The biggest spread in history

After buying a financial asset, everybody has a price at which they would sell. Concerning Bitcoin, even the most ardent supporters have one too. It just may be exorbitantly high. If each Bitcoin were worth $1B tomorrow, all things kept equal, then it would probably be sufficient to entice the strong hands to sell.

It struck me yesterday, that Bitcoin is the first investment that I have ever seen where savvy investors (yes, I am going to call some Bitcoin holders savvy, particularly those who have bought and sold securities for a long time) can say with a straight face: “I bought at $1, but I’m not selling nor spending until $100,000.”

These people aren’t selling at $100, after a 10,000% gain, but nor are they buying, being anchored in the reality that it would be foolish to risk more than they already have. They are resting in the vast expanse that is – what appears to me – to be the largest spread (at least on a per person basis) in history.

When has this happened before, where people are willing to wait patiently for decades for their assets to appreciate 5 orders of magnitude? Not only do they believe that this is possible, they are expecting it.

We have entered an entirely new wacky place. Last night my wife and I had dinner with some friends who knew that we were Bitcoin enthusiasts. “How are those Bitcoins doing?” my friend asked, hinting at the recent price drop. My wife and I looked sheepishly at her, “well, yes, they have undergone a large correction, but they are about $95 today.”

Later, I kind of snapped out of it and said privately to my wife, “When was the last time that you’ve felt like a 1000% appreciation on something purchased 2 years ago was anything other than a groundbreaking miracle?”

I acknowledge that my mind has been warped by dreams of a better future, and it’s exhilarating. I have little doubt that Bitcoin is going to be one of the most significant inventions of the century, and if it is somehow killed off in the coming years, it won’t be done quietly. Battle lines would have to be drawn before it burned up in a blaze of glory.

Until the day of reckoning, win or lose, I’ll be hanging out in Bitcoin purgatory, somehow feeling like $100,000 is a totally reasonable price target.

If you’re here with me, I just wanted to say hello.

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6 comments on “The biggest spread in history

  1. Tyler Winklevoss says:

    A million dollars isn’t cool. You know what’s cool? A million bitcoins.

    • chralash says:

      If this is the real Tyler Winklevoss, it totally made my day. My wife, who coxed on the UVA men’s team, said: “Oh! Tell him that we have a lot of friends in common!!!!!”

  2. J. Singleton says:

    Interesting article, and one can only hope that it eventually turns out to be true.

    Winklevii: go away, please.

  3. Hi I can agree with your price target however you should really consider scaling out before then or get a job or build a business earning bitcoins where a portion can be saved so that you can cash out sooner.

    It would be far better for you to create business in bitcoin because it will drive up the demand for the currency a lot more than just sitting on it.

    With a business people will have more reasons to buy/earn bitcoins and spend them. This create money velocity. The biggest even was Avalon charging a fixed bitcoin price for there units. It means that people had to buy bitcoins first before they could buy the Avalon product.

    Anyhow nice blog.

  4. Owen says:

    “After buying a financial asset, everybody has a price at which they would sell.”

    I disagree with this. By “sell” you mean “convert back to USD”. But I like bitcoin because it brings me out of the USD system. I have no intention of selling, even if my coins are worth billions. I’ll just spend them directly on the goods, services and investments that I want.

    • Daniel says:

      I agree with you. Selling Bitcoins for paper notes is not my intention. If each Bitcoin is worth $1B, I am sure I can trade fractions of those Bitcoins directly for a good and service without having to exchange them to fiat currency.

      This reminds me those buying “paper gold” and asking delivery. When the bank is unable to deliver the physical metal, the bank issues the “equivalent” in bank notes (USD, EUR). Well, this “equivalent” is not good because within a few month the central bank may inflate the currency and stealing the purchasing power of the saver. For me, Bitcoin is an insurance policy against inflation (theft by central bank / government), and I am not willing to sell any Bitcoin for worthless pieces of paper.

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