The Billion-Dollar Pizza
I have a theoretical question for you if you'll indulge me. Imagine standing in the Target checkout line with a small basket of products. The cost will be about $20. Lucky for you, you have a $20 bill in your pocket. However, as you're about to hand the bill to the cashier, you remember that you strongly believe that $20 bill will be worth $100 by next year. Do you still use that bill to pay for your goods, or find a different way to pay? Hold that thought.
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In May 2010, a man ordered two large Papa John's pizzas for delivery. The total bill was about $40. Instead of using cash, though, he thought it would be fun to pay with this new type of currency....it was called Bitcoin. In exchange for his two pizzas, he sent Papa John's 10,000 Bitcoins. As of last night, those 10,000 Bitcoins were worth about $990 million. Yes, he paid almost a billion dollars for two large Papa John's pizzas.
With the crypto market heating up in the last several weeks, I'm again getting countless questions about it. "Should I buy it?" "How much should I buy?" "Which one should I buy?" "What should I do with my millions of dollars next year after my blah blah blah currency pops?"
Today, more than 13,000 cryptocurrencies are in existence, Bitcoin being the most famous. I have a question for you. With so many people owning crypto these days, when was the last time you saw someone use crypto to purchase anything? I'll wait.....
In my opinion, the billion-dollar pizza was both a monumental moment in the journey of crypto, and also its undoing. Given its massive price run-up, it's become a victim of its own success, and has lost the right to be used as a currency. After all, who would buy goods and services with a currency they think will be worth multiples of its current value?
So, if it's not a currency, what is it? It's largely treated as an investment....a highly touted, glorified, idolized investment. But an investment into what? It's backed by nothing. It's secured by nothing. It only has value because other people also believe it has value. Crypto advocates argue other assets share the same dynamics, such as the U.S. dollar. While it's true the U.S. dollar is no longer backed by actual gold, it's backed by the full faith and credit of the most powerful government in the world. What about gold? We can argue about the value of gold, but at least gold has tangibility and utility. What about stocks? Sure, stocks feel like a number on the screen, but they are actual fractional ownership in some of the largest and most profitable companies in the world. Businesses that make actual products and sell them for actual money.
I do believe crypto is the future, though. It's inevitable. However, I believe only a few of the 13,000+ cryptos will likely survive. The owners of all the others will likely lose 100%.....eventually. It's not a train I want to ride. The uncertainties are massive. The future is murky. We are in uncharted territory. I prefer to live with meaning, and losing sleep over the volatility of made-up coins does not check my box of meaning. It's a hard no for me.
What say you? Questions? Thoughts? Insights?
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