Why Bitcoin's Scarcity Drives It's Value

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like that, but it's actually done with software. And it's done with computing power, and it takes a lot of energy. You may have heard stories about how much it costs to have produced just one bitcoin. In terms of energy, you could power a small city, right. A lot of that's true, but it's getting a little bit easier to that the energy use is not as intense as it

used to be. But because there's only twenty one million bitcoin that will ever be mined, that's a limited supply, and that's one of the attractive features of bitcoin, especially as we see it at these very high prices. We're at about nineteen point eight million that have already been mined. There are not that many more bitcoin to be mine.

The thing about bitcoin though, because you have to mine it solving a software equation or a math equation with software, it gets harder and harder for programmers to solve it. It takes a lot of computing power, it takes a lot of smarts, and it takes a lot of time. So as we get closer to twenty one million and worre about nineteen point eight million, it gets harder and harder to mind these things, which kind of raises the value.

Tighter supply, more difficult to produce that's helping boost the price, along with a bunch of other factors. Right again, it's a supply demand issue. We're here right now, and well we're here a little bit further in twenty twenty four. Not that many more bitcoin to be mined. A lot of it's already out there. It's just more difficult to mind. And it has a scarcity issue. When you have a scarce resource that a lot of people are interested in, prices go up. I don't care if we're talking about

air Force ones. I don't care if we're talking about, you know, a brand new special iPhone. You know, Scarcity of a product that people want and are interested in always drives price. It's supply demand and its manias and its hype, and bitcoin has all of these aspects associated with it. Right. So, in terms of an asset something you can buy and trade and invest in, well, bitcoin has ruled the roost in the capital markets for the past ten years really, but in the past five years alone.

Just look at the price appreciation of bitcoin. It just blows out all these other things. I'm gonna read it. If you can't get if you can't see it close enough, Bitcoin's up about one thousand, two hundred and ninety percent in the past five years. Right, the S and P five hundred our stock market, the five hundred biggest companies in America, is up ninety one percent in the past five years. Guys, that's outstanding, right, Those are great returns

for stocks. But when you look at bitcoin, it doesn't even compare the Dow Jones industrials. They are not all industrials. That's up fifty six percent. Gold and I use the ETF as the proxy is up about seventy eight percent in the past five years, and the dollar is up about ten percent. So Bitcoin in terms of an investment, has returned a lot more or generated a lot more what we call alpha in our business because of this scarcity, because of the interest in it, and a lot of

that has come in different waves. Rare Shad mentioned he first got introduced to it in twenty sixteen. Twenty seventeen, bitcoin had already been around. I remember back in twenty fourteen when it was two bucks, and no, I didn't

buy it because I didn't understand it. But the more scarce it gets, the more interest there is and the more adoption there is by both investors like us individual investors or institutional investors like the Fidelities of the world, the Black Rocks of the world, the Goldman Sachses of the world, and yes they're interested, and yes they're mining their own bitcoin. Well, that's just going to drive price even higher. So in the past five years it has blown out stocks by a long shot. But let me

take you back five more years beyond that. Ten thousand dollars invested in bitcoin ten years ago, that's where two point nine million dollars today. Now we want to talk about fear missing out or you know, I wish, you know, somebody would have told me about this and I just would have put a thousand. Well, we can think about that with everything. Bitcoin is super unique, with returns like this ten thousand, ten years ago worth two point nine

million dollars today. We have never seen anything like it in the capital markets. And I've been doing this for a very long time, so we could talk about why that's happened. But still, even with that massive price appreciation, bitcoin is still much bigger than that. It's about a trillion and a half now, but it's very small compared to the market capitalizations of big assets that are already traded in our capital markets, real estate being the biggest

worldwide to three hundred and thirty trillion dollar market. Global debt, we're talking about the bond market. We're talking about US debt, Chinese debt, Japanese debt, European country debt. That's a three hundred and fifteen trillion dollar market. FIAC currency we're talking about dollars, euros, YenS, right, that's one hundred and twenty trillion dollar market. Bitcoin is a trillion and a half

dollar market. It's come a long way in fourteen years, but it is still a very small asset class comparatively speaking, and given the hype that it gets, barely anybody owns it, but the people that own it own a lot of it, especially some of the bigger companies. So we'll get into

that in a second. Just keep that in mind though, when Rashad mentioned that eighty five percent of people's surveyed say they don't own it, Well, you know, it's still pretty young, and it's still pretty small, and it wasn't until like the last year or two where it really became available for us to put into our retirement accounts, to buy like an exchange traded fund, like we would

buy in exchange traded fund that tracks the Nasdaq. Right, it is still kind of a I wouldn't call it a baby, but I may call it like an eight year old or like a fourteen year old, because that's actually what it is.

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