I have been described as the biggest bear there is on Bitcoin. The Rusty Wallace of Bitcoin Bears. For those of you that didn’t watch early 1990’s NASCAR