Why Some Investors Get Bitcoin So Wrong

It is frustrating. But at the same time, interesting.

Over the past couple of weeks, I’ve heard two well-respected investment managers say that they don’t believe in bitcoin’s supply limit. If it’s easy to spin up another Bitcoin, they claim, then there is really no limit. Most of you reading this will be rolling your eyes at this stage, but since it seems to be a firmly held view by some smart people, we should dig deeper.

We’ll find that it’s about more than a lack of research.

First, let’s look at what the two investment managers I’m referring to actually said.

This is from investment researcher and former hedge fund manager Jesse Felder’s blog post of a few weeks ago (my emphasis):

“Bitcoin believers rely entirely on the idea that bitcoin is limited in supply making it far more attractive than fiat currencies that are being printed like mad by central bankers around the world. However, Bitcoin has already hard forked several times, multiplying the number and type of bitcoins in circulation. In fact, if you put together all the hard forks Bitcoin has undergone since it was first created, the number of total bitcoins has actually grown faster than the number of dollars. That’s a fact.”

And on the markets and investment podcast The End Game this week, investment manager and writer Fred Hickey said (again, my emphasis):

“The number five cryptocurrency is Bitcoin Cash! The number 12 biggest is Bitcoin SV – there’s no limit to these things. If bitcoin got too expensive, they would just go to another one. These are speculators, they pile into anything that’s cryptocurrencies.”

For now, we’ll ignore the snide implications that bitcoin’s market is entirely speculator-driven, and that speculators don’t know how to do research (because those assertions are just too flimsy to even bother with). Instead, let’s focus on the misguided idea that new Bitcoin blockchains can be spun up whenever we want.

And let’s go deeper as to why this…

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