The greatest financial tragedy of our time

Judging from past price history, I must have discovered Bitcoin around November 2013. The price was around $300 for the first time. I recall this in my 2021 Reddit post "Bitcoin is the Greatest Financial Tragedy of our Time and a Mirror for Mass Stupidity" in r/unpopularopinion. It got a proud eight upvotes, and the opinion was attested to be truly unpopular by a supposedly neutral commenter.

Am I sad and frustrated that I never jumped on the bandwagon? Here is the thing: of course I like money, and of course it would have been nice to get rich. But you could ask the same thing about the lottery or the black eight at the roulette table. I’m sure every day someone could have won the lottery if they had simply written their birthday on the ticket. But they did not, because they do not play the lottery—which is conceptually still the recommended financial strategy. I would probably have sold it at $600 anyways.

Since 2013, the only real use case that ever emerged for Bitcoin was crime. And even that fades now as the authorities catch up, because Bitcoin is actually not anonymous; it is pseudonymous. But wait, what did I read in a Reddit comment a few days ago? I am blind not to see how Bitcoin is so close to a breakthrough; Iran almost got themselves a deal where they receive a ransom for each ship let through Hormuz, paid in Bitcoin.

I believe that when it comes to risky investments, you should pick the ones that reflect your vision and hopes for the future world you want to live in. People who invest in Bitcoin need to hope for some kind of post-apocalyptic world—a world like in a Fallout game. And even there, I’m skeptical Bitcoin would actually be more widely adopted for payment than those cola bottle caps.

So I stayed right here, holding onto my vision of a world that is not just fairies and their tales, but certainly more optimistic than rooting for Fallout to happen. I wrote “MicroStrategy (MSTR) now officially a Ponzi? To hold Bitcoin Bros hostage?”, which got almost one million views. To this day, it might be the most upvoted original content analysis about MicroStrategy/MSTR on r/wallstreetbets.

Note that this was more than a year ago, and I see that hostage situation unraveling exactly as promised. Saylor seems to be getting more passive-aggressive toward the Bitcoiners who are no longer buying his bags. But more about this later.

Thank you Mr. Saylor, for this moment

After the viral Reddit post, the biggest weekly print newspaper in Europe, DIE ZEIT, wrote a piece about MicroStrategy, using me as the MacGuffin—the face of the story (english translation). I guess I have to thank Michael Saylor for making this possible.

To be fair, landing on the front page of ZEIT.de (the German equivalent of NYTIMES.com) doesn't suddenly make me a certified Wall Street insider. So, is this relevant, or am I just bragging? It definitely shows that I am willing to stick my neck out for my theses.

I only got a quarter of a million views on an r/wallstreetbets post called “Calculating the Strategy/MSTR Ponzi-Ratio Curve“ (featured with direct quotes on Yahoo! Finance, AOL.com, this Instagram reel). The argument of the article was that even if you really think it is valuable to have a company buying Bitcoin with strangers’ money, you should at least track how much of that money actually accomplishes that goal, and how much is just funneled from new investors to old investors. Google’s summary AI actually recognizes the term "MSTR Ponzi ratio" nowadays, and I have always thought about making an update. The problem is, it only works as long as Saylor is buying Bitcoin; I have no idea how to handle him selling it.

The post that was too hot for r/wallstreetbets

And by too hot, I mean both: too hot of a take and too much of a rocket. In the ten minutes before it got removed, it had been upvoted 22 times and shared 34 times. My other post that ended up at 1,400 upvotes and 920,000 views did not develop half as fast in the early minutes.

Not sure if I need a proof, but because only the author can see removed posts, I have uploaded some screenshots here — better safe than sorry.

The frog cannot be boiled

Michael Saylor, the guy who said that Bitcoin is so awesome he will never sell it, announced a few days ago that he actually sold it. MicroStrategy amassed 4% of the total amount of Bitcoin that will ever exist, and some funny crypto news page even asked: Has Bitcoin become a single-buyer market? In the last few weeks, Saylor's mood shifted from “Bitcoin is the best,” to “Bitcoin would be worth half as much without us,” and then to “Actually, I will sell Bitcoin to make STRC the best; STRC is the best!”. Saylor is basically pissed that people are not buying his Bitcoin bags. His new mission is to make STRC, the instrument that financed most of the last month's Bitcoin buys, “the best fixed-income instrument that exists.” Why will it be the best? Apparently not because it finances something awesome, but seemingly just because it pays so nicely—an intrinsically awesome fixed-income instrument. That does not sound like a Ponzi at all, right?

So why did he sell just 32 Bitcoin a few weeks ago (and report it a few days ago)? Maybe because he needs the money, but also very surely to establish a precedent, because he will definitely need a lot more money in the future. He wants to slowly put people at ease with the idea that MicroStrategy’s new strategy is simply pumping and dumping Bitcoin. He wants to boil the frog slowly and hope it does not jump out of the water. But it looks like that did not work very well; Bitcoin tanked -20% or more in a few days while every other market happily enjoyed a place somewhere near its top. By the way, the thing with the boiling frog—it is an urban legend. The frog will always jump out if it can.

