Thread by @CremeDeLaCrypto

Sharing a comment letter I wrote to the SEC regarding questions and concerns around Bitcoin’s Value.

“Examining Bitcoin’s Valued Attributes”

The content is on Medium here: medium.com/@Bitcom21/exam…

The letter can also be viewed directly: sec.gov/comments/sr-ny…

Summarized below

2/ Before diving into Bitcoin’s valued attributes, I offered a quantification of the market for store-of-value assets (beyond gold)

Gold: $9T
High-end art & collectibles: ~$4T
Real Estate: $175T (of which *at least* $9T is attributable to utility as store-of-value)

3/ The common thread between all these assets: scarcity.

With scarcity, holders of these items can rest assured that new supply will not dilute their accumulated wealth.

This capability delivers real utility to hundreds of millions of people.

4/ Gold’s value in this respect is intuitive, so I’ll focus on the other two (Art/Collectibles & Real Estate)

To a similar, albeit less-so than gold, real estate derives a significant portion of its value from scarcity and supply constraints.

5/ The value of real estate as a byproduct of scarcity (as opposed to consumptive or cash-flow value) is made apparent by examining the micro-structure of many metropolitan real-estate markets.

For example: Vancouver

6/ To a significant extent the Vancouver real estate market has been driven by overseas purchasers that do not reside in the homes or collect rental income

Clearly these purchases are not for consumptive or cash-flow value—they’re a store of value in an asset with limited supply

7/ Interestingly, the impact of overseas purchasers became so severe that the city implemented an “emtpty-house tax” to discourage the behavior.

8/ Art & Collectibles: Yes, paintings from the likes of Picasso & Van Gogh are beautiful but purchasers do not acquire these assets to adorn their wall—most sit in vaults/museums

They are acquired primarily because no new Picasso paintings or 1963 Ferrari GTOs will ever be made

9/ Despite their utility as a scarce asset, at an avg price per Picasso or vintage Ferrari > $10M, and the average home in Vancouver >$1M, these assets are largely inaccessible to the vast majority of people — which leads to another of bitcoin’s valued attributes: divisibility.

10/ Whereas the required capital to access scarce assets like metro real estate or high-end collectibles exceeds $1M, bitcoin’s divisibility lowers the barrier to entry for exposure to less than $1

In this sense, bitcoin is the every man’s Picasso.

11/ Portability: This is easy – it’s hard to move Ferraris and Picassos around the world. Gold is easier. Bitcoin is easiest.

Even for gold: It took the Bundesbank 5 years and >$9 million to repatriate a minority percentage of Germany’s total gold stock.

12/ Fungibility: Whereas every Picasso painting, every vintage Ferrari, & every piece of real estate is priced differently, the Bitcoin network treats all unit of Bitcoin equally

In this sense, bitcoin resembles gold: Each bitcoin is equally as valuable as other same-sized units

13/ Liquidity: Bitcoin is highly liquid. In contrast, classic paintings and vintage vehicles rarely trade in secondary markets and, consequently, have poor price discovery

Real estate txs take months to finalize and cost 8-20%, Bitcoin takes seconds with <1% tx cost

14/ Programmability: Among other store-of-value assets, bitcoin is particularly unique in its programmability. As a natively digital asset, bitcoin can be programmed to attain unique objectives and enhanced security. For example: multi-sig & time-lock txs.

15/ Ease of Authentication: Very difficult to authenticate most SoV assets. Even gold requires dangerous nitric acid or expensive professional equipment.

Meanwhile, forgeries are notorious and pervasive in the art market & real estate requires expensive and detailed inspections.

16/ In comparison, bitcoin can easily be authenticated on a standard computer using free and widely available software which makes it more accessible and valuable to a greater number of people.

17/ Strong assurances: We discussed the impact of foreign SoV purchasers on the Vancouver market but this also occurs in many other cities across Canada, the US, and UK.

What these cities have in common is they reside in jurisdictions with strong property rights.

18/ Given that people have an innate desire to protect their property, wealth gravitates to these jurisdictions (particularly from countries with weak or ill-defined property rights or where they are poorly or unequally enforced) in part to mitigate the risk of wealth seizure.

19/ Bitcoin is very useful in this respect: Its underlying network is a rules-based, self-arbitrating court where valid transactions are clearly defined, objectively verifiable, and unerringly enforced by network participants’ software.

20/ As a result, bitcoin offers its users strong, geo-politically neutral assurances for objective property rights, impersonal rules and consistent enforcement.

21/ Bitcoin’s strong assurances are of great utility to the largest segment of the population: good, honest people that want to protect their property in a non-violent manner.

22/ While, admittedly, digital assets and digital scarcity are relatively new frontiers for everyone, bitcoin has over 10 years of consistent operating history and the market is unequivocal in its demand for an asset with bitcoin’s attributes — many of which are unprecedented.

23/ At a low-end market estimate of roughly US $14 trillion for store-of-value assets, the magnitude of the market reflects people’s innate desire to preserve a portion of their wealth through scarce and well-recognized assets.

24/ Given that demand for SoV assets has persisted for thousands of years and that BTC presents a unique — and in many ways superior — set of attributes as a store-of-value asset, it seems reasonable…..

25/ …. to allow the American investing public easy, secure and regulated access to financial products that provide price exposure to this asset through existing, trusted channels and advisors.

Phew! Fin.