Bitcoin: The Investment That Isn’t

The Pitch You’ve Heard a Thousand Times

Bit­coin is dig­i­tal gold. A hedge against infla­tion. The future of mon­ey. If you don’t own some, you’re miss­ing out on the oppor­tu­ni­ty of a life­time. The suits on CNBC say it. The cryp­to evan­ge­lists on Tik­Tok say it. Hell, there are ETFs for it now, which appar­ent­ly means it’s “real.”

Why It Sounds Good

Look, I get the appeal. Cen­tral banks are print­ing mon­ey like it’s going out of style, infla­tion is eat­ing away at sav­ings, and tra­di­tion­al invest­ments feel… bor­ing. Then you see some­one turn $10,000 into $40,000 in a few months, and sud­den­ly your sen­si­ble index fund feels like a waste of time. The FOMO hits hard.

The Problem Nobody Wants to Talk About

Here’s the uncom­fort­able ques­tion: What is one Bit­coin actu­al­ly worth?

Not “what’s it trad­ing for today?” Not “what could it be worth if every­one adopts it?” But what is its intrin­sic val­ue right now?

With a stock, you can look at earn­ings, cash flow, assets. With a bond, you’ve got inter­est pay­ments and a matu­ri­ty date. With real estate, you can cal­cu­late rental income. These things pro­duce some­thing. They have frame­works for val­u­a­tion.

Bit­coin pro­duces noth­ing. It sits in a dig­i­tal wal­let. Its only val­ue is what some­one else will pay for it tomor­row.

As of today, one BTC is trad­ing around AUD $131,893. Eight days ago? $145,064. A cou­ple months back? $184,574. For some­thing mar­ket­ed as a “store of val­ue,” that’s a pret­ty wild ride.

The Scarcity Sleight of Hand

The main defence you’ll hear is “lim­it­ed sup­ply.” There will only ever be 21 mil­lion Bit­coin, there­fore it must be valu­able.

But scarci­ty alone does­n’t cre­ate val­ue. There’s a lim­it­ed sup­ply of signed pho­tos of my high school band “The Rhythm Pigs” (for sale if you get in quick), but I’m not pitch­ing them as an insti­tu­tion­al asset class. Some­thing can be both rare and worth­less.

The only argu­ment any­one real­ly makes for Bit­coin is that it will be worth more lat­er because… well, because it will be. That’s not an invest­ment the­sis. That’s hop­ing you’re not the last per­son hold­ing the bag. It’s a vari­a­tion of the “Greater Fool The­o­ry” (pop­u­larised by Bur­ton Malkiel, an eco­nom­ics pro­fes­sor at Prince­ton, in his 1973 book ‘A Ran­dom Walk Down Wall Street’). In sim­ple terms: you can make mon­ey on an over­priced piece of garbage as long as there is a greater fool will­ing to pay even more for it than you did.

The Real Cost

The mon­ey you might lose on a 40% draw­down is one thing. But there’s a deep­er cost: the psy­cho­log­i­cal toll of own­ing some­thing you can’t val­ue.

When you don’t know what some­thing is actu­al­ly worth, you have no anchor. No ref­er­ence point. You’re just watch­ing a num­ber go up and down, try­ing to guess when to get out, paral­ysed by the fear that you’ll sell right before it moons.

And here’s the thing that should both­er you: if Bit­coin is real­ly head­ing to $1 mil­lion or $10 mil­lion with math­e­mat­i­cal cer­tain­ty, why are insti­tu­tions sell­ing it at $145k? Why are the same peo­ple pump­ing it also dump­ing it? Maybe because they under­stand some­thing the retail investors don’t.

A Different Approach

Char­lie Munger called invest­ing in Bit­coin “it’s like some­body else is trad­ing turds and you decide ‘I can’t be left out’.” War­ren Buf­fett said he would­n’t buy all the Bit­coin in the world for $25. These weren’t emo­tion­al reac­tions — they were obser­va­tions from peo­ple who’ve spent their lives fig­ur­ing out what things are actu­al­ly worth. They had dis­ci­pline and log­ic behind their invest­ing strat­e­gy.

Real invest­ing isn’t about guess­ing. It’s about hav­ing a process — a way to deter­mine if some­thing is cheap, fair­ly priced, or expen­sive. If you can’t run that cal­cu­la­tion, you’re not invest­ing. You’re spec­u­lat­ing.

There’s noth­ing wrong with spec­u­la­tion if you know that’s what you want to do with your life. But let’s not con­fuse it with seri­ous invest­ing.

---

QAV Myth Killers is a week­ly col­umn in the QAV newslet­ter, tak­ing apart a piece of
invest­ing con­ven­tion­al wis­dom. Read the series, or
get it by email every Fri­day.

Gen­er­al advice only. Space­craft Pub­lish­ing Pty Ltd
trad­ing as QAV is a Cor­po­rate Autho­rised Rep­re­sen­ta­tive (CAR 001292718) of MF & Co.
Asset Man­age­ment Pty Ltd (AFSL 520442). This is gen­er­al infor­ma­tion and does not take your
per­son­al cir­cum­stances into account. See our
dis­clo­sure.