58 the list that the government um you know 02:59 Bans it I really think that probability 03:01 has dropped to zero uh number two would 03:03 be that the government regulates it in 03:05 some huge way that makes it you know 03:07 effectively unusable again I think at 03:09 you know that probability is close to 03:11 zero as well and any kind of Regulation 03:14 the government put on bitcoin I think 03:15 would would not keep it from being you 03:17 know usable in all the ways I use it um 03:20 so third up is what about a security 03:22 breach what if there's some sort of 03:24 massive hack of the Bitcoin network uh 03:26 the short take is I don't see that 03:28 happening um the Bitcoin Network has 03:30 been going for 15 years5 15 years it's 03:34 storing more than a trillion dollars of 03:36 value it's open source software which 03:38 means all of the best software 03:40 developers in the world can troubleshoot 03:41 it look for bugs and even if there was 03:44 some sort of catastrophic breach it is 03:46 super easy in the Bitcoin Network to 03:48 roll the network back exactly to the 03:50 point before the breach and restart the 03:52 network from there now you know worst 03:55 case scenario if there's some huge huge 03:56 breach it takes a couple hours to get 03:58 the network back online and they have to 04:00 redo some of the transactions and 04:02 essentially they just redo the network 04:04 without the nefarious activity but I 04:07 think the probability that happens is 04:09 again zero it's dropped to zero so um so 04:12 anyway I think I think that one's really 04:14 zero as 04:16 well and the preview for all of this is 04:18 I think all of the probabilities are 04:20 zero so or close to zero uh I would not 04:24 be promoting uh you know Bitcoin on 04:27 Facebook so much if I thought any of the 04:29 uh possible risks to it were meaningful 04:32 really at all uh the reason I am so 04:34 bullish on on bitcoin is because I think 04:37 the the the the potential harms or the 04:39 potential threats to bitcoin really have 04:41 dropped to effectively zero uh otherwise 04:44 I would be highlighting all of those 04:45 threats all over Facebook and the reason 04:47 I'm not is because back when I started 04:49 buying Bitcoin in 2017 there actually 04:52 was real threats to it back then uh but 04:54 at this point it's just those again have 04:56 effectively dropped to zero and so I 04:58 feel like it's a it's a very investment 05:00 for those purposes but of course this is 05:02 not Financial advice it is not tax 05:04 advice want to be super clear about that 05:06 so probability of a security breach I 05:08 think has effectively dropped to zero as 05:09 well uh what about other technology 05:11 issues again there Bitcoin is supported 05:14 by a team of worldwide of the best 05:16 software developers in the world it's 05:18 all open source software there's 05:20 effectively a trillion dollar bug Bounty 05:22 if you can find something wrong with it 05:24 uh there's just I just don't see a 05:26 technology issue coming in you know 05:28 interfering with Bitcoin worldwide 05:30 adoption all right so what about Quantum 05:32 Computing what if somebody figures out 05:34 with Quantum Computing a way to hack you 05:37 know Bitcoin security somehow well first 05:38 of all if that happens way more than 05:41 Bitcoin has a problem at that point all 05:43 of the security that secures everything 05:45 that's valuable in the world also is 05:47 subject to being hacked so if that were 05:49 to become a threat the software 05:52 developers that support the Bitcoin 05:54 Network I believe would um would find a 05:58 solution to that faster than any of the 06:00 software developers that are securing 06:02 your bank accounts or the stock market 06:04 or anything else of value in the world 06:05 so I think the probability that Quantum 06:08 Computing is a threat is also again 06:11 effectively zero uh because I think if 06:13 it became a threat the software 06:15 developers behind Bitcoin which is a 06:16 massive team of the best software 06:18 developers in the world spread all over 06:19 the world they would uh you know find a 06:22 solution before it became a problem and 06:24 