By Raoul Pal
When I first looked at the crypto space, I thought that bitcoin would be the winner and that its blockchain technology would essentially be the Internet of finance over time. As I said in 2013: It’s either worth zero or it’s worth a truly outstanding amount of money. The price of bitcoin then looked similar to the price of gold back in the 1950s to 1980s. I even did some “back of the envelope” analysis comparing the cryptocurrency with gold – showing that the relative value of a single bitcoin could be worth as much as $1 million. Today, that no longer looks true. Instead, bitcoin appears to be a very clever invention that can be copied, tweaked, and changed infinitely. Essentially, what we have created is a commodity in blockchain, some better than others. This makes me think it’s more like cloud computing or broadband than an equity or asset. The value of blockchains should converge to near zero, with some better than others and able to offer premium value. Bitcoin’s sheer size means that it will likely not be worth zero, but maybe should trade at a utility cost over the U.S. dollar, i.e. as a spread. It will likely be anchored to a currency via the relative valuation of assets. Basically, if a slot on the blockchain is too
What we have created is a commodity in
blockchain, some better than others.
prices. The price will therefore most likely be deflationary and should trend lower as the value of somewhat interchangeable blockchains go to zero. Though its relative value may remain elevated, it is far, far from a sure bet that it goes up further or stays up. Most of the other cryptocurrencies will go to zero, but not all of them for similar reasons. This is a bubble . I’ve lived many before. Passionate believers will hate you because they are emotionally involved in an investment. It has made many, many people very rich from a very small base. No one believes that blockchain technology and cryptocurrencies are possible commodities with infinite supply. Just because one has the largest market cap,
expensive, people will use another. This sort of bitcoin protocol is not
deflationary as the hard-currency believers dream – i.e., it goes up every year. It has a marginal utility that declines at higher
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