Bitcoin has no value because it doesn’t produce cash flows:

A friend of mine recently told me he doesn’t invest in #Bitcoin because it doesnt produce cash flow. I found that to be an incredibly odd criticism of #Bitcoin, until I found out that apparently lots of people have this reservation.

Let’s unpack it.

👉 #Bitcoin is not an investment: Most people assume #Bitcoin is an investment like any other. They are wrong.

#Bitcoin is not an investment. In fact the whole point of #Bitcoin is to be able to preserve your wealth without having to gamble it in the stock market. #Bitcoin is money. While money is being adopted in the store of value phase it accretes value rapidly which makes it mimic an investment, but Bitcoin is not an ‘investment’ in the traditional sense the way the dollar is not an investment. 

👉 Most assets don’t produce cash flows: There’s about $900 Trillion of assets in the world and the vast majority of them don’t produce cash flows. Only Equities (about $100 Trillion) produce cash flows, and the entire market cap of equities is not based on cash flows; a lot of it is a monetary premium added as people use the index as a store of value and some of it is book value based on fixed assets.

And no, Real Estate and Bonds don’t generate cash flows either. They generate yield. Yield is simply the amount you get paid for lending out something. Anything can generate yield including money itself. When you lend out money and charge interest, you are generating yield and not ‘cash flow’ just like when you rent out your house, you’re generating yield. Your house is not making products and services.

Lending out money is actually better at generating yield than a house is, that’s why money generates higher yield than real estate. Because Real Estates use is limited to shelter, whereas money can be used for anything including shelter.

👉 Equities make for bad store of value assets: As a former equity investor and Warren Buffet fan boy, I was also under the misapprehension that cash flow producing stocks are a gift from God.

I was wrong. When you store your value in #Bitcoin, you are not relying on a fallible management to go out and continuously create products that people want to buy in ever increasing numbers in perpetuity. You are relying on the intrinsic properties of #Bitcoin which are immutable.

There’s a reason why Gold has held its value for 5000 years and no company has held its value for even a 100. In fact Apple, one of the most successful companies of all time, has only been producing cash flows consistently for about 25 years.

Betting on whether a company will store your value incurs several different risks including but not limited to;

Custody risk
Counter party risk
Management risk
Key man risk
Competition risk 
Technology risk 
Regulatory risk 
Market risk
Product saturation risk
Geographical risk 

And at the end of all that, most investors do not beat real inflation post tax and simply cant pick stocks. The idea that gambling your labor in a casino of companies in the hope that you will keep getting it right while navigating untold risk just to preserve your capital is a good thing, is crazy. 

In summary,

➡️ Equities make for lousy store of value assets

➡️ Gold held its value because its properties of scarcity and chemical resistance to corrosion are timeless, unlike a company.

➡️ 90-95% of all the assets in the world don’t produce cash flow, are you saying they don’t have value ?

➡️ Cash flow is not yield. Anything can produce yield, including Bitcoin and money. 

➡️ Investors incur several risks to preserve their capital in stocks. Bitcoin has none of those risks while generating significantly higher returns.
#Bitcoin #Bitcoin