Thread by @smdiehl

Let's have a frank discussion about bitcoin hype. Bitcoin is really an symptom of the problems of our era, of a post-truth world awash in crackpottery and of a breakdown of trust in our institutions. 🧵 (1/)

First, cryptocurrencies absolutely aren't currencies. They're a sort of pseudo-asset, in the sense that all people do is speculate on its price movements with the expectation of a return on investment. (2/)

Which is pretty much why all bitcoiners ever do is just talk about its price in USD, because there's nothing else *to* talk about. There's no additional structure to the asset other than what someone else will pay for it currently. (3/)

This is very different than trading other products like bonds or equities. Companies actually *do* an economic activity: they build cars, fabricate semiconductors, cook burgers etc. (4/)

You can value normal financial products in terms of the risk associated with their future cashflows and get some approximation for what they are worth on the market. (5/)

Bitcoin has no structure or future cashflows. It is simply a greater fool investment, you only buy them to sell them to someone who is a greater fool than you and will pay more for it. (6/)

Trading these kind of products is a purely negative sum activity, if you factor in the market making and transactions on top of the zero-sum musical chairs, trading it statistically has a negative expected return. (7/)

Sure some people will make money, however you'll never hear about the ones that don't. And everything one winner is necessarily paid by out by multiple losers. (8/)

The reason bitcoiners take out advertisements on the subway and engage in conspicuous consumption is to increase the pool of fools, so that those that bought in early can cash out. (9/)

The whole structure of this project is just wealth redistribution derived from fleecing others and convincing them to buy into this get-rich scheme. Which is why these people are so vocal in touting the investment and act like rabid cultists. (10/)

The whole "brand" of this scheme depends on public perception that it is actually some crazy future tech that you have to get in early on, or miss out. And it cloaks itself in this techno-libertarian narrative about financial independence from the state. (11/)

The reality is simply the same story conmen and hucksters have been selling throughout human history: money for nothing out of nothing, just get in early and don’t ask where it comes from. (12/)

If you peel back the slick marketing and technical obscurantism you're confronted with a simple inescapable cashflow question. Where will all the money come from to pay out all these new paper bitcoin millionaires?

The answer is simple: they need it to come from you.

/fin