you're going to have way way way bigger 06:26 problems if that's an issue uh for 06:28 example the the the question I addressed 06:31 of what happens if the internet goes 06:32 down uh will Bitcoin stop working it's 06:34 like well your bank's going to stop 06:36 working the ATMs are going to stop 06:37 working everything's going to stop 06:38 working Bitcoin is going to be the least 06:40 of your concerns and it would be the 06:42 last thing to go down and the first 06:43 thing to come back up same with Quantum 06:45 Computing Bitcoin is just going to be 06:46 the very first thing that gets up 06:48 upgraded to Quantum Computing proof uh 06:51 security technology so um what about 06:54 Market volatility yes Market volatility 06:56 is something that will continue to 06:57 happen there will continue to be big 06:59 price swings uh over the course of years 07:01 those can be sort of eye-watering uh 07:05 levels of price Corrections over time 07:07 with the approval of the Bitcoin ETFs I 07:09 do think that that volatility will come 07:11 down substantially um so I do think that 07:14 in in some ways uh you know what we're 07:16 dealing with with uh with price uh price 07:19 uh volatility with regard to bitcoin I 07:22 do think it's it's somewhat temporary in 07:24 that every time there's a price 07:25 correction it uh it corrects to a sort 07:28 of a a lower level so in the early days 07:31 of Bitcoin it was dropping you know the 07:32 price Corrections were 94% 84% you know 07:36 and since then the price Corrections 07:38 have been coming down they're still 07:40 large but significantly lower than they 07:42 were in the early days of Bitcoin and I 07:44 think with the approval of the Bitcoin 07:46 uh ETFs I think that volatility will 07:48 come down substantially as well and as 07:50 we get closer to 2025 especially the 07:53 second half of 2025 I'll start talking 07:55 about what you know Bitcoin bare markets 07:57 look like because it tends to go through 07:58 a bare Market about once every four 07:60 years and historically that's been the 08:02 year after the having in the second half 08:04 of the year after the having which if 08:06 that holds up would be in the second 08:08 half of 2025 so it feels like we're a 08:10 long way from that uh it does feel like 08:13 we could certainly have 20% or 30% drops 08:16 uh in the price of Bitcoin but if you if 08:18 you wait for those it's probably going 08:20 to go up 40 or 50% first and then it's 08:22 going to drop 20 or 30% meaning uh 08:24 you're still you know better off with 08:26 today's price than you are waiting for a 08:28 market dip because Market dips are 08:30 completely unpredictable and as soon as 08:32 you think you're going to wait for one 08:34 and buy Bitcoin usually they don't 08:35 happen for a very long time and then you 08:37 know you're stuck buying at a price 08:39 higher than you could have bought if you 08:41 just bought that's usually what happens 08:43 um all right next up for potential 08:44 threats is scalability so right now the 08:46 Bitcoin network is maybe processing 08:49 three to 4,000 transactions every 10 08:52 minutes so obviously if it were to 08:54 become the new monetary system of the 08:55 world that the Bitcoin Network itself 08:58 which is designed to be the most sec 08:59 secure network uh the most distributed 09:02 the most decentralized the most secure 09:04 network that humans have ever built uh 09:06 is not going to be able to handle you 09:07 know many thousands of transactions uh 09:10 Beyond its current capacity uh I am not 09:12 worried about that because every other 09:15 Financial network is built in layers for 09:17 example uh fedwire the FED Network that 09:20 Banks use to settle between each other 09:22 for billions and trillions of dollars if 09:25 you try to do a wire transfer at your 09:26 bank it costs you $25 well obviously 09:29 you're not buying a cup of coffee with 09:31 fed wire you're not transaction on the 09:34 base network of the Federal Reserve to 09:37 buy a cup of coffee if you did it would 09:39 cost 25 bucks just like it does to wire 09:41 money from your bank um so there there 09:43 are layers on top of that for most uh 09:46 for most transactions