Why this time Bitcoin could really die

Dead again? Bitcoin has been pronounced dead so often, right? Let me explain what makes this time different. I agree it will probably never go to absolute zero. At $10, I might buy a Bitcoin just for the sentimental value, so there is always some demand, just like for a weird toy from the seventies that nobody understands if they didn't play with it. But there are two major reasons that make this time different from the last: First, there are no more worlds to conquer. And second, Bitcoin will sink MSTR, and that will not make it look like a good investment.

Donald Trump is the second greates fool

Trump said it himself: Bitcoin is a scam. He only changed his opinion when he realized he was not too late to join. And he was right; he and his family made a good dime on Bitcoin and other correlated crypto stuff. He even said, when he signed the Bitcoin executive order, that from now on the US will follow the doctrine of “never sell your Bitcoin,” and then he looked around and said, “I’m not sure this is a good idea.” Look it up, there are videos of it—it is ultra funny. So please tell me: what is left to conquer? Who are the bigger fools than those who joined after the President of the United States?

Bitcoin and MSTR will sink together

We are heading towards the moment where Bitcoin and MSTR cannot help each other anymore. Before, when Bitcoin “almost died,” it was always possible to construct a comeback story—to tell the people who lost everything with Bitcoin that they were simply doing it wrong. But look at this guy, he got rich and drives a Lambo now; you just suck if you let this opportunity slip. It never occurred to enough people that every Bitcoin Lambo is financed by someone losing money on Bitcoin; that it is a zero-sum game. At least, not to enough people to stop the spread of the comeback story.

Everything Bitcoin promised was eventually uncovered to be bogus. A hedge against inflation, a store of value, not to mention an actual currency. But it never had such a prominent test case: one actor, MicroStrategy/MSTR, buying 4% of it, and then what? It is almost as if Saylor wanted to prove Warren Buffett’s point that if he had bought all the Bitcoin, he would not know what to do with it. Yes, exactly—what do you do with it now, Mr. Saylor?

The real value is in the bubble shaker and popper

A classic pump-and-dump scheme is built upon a lie, a deception. What Michael Saylor built here is not a classic pump-and-dump in that sense. It might be legal because its deception is technically not fraud or a lie; it is a system that is hard to understand. I always said that the reason Bitcoin survived so long and went so high was the technical complexity that made people believe there is more to it—they simply do not understand it enough to conclude the obvious. Saylor added financial complexity and tried to hide the nature of the pump-and-dump within that.

One point where I agree with Saylor is that Bitcoin would not be “worth” nearly the same without his (maybe technically legal) pump-and-dump. It crumbles now because people are catching on to it. So how do you play if you have a legal, transparent pump-and-dump set up against you? The answer is simple: you stop looking at the price, you go calculate your fundamental value (for example, based on your dividend expectations), and you are going to buy below and sell above that fundamental price. For Bitcoin, that’s very hard, but for a reasonable stock, that is sensible, if not easy, to do, and people will jointly arrive at a fair valuation.

The nature of a bubble nowadays seems to be that people know it is a bubble, but they still make money by playing this stupid zero-sum game of trying to estimate the collective willingness to assume a common stupidity to spiral up the price of some hyped asset. Everyone just hopes that they are simply not the greatest fool at the end. This is the pure nature of Bitcoin’s price action, but even hyped bubble stocks and their prices are partially (and towards the end of a bubble, almost fully) explained by this behavior. A Handelsblatt journalist once told me that when she was working in New York, she asked old Wall Street traders what their learnings from the dot-com bubble were, and some told her: I was a chicken and pulled out too fast.

So that’s what I am saying: A legal, well-understood, and transparent (Saylor’s gets clearer from day to day) pump-and-dump will shake out and pop bubbles that otherwise would have gone on for ages. There could be a real instrument made out of this—a passive investment instrument that is bound to one specific hyped asset. If it does not have enough volume to move that asset’s price, the money is simply invested market-neutral. But any day, it can test-pump and dump that asset to see how the price moves.

If you believe something to be a bubble and that there is money to be made by pumping it even more, then the bubble shaker will always be your preferred investment. But if you just invest in something that is hyped because you actually believe its price to be a correct valuation, then a loading bubble shaker should make you think twice. And if you then come to the conclusion that everything is fine—that the value is fundamentally correct—then the bubble shaker’s transparent pump-and-dump attack will be futile, and you have nothing to lose.

The bubble shaker could be passive and managed by triggers and technical rules, including randomness. I think of it as the atom bomb of the finance world. It does not need to be used often, and its existence alone would calm down markets and force participants to think more reasonably about their investments. Michael Saylor: the Oppenheimer of the finance world.