Every Tuesday afternoon, my editor John will email me saying, “Are you OK to do Money Morning tomorrow?” and I’ll reply saying, “Yes”.
I then start brooding – what shall I write about? I often still don’t know by the time I go to bed, but I think my subconscious must compose the articles when I’m asleep because by the time I wake up the following morning, usually the solution has presented itself.
Today one subject stands out, because the asset in question has broken out to new highs –again. Bitcoin.
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Bitcoin’s real strength is in its network
Remember the golden rule: what is the most likely thing to follow new highs? More new highs.
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Should you be buying bitcoin if you don’t yet own any? Yes. Should you be selling if you do own some and taking profit? No: you want to maintain exposure to the collective intelligence of bitcoin.
I have two observations to make today. The first is this: when you buy and hold bitcoin, you are not just investing in a revolutionary system of money, you are investing in and holding the product of the collective intelligence of some of the brightest minds on the planet.
If bitcoin had its origins in the Cypherpunk movement of the late 1980s, we are talking about over 30 years of collective computer genius.
You might say the same about holding stock in any tech company. We can only make the cars or the phones or the search engines we make today because of the collective efforts of thousands of human beings over many centuries. But they are still individual companies.
Bitcoin is an open-source movement. The collective intelligence and effort, voluntarily expended, of probably hundreds of thousands of people, if not millions, has gone into it over many decades. I’m not just talking about scientific and technical intelligence, but philosophical, political, promotional, mathematical and more.
Everyone who talks about it, thinks about it, uses it, builds apps or companies around it, is in some way contributing.
Attacks strengthen it. The network learns and develops as a result. It gets more resilient. Even attacks from journalists strengthen it.
If the criticisms are well founded, someone in the open-source movement will address them and the network will improve as a result. Most of the time they are not, however.
We have a good example this week. The Spectator joined pretty much every UK media outlet on the wrong side of the bitcoin argument when it had someone who neither uses nor understands bitcoin to hold court about it with a piece called “The Bitcoin Delusion”.
The Spectator could have had an accurate, non-speculative article from an outsider to inform its readers, but instead it chose the easy option of getting one of its regular writers to pen something. I can’t say I blame them because it’s often a quicker, easier choice. That’s how the system is set up with centralised companies in journalism.
In the open-source movement, however, someone somewhere will have the time, the expertise and the inclination to write such an article and as a result there are thousands, probably millions of properly informed and expert blogs.
Meanwhile, a journo from the Spectator is another to join the very long list of bitcoin obituaries – an open source database of public figures to have declared bitcoin dead.
Thus the network has developed a way of dealing with ill-informed criticism. The critic becomes a laughing stock.
It’s pure Adam Smith: nobody is in charge –everybody acts out of their own self-interest. As a result, the network as a whole grows stronger: “Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
Gold is worth holding, but it lacks bitcoin’s network
I remember going to gold conferences back in the ’00s and I was deeply persuaded by many of the arguments I heard there about inflation, the Cantillon effect, fiat money and so on. But, with a few exceptions, gold miners are not the brightest bunch, and nor does the body in charge of promoting gold, the World Gold Council, have anything like the same collective drive, imagination and intellect as those in the open-source bitcoin network.
Gold may be the oldest, most tangible, most permanent substance on earth. Stardust. The result of perhaps the greatest open–source network of all – nature. Or, better, the universe. It really is marvellous, and I advocate owning gold for that very reason. But that is gold itself.
Gold’s investment network does not carry the same youthful vigour, energy and genius as bitcoin’s. Compare the collective intelligence of the gold world to the bitcoin world, and the latter is almost infinitely superior. If we ever populate space, we won’t be sending gold to each other. We could be sending bitcoin, however.
The way to get exposure to the collective genius of the open-source movement that is bitcoin is to own bitcoin.
Altcoins can make you money, but bitcoin is the one with staying power
My next observation is this: if you look at the top ten cryptocurrencies by market cap four years ago or eight years ago, the list looks very different. But bitcoin is always top.
In 2014, litecoin was the second biggest coin and ripple the third. Then there were coins such as peercoin, namecoin, omni, quark, nxt and megacoin. Today, only ripple remains in the top ten coins by market cap. It’s 7th. Litecoin is 14th. The others have all but disappeared. Peercoin is 770th. Namecoin 772nd. Omni 1,645th. Quark 1,651st. Nxt is 790th and Megacoin 2,281st.
I imagine the developers have all but walked on most of these projects and that they barely trade.
Towards the peak of the last cycle which peaked at the beginning of 2018, the top ten coins were ripple, ethereum, bitcoin cash, cardano, litecoin, NEM, stellar, TRON and IOTA.
Here we are three years later and six of them are no longer in the top ten coins by market cap.
We all want to find the next coin that’s going to multi-bag and grow a hundredfold. If only I bought solana, when that random on the WhatsApp chat told me to last year. I could have paid off the mortgage and retired to the Cayman Islands. If only I had bought dogecoin when Elon Musk pumped it, or shiba inu.
“Stay around for a good time, but not a long time,” is the saying used when certain unscrupulous promoters take over speculative mining companies. The same could be said of altcoins.
Because in all probability many of these highly exciting new coins that are promising to do this, that or the other and solve this or that problem will in fact go the way of megacoin, omni and quark. They might go wild in altcoin season, but altcoin season is not forever.
Bitcoin, on the other hand, has the network effect. No altcoin has such a collective. This huge collective of, as Michael Saylor puts it, cyber hornets.
Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.