it's the Visa and 09:48 MasterCard Network which works great 09:50 with Bitcoin the coinbase debit card 09:52 works on the Visa Network and they 09:54 settle to the Bitcoin main chain every 09:56 so often and if you're paying a $3 09:59 transaction fee to transact on the 10:01 Bitcoin main chain and you're 10:03 transacting hundreds of millions of 10:04 dollars every time you do that it's an 10:06 irrelevant amount of money uh Bitcoin 10:08 also has its own native payments uh 10:10 Network called the lightning Network 10:12 which also works great it's not very 10:14 widely adopted around the world yet one 10:16 day it will be in the inter interim you 10:19 can just use the coinbase debit card 10:21 which uses again uses Visa so um anyway 10:25 the short take is I'm not worried about 10:26 sort of payments and the scalability of 10:29 the Bitcoin coin Network because that is 10:31 easily solved by uh layers on top of the 10:34 Bitcoin Network like Visa or Mastercard 10:37 or the Bitcoin lightning Network and as 10:40 the adoption of the lightning Network 10:42 increases over time or even Square block 10:45 they have their own sort of payment 10:46 network uh over top of it as well so as 10:49 all of those things get uh you know 10:51 better adopted and more broadly adopted 10:54 then none of that uh it's basically not 10:56 going to matter what the price is to 10:57 transact on the main chain because of 10:60 the small transactions will happen above 11:02 that again if you want to transfer a 11:04 substantial amount of your Bitcoin into 11:06 self- custody to get it off the 11:07 exchanges you can do that and so what if 11:09 you it costs you $3 or $2 or $1 to do 11:12 that if you're moving a lot of money it 11:14 doesn't matter if it costs a dollar to 11:16 transact on the main chain so I'm not 11:18 really worried about scalability as all 11:20 as as well because there's numerous ways 11:22 of solving that above the base layer and 11:24 the base layer which is you know that 11:26 holds the $1.4 trillion of Bitcoin value 11:29 all you care about for that layer is 11:31 that is the most secure the most 11:34 decentralized uh you know Network in the 11:35 world scalability can be handled above 11:38 that layer all right uh next up concern 11:40 is environmental impact so right now 11:42 something like one tenth of 1% of the 11:45 world's electricity is going to power 11:48 the Bitcoin Network so is that a problem 11:50 well first of all the Bitcoin 11:59 in half every four years so right now 12:01 they're getting 6.25 Bitcoin every 10 12:03 minutes in April around April 19th they 12:06 will get uh 3.125 Bitcoin half as much 12:10 and then in 2028 they'll get half as 12:12 much again and 2032 they'll get half as 12:15 much again and by either 2032 or 2036 12:18 99% of all the Bitcoin is already going 12:21 to be mine so the next 100 years they 12:23 will be finished mining the last 1% it's 12:26 something like that it's it's heavily 12:27 Lop sided toward the front so um I'm not 12:30 really worried about environmental 12:32 impact for a couple reasons one it's a 12:33 tiny percentage of world electricity use 12:36 two because the Habs keep happening it 12:39 the incentive to build more uh Bitcoin 12:41 mining Farms of huge massive Farms of 12:44 Bitcoin mining computers that secure and 12:46 audit the network that incentive drops 12:48 in half every four years and obviously 12:50 every time it drops in half the 12:52 incentive and therefore the capital to 12:53 deploy more mining Hardware drops in 12:56 half as well so not really worried about 12:58 that again because the incentive to 12:60 deploying more mining equipment keeps 13:02 dropping and I consider it a very good 13:04 use of electricity to secure and audit 13:07 the most valuable computer network that 13:09 humans have ever created so you know 13:11 it's going to use some level of 13:12 electricity and it has to use some level 13:15 of electricity to secure and audit uh 13:18 the network um and then last stuff would 13:20 would be Network attacks what if 13:22 somebody tries to hijack the entire 13:24 Bitcoin Network which would require them 13:26 to gain control of more than half of all 13:29 of the