Bitcoin, Reasons to Believe It's Worth it

Bitcoin's supply schedule is fixed, public and enforced by the incentives of everyone who holds it. Twenty-one million units, issuance halving roughly every four years, no committee empowered to change the number in response to a recession or an election. Gold approximates this and fails at the margin: a higher price funds more mining and supply grows.

Absolute scarcity is a genuinely new property for an asset that can also be transferred globally in minutes. Whether that property is worth a trillion dollars or ten is the debate; that it exists and cannot be replicated by issuing another token is the foundation of everything else.

The second property is the ability to hold and move value without depending on a counterparty who can refuse. For most people in stable jurisdictions this sounds abstract. For anyone who has lived through capital controls, a bank holiday, a currency redenomination or a frozen account, it is the entire product.

The relevant demand is therefore not the marginal Western investor deciding between bitcoin and an index fund. It is the long tail of holders for whom the alternative is a currency losing a third of its value each year, and institutions that want an asset outside the settlement systems they otherwise depend on.

Discounted cash flow does not apply, so the honest approach is comparative. Estimate the size of the pools bitcoin could take share from — gold, offshore savings, sovereign reserves, the store-of-value portion of real estate — and ask what a plausible share implies per unit, then discount it heavily for the probability of failure.

That framing keeps two things straight. First, the upside case requires monetisation, not utility: the asset becomes worth more because more people choose to hold it as savings. Second, the appropriate position size is small, because the distribution of outcomes is wide and includes zero.

Bitcoin has fallen more than 70% from a high on several occasions and recovered each time. Investors who describe it as a hedge and then sell in the drawdown never held the asset they claimed to hold; they held a momentum trade with a monetary story attached.

The practical implication is that position size and holding period must be chosen together. A 1-3% allocation held for a decade is a coherent position. The same allocation held for a quarter is noise, and a 20% allocation is a decision about your whole financial life rather than about an asset.

The strongest objection is that bitcoin's value depends entirely on other people's willingness to hold it, and reflexive assets can lose that consensus. There is no earnings floor, no book value and no cash flow to arrest a decline: the price can go anywhere the belief goes.

The second is regulatory. Governments cannot switch off the network, but they can make regulated access expensive, tax it punitively or restrict the on-ramps most holders rely on. The third is concentration: a large share of supply sits in few hands, and a large share of trading flows through few venues.

None of these is an argument for zero exposure or for full exposure. They are arguments for treating bitcoin as a small, high-variance monetary position held for a decade, rather than as a cash substitute or a trade.

Write the falsifiers down before you buy. Sustained decline in the number of holders and in on-chain settlement value through a full cycle. A credible technical failure, or a persistent collapse in the economics that secure the network. Coordinated regulation in the major economies that removes regulated access rather than merely taxing it.

If none of those happens and adoption keeps compounding, the thesis is intact regardless of the quarter's price. That is the whole discipline: define the evidence in advance, then let the position be boring.