Bitcoin is up ~110% YTD and is within an earshot of its all-time high near $20k.
Gold and Bitcoin are often lumped together as safe-haven assets, but there is one crucial difference.
From Pomp’s recent letter:
Gold is narratively scarce but Bitcoin is provably scarce. That sounds like immaterial nuance, right? It’s not. The idea of scarcity has historically been driven by the public perception of little supply. You couldn’t prove it. All you could do is tell the story and people chose to believe the narrative.
That all changed with Bitcoin. You can now prove the exact scarcity. There will only ever be 21 million Bitcoin. There are only 900 Bitcoin produced per day at the moment. You don’t need a story or narrative. I can show you the scarcity in the code. On the actual blockchain which is immutable. The scarcity is programmatic. It is transparent. And it is provable. This makes Bitcoin’s scarcity superior to gold’s scarcity.
Scarcity. A topic rarely discussed but extremely important, especially when it comes to understanding the investment thesis behind crypto investments like Bitcoin.
A non-Bitcoin example of the power of scarcity
Supreme, the streetwear fashion label, just sold to VFC Corp for $2.1 billion. Their strategy is built around limiting their products' supply (creating scarcity) and cultivating a rabid fanbase through their social media channels.
The Bitcoin community is equally as rabid in their belief that Bitcoin is the future of money. Whether it turns out to be true is beside the point. Scarcity in Bitcoin is provable; you can see it in the code.
The bottom line
I don’t know what Bitcoin's price will be in a year or ten, but I get the argument for a small allocation. How many investable assets are provably scarce?
And institutions are still underweight Bitcoin as an asset class. JPMorgan noted that Bitcoin’s market cap would have to 10x from current prices to match the total private sector investment in gold via ETFs or bars and coins.
We’ll leave this subject with Pomp’s best point:
History tells us that the digital version of anything is almost always larger and more effective than the analog version.
If the statement above is true, and I think it is, perhaps we’re all underestimating the potential disruption Bitcoin will wreak on traditional asset classes like gold.
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