David Rosenthal: uncertainty

Transcript context

…Matt has made this really great point. If I could tell you to do things to follow up, one is obviously the Bitcoin white paper remarkably cogent. The other is actually reading Matt's piece about his summary of Bitcoin. It's at paradigm.xyz and sort of why we're doing what we're doing. Why do we think it's interesting? What the trade-offs are. Where it could go wrong. Where it could go right—really a cogent analysis. One of the things he points out is of course Bitcoin has these bubbles, but as David mentioned, every time they pop, it plateaus at a higher level than the previous bubble. Because Bitcoin requires this network effect to be valuable—it is a self-fulfilling prophecy in a lot of ways—it actually uses bubbles as a go-to-market strategy. Where every time there's a run-up, there's more and more legitimate players and more and more institutional capital that piles in, more infrastructures get built up. When the bubble pops and you have a lot of the late-coming speculators that of course lose money, what is left there is all that infrastructure and all that advancement that was made from the mania and the hype. It's just really interesting to see that it really is a go-to-market strategy. What's so interesting about it this time and unique—and we're already seeing this play out in how the price has risen, fallen, and then stabilized over the past couple of weeks—is in previous bubbles, it was mostly individuals who are doing this. Who are subjects of course to individual psychological behaviors in price crashes, lots of people are going to sell? Lots of people will hodl, but lots of people will sell too. This time the big chunks of demand are driving up the price, this is Square’s balance sheet. This is MicroStrategy holding this is a treasury reserve. They're not going to sell. They're investing purposefully as treasury and as diversification. The price crashes 50%, 70%, they're not going to sell. They're institutions. Part of the thinking here is that as we now shift into this new phase of Bitcoin where institutions are playing within it, there's going to be a lot more stability. What’s happened with the price over the last month or so? We went from $3700 in March during the COVID liquidity crash to by the end of November, Bitcoin surpasses that all-time high of December. It's $19,860 in November. By the end of December, by the end of 202, on New Year’s Eve, we're sitting at $29,000 for a Bitcoin, which is insane. Another $10,000 in a month. It doesn't stop. The first week in January, which was last week even though it feels like last month, it hits $40,000. Ultimately, the price goes all the way up to $42,000 per Bitcoin before coming back down again several days ago over the last weekend—even though it feels like a month ago—to a low of about $30,000. We could have another crash, we don't know, but this crash is still $10,000 above the previous high. It’s now trading right around $35,000.…

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