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If you haven’t heard of Bitcoin and at least formed some idea of what it is – you really aren’t trying.  But if you aren’t sure that you fully understand Bitcoin or its value – then you are like most people.  I would like to promise you that if you read this commentary then it will be clear to you how it works and how valuable it is (or isn’t) – I can make no such promise.  The best I offer is my arguments against owning this limited supply token.

I was going to write about Bitcoin when it was $8,000 (all amounts in USD).  My main assertion at the time was that the ‘coin’ was worthless.  Then the price crashed, and it seemed like my views would just sound like 20/20 hindsight.  I was going to write again when its value went back up over $20,000, but was busy with other stories, including a pandemic.  When I finally found time, its price had fallen by more than two-thirds from over $60k to less than $20k…clearly, I would just be declaring my future prediction on the clear trajectory of the markets.  Nothing brilliant there.  Then, this past December, the price went past $100,000 and surely if I was going to predict the value was much closer to zero – this was my chance.  Sadly, my post on the meltdown on DEI (and ESG) was far too timely to postpone thanks to President Trump.

That brings us to today – April 15, 2025.  The current price of Bitcoin is a measly $80k and change.  So again, it might look like I am jumping on the obvious conclusion of the market that these digital currencies are not worth as much as some say.  I am hoping that the real crash is far enough off that I can get this printed before that catastrophe.

The Blockchain

To understand Bitcoin, you must understand the blockchain.  I am not going to profess deep expertise.  I am going to tell you the three key things to know.  First, the blockchain exists virtually on computers and has no physical location.  Second, the blockchain records the holdings of each ‘wallet’ which are pseudonymous meaning they show addresses and not directly an identity – this is what makes the coins so attractive to criminals.  Although law enforcement is making progress in tracing wallets back to individuals, it is reported that 98% of ransomware attacks are paid in bitcoin.  Third, the blockchain has no primary home, it exists on many computers all with an identical record of who owns how much bitcoin – this is called a distributed ledger and in theory is the brilliance behind the mechanism – everyone can see the same records so there is no debate on who owns what.

Behind the scenes are all sorts of stuff that you don’t need to know that cause the blockchain to operate.  But the big new is the reason that these coins are called ‘crypto’ is that the entire system works on a system of cryptography.  Cryptography is an obscure but incredibly important field of mathematics – best presented in the movie The Imitation Game.  Another time I will write about encryption and worrisome predictions of computing power growing so powerful to render today’s encryption tools useless.

Meme Coins

The blockchain technology can be used for any digital asset.  With the rise of bitcoin came the rise of meme coins.  I would like to explain the difference between a cryptocurrency like bitcoin and a meme coin like Dogecoin.  Unfortunately, I can’t figure it out – which is part of my thesis that they are all worth the same amount – about zero.

But if you find that explanation completely unsatisfying, here is Investopedia to try to do better. “They…. can be used in peer-to-peer payments, speculative investing, or trading.”  Doesn’t that sound very similar if not the same as bitcoin?

Donald Trump – somewhere between the time he was President Trump (45) and he was again President Trump (47), published his own meme coin $Trump.  They sold like hotcakes, rocketing from a starting price of 18 cents to over $50 each before settling in at around $10 for each coin.  There have been many winners with $Trump (some argue none more than the Trump family) an many many more losers as reported by Rolling Stone magazine (that renowned financial journal).  The paper pointed out: “No evidence has emerged that Mr. Trump or his associates artificially inflated the coin’s price or engaged in insider trading.”  That sure makes me feel like this is probably all legitimate.

So, my thesis is that when there is no real price discovery process to reveal the value of an asset and all you have is speculation, then you have the makings of a ponzi scheme where the last one holding the asset when there are no more buyers, is the one that finds out the true value is much closer to zero than forecasted.

Mainstream Investing

Retail investors buy all sorts of stuff on hype – some get in early, some get out early, some lose it all.  Security exchange commissions around the world try to stop these ‘pump and dump’ schemes before they get going – but counting on a regulator to protect every investor, at all times, is unrealistic.

What is interesting about bitcoin specifically, is that it is being sold as the ‘new gold’.  For those that don’t spend much time studying investments, gold is considered the ‘safe’ asset that people run to in times of chaos.  Gold generates no income, and I have my doubts on the value of gold as an investment, so does Warren Buffet so I am at least in good company, but that is a discussion for another day.

What worries me now is that mainstream pension funds have started to put some money in crypto businesses and established trading houses are now offering bitcoin-based ETFs so that the regular folks can get access without having to have a computer nerd in the family.  The Ontario Teachers Pension Plan thought that they were one step ahead.  Rather than guessing on the value of the coins, they would invest in the ‘exchange’ that allows regular folks and computer gurus alike trade the coins.  A modern day ‘own the pipeline, not the gas producer’.  Unfortunately that didn’t go smoothly for OTPP and reinforced my criticism about how much we pay the investment executives at the big pension funds to guess at what investment will perform well in the future.

Google the name Michael Saylor to learn more about the biggest bitcoin bet.  Saylor is convinced that bitcoin will continue to rise in value indefinitely, and he is helping to make his case by continuously buying more bitcoin at ever higher prices.  The problem is that he has no way to sell the billions of dollars in bitcoins without crashing the price – there just aren’t that many buyers at the margin.

Wanna Bet?

When we were in university, my poker buddies and I would bet on anything.  But the entertainment was in creating the bet, finding someone to take the other side, and declaring a winner and loser.  Gambling was not a money-making scheme for any of us and to keep the entertainment inexpensive, the bet was always for one dollar.  I can hear Wayne now, he was the best at saying “One dollar”.

But somehow, everything is now focused on gambling as a way to make money.  I wrote about the problem here.  I was raised with the values of getting an education, working to build a career, spending less than you earned, and building a retirement nest egg over 40 years.  If you did the math, it was actually 47 years from age 18 to when CPP was scheduled to start at age 65 (before the age 60 option existed).

We don’t sell that long road to kids anymore.  We tell them education is worthless (because often the degrees they buy are worthless), we tell them they will never get ahead (because it takes 117 years to buy a house if you make minimum wage), we tell them that the only road to wealth is to inherit or win the lottery, and we tell them that working past age 60 is undesirable.  So, we shouldn’t be surprised that many younger folks are turning to the illusion that cryptocurrencies, sports gambling, short squeezing veteran traders, and NFTs, are the easy way to make money.  These kids are too smart to play the lottery, and these other methods are ideal for young people that understand things that the older generations just don’t get.

I am willing to bet this all ends badly. It might take years, but surely it will end badly.  One dollar?

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Postscript.  One of my pre-publication reviewers did not agree with my overall negativity and suggested that my viewpoint might be rooted in my generational viewpoint.  The reviewer wondered if a younger generation would think differently.  I set out to survey a small group of knowledgeable investors under the age of 30.  The results I got back were in some part negative but overall, more positive towards Bitcoin.  One such comment was ‘time horizon – over the next five years maybe not so much but in 30 to 40 years the value will be realized’.

So, if my reviewer is right, the value is not going to zero very fast if ever.  My conclusion is that if it does take a decade+ for the value to collapse, the boomers will once again come up smelling roses with another liability transferred to the next generation.

I am approaching age 60 – I hope I can live to age 80 to see what happens and I wish my dad, who was an avid investor and passed in 1999, was around to get his take on all of this.  My bet is he would have been fascinated.