Getting an increasing # of questions from investors about bitcoin. This also happened in early 2018 after its runup. Thought Id share my general response. Im not an expert on bitcoin but I have a general idea what I can know & future price of bitcoin isnt one of them.

THREAD

1) I view bitcoin similarly as gold or potentially any other commodity that has restricted supply. Commodities are non-productive assets, meaning their value is always based on someone else paying you something in exchange for that commodity based on supply/demand dynamic.

2) Productive assets like stocks & bonds are worth the cash they generate over their life. I can come up with a reasonable estimate of a productive asset's intrinsic value by estimating the cash it may return to owners.

3) I struggle valuing commodities bc youre always dependent on someone else paying you something for that asset vs cash it internally generates. Therefore commodities typically go into my "too hard bucket" unless I can get strong conviction otherwise, aka it's an arbitrage oppty.

4) With bitcoin, the thesis is that it is an independent alternative currency w/ a restricted supply. It has similar qualities as gold: scarcity, fungibility, and durability. It can't get deflated away by a central body/government printing more.

5) So in theory if the gov prints a lot more USD & value of USD deflates relative to other assets (inflationary environment in USD terms) nominal price of bitcoin in USD will increase therefore it's an inflation hedge, which is a similar argument for why people may buy gold.

6) Overall, Im skeptical to purchase bitcoin or any other crypto currencies as an investment or even hedge against inflation. Their historic prices have been very volatile (relative to USD) & the value is always based on fluctuating demand that seems more geared to speculation.

7) I could def be wrong & price of bitcoin (relative to USD) goes up 100x. If bitcoin ever does become a realistic currency (Im skeptical but its not impossible) therefore demand grows exponentially vs supply remains restricted, price of 1 bitcoin vs USD could be very high.

8) For investing purposes, I prefer owning high quality companies where I have a general estimate of the intrinsic value vs owning non-producing commodity assets.

9) If one day we transact in bitcoins, then those high quality companies I own will be worth their value they provide to society (their earning power) relative to however many bitcoins are in circulation. Those great companies will still earn their weight in bitcoins!

10) Ps. $FB, is Libra (or Diem ) still happening? Happy w/ that being my potential blockchain exposure.