Bitcoin 13:30 computers and all of the more than half 13:32 of all the electricity that's being used 13:34 uh to power the Bitcoin Network again 13:36 I'm also not worried about that that's 13:38 just statistically impossible even at 13:40 this point if the United States and 13:42 China and Russia and the United Kingdom 13:45 even if they all colluded to try to 13:47 hijack the Bitcoin Network in some way 13:49 there is no conceivable way on the 13:51 planet that they could amass enough 13:53 computing power because uh the Bitcoin 13:56 network is powered by specially designed 13:58 computers that do only that so it's not 14:00 like computers you can just go buy on 14:02 the open market right now if you were to 14:04 try to get 51% of all the computing 14:06 power of the Bitcoin Network it's just 14:08 it's impossible that the computers are 14:10 not even available for sale and it would 14:12 take years and years and years even to 14:14 produce them and the whole time the 14:16 Bitcoin Network people are buying more 14:18 computers and bringing them online so uh 14:20 so all that to say back when I started 14:23 adopting Bitcoin in 2017 maybe half of 14:27 these potential risks were viable maybe 14:29 they only had a single-digit percentage 14:31 you know probability of risk but each of 14:48 those huzzle which dropped the last part 14:52 of the risks down to effectively zero um 14:55 so to recap I think the the likelihood 14:57 is effectively zero of the government 14:60 Banning it or regulating it you know 15:02 making it unusable due to regulations or 15:05 a security breach or technology issues 15:07 or Quantum Computing being a problem or 15:09 Market volatility which will continue to 15:11 be the case but as long as you can 15:13 stomach the ups and downs uh it's not a 15:15 problem in 100% of assets that are are 15:19 going up very quickly in value have High 15:22 um have high volatility so there is no 15:24 asset that is growing at the rate that 15:27 Bitcoin is growing that does not have 15:28 high volatility that is 100% a part of 15:32 an asset that is growing this quickly is 15:34 it absolutely positively will have 15:36 volatility it's just part of the ride so 15:39 without the volatility it would mean the 15:41 price was not growing as aggressively as 15:43 it is and so that's just sort of baked 15:45 in uh the environmental impact is again 15:48 extremely small and um and as the havs 15:52 keep happening uh the incentive to bring 15:54 more computing power online uh will keep 15:57 going down but I'm not worried about the 15:59 security in auditing of the Bitcoin 16:00 Network because right now even right now 16:03 the amount of computing power uh used to 16:05 secure and audit the network is far in 16:08 excess of even the the $1.4 trillion 16:11 that is being stored so the short take 16:12 is the the network is far beyond the 16:14 point of being unhackable anyway and so 16:18 uh even as the incentives go down over 16:20 time for the miners they will still be 16:21 getting transaction fees even if they 16:23 get less Bitcoin uh as a result of the 16:26 minor rewards they get every 10 minutes 16:28 they still get all the transaction 16:29 action fees which you know earlier today 16:31 was between $1 and $3 per transaction so 16:34 they're still getting all those fees as 16:36 a reward so I'm not worried about there 16:38 not being enough of a what's called a 16:40 security budget uh to secure the network 16:42 because I think that's going to be 16:44 plenty plenty plenty uh into the future 16:46 and then uh again Network attacks are 16:48 just mathematically impossible so all 16:50 that to say um as the risk reward 16:54 profile as the risk has come down on 16:55 bitcoin um the risk reward profile has 16:59 gotten better and better and better and 17:00 if you think well I wish I had adopted 17:02 Bitcoin way back way back way back way 17:05 back the farther back you go the higher 17:08 the risk so I would argue right now that 17:10 Bitcoin has one of the highest risk 17:13 reward profiles it's ever had and the 17:16 reason for that is there's still a huge 17:17 amount of upside left in the price of 17:20 Bitcoin as the world adopts Bitcoin but 17:23 the downside risk of Bitcoin as long as 17:26 you're willing to hold for the long term 17:27 has dropped almost to Z Z in my opinion 17:30 and so as a result of that the risk 17:32 reward profile is hey maybe you could 17:34 have made you know the upside was Triple 17:37 you know two or three or five years ago 17:39 but the risk profile was probably 5x or 17:41 10x three or four or five years ago so 17:45 the risk reward profile which is what 17:46 matters in investing is uh is probably 17:49 the best it's ever been for Bitcoin 17:52 because the downside risk is the lowest 17:54 that's ever been in history and the 17:55 upside and the vast majority of the 17:58 upside is still to come uh paired with a 18:01 uh you know a price that's that's way 18:03 low so uh that's the updates um the um 18:07 and and I would say as well to add thank 18:09 you David hamy for putting it in the 18:11 chat here yes uh as the price of Bitcoin 18:14 Rises the value of those transaction 18:16 fees in the blocks increases as well 18:18 which means they offset the price of the 18:21 having meaning there will always be an 18:22 incentive for miners to keep securing 18:24 and auditing the network because the 18:26 price keeps rising and offsetting that 18:28 which means I'm not again not worried 18:30 about the security and auditing of the 18:32 network because there will always be an 18:33 incentive to do that um but at least if 18:35 anybody's worried about their sort of 18:37 Epic levels of uh you know of energy 18:39 usage related to Bitcoin mining that 18:41 again does drop with each of the Habs um 18:44 so anyway I think Bitcoin uh remains 18:47 just just about the best risk reward 18:49 profile it's ever been and that is 18:52 combined with the fact that it is um you 18:54 know still very early in the adoption 18:56 process I think Bitcoin the price 18:58 longterm goes to at least $500,000 to $1 19:01 million per coin minimum again somewhere 19:04 in that range um it would have to 19:06 increase in value by about 10x meaning a 19:10 th% um or whatever yeah 10x would be a 19:13 th% uh in order to get close to the 19:15 price of gold I think Bitcoin far 19:17 exceeds should far exceed the value of 19:19 gold because Bitcoin is way better than 19:21 gold um I own uh still left over from 19:24 the past some gold and uh I really don't 19:27 like it bit uh gold does not work well 19:30 it does not do any of the amazing things 19:31 Bitcoin does I was hopeful when I first 19:33 bought gold that it would it doesn't 19:35 Bitcoin is way better and so I just 19:38 think Bitcoin at a minimum eventually 19:39 reaches the price of gold which I think 19:41 right now would be about 19:43 $650,000 per Bitcoin so that's uh not 19:46 quite 10x but close to 10x the current 19:48 price um and last thing I'll say I get 19:50 asked a lot you know should I wait for a 19:52 price dip again I mean you can but the 19:55 likelihood that you get left behind I 19:57 think is probably 80 to 90 % and the 19:60 likelihood that you catch some magic 20:02 price dip that lets you buy at a lower 20:04 price is probably 10 or 20% and when 20:06 you're looking at 10x on the upside 20:09 trying to get a 10% price drop on the 20:12 downside and potentially sacrificing 10x 20:15 1,000% on the upside trying to catch 10% 20:18 on the downside it's just to me it 20:21 strikes me as a fool there and so every 20:23 time I've tried to buy Bitcoin as soon 20:25 as the capital became availability me 20:27 available to me whether that was a wire 20:29 I was waiting on or some liquidity 20:31 related to some aspect of my finances uh 20:34 as soon as the capital became available 20:36 to me I immediately bought at regardless 20:38 of what the price was just because again 20:40 especially in a bull market like this 20:42 waiting for a price dip I just think the 20:44 probability you get left behind is about 20:46 80% to 90% And the probability that you 20:49 get uh catch some downside and buy it 20:51 cheaper is maybe 10% to 20% but again 20:54 it's not that ratio is not just 5 to1 or 20:56 10 10 to1 when you multiply that by the 20:59 upside being you know the up the upside 21:02 being a 100 times greater than the 21:03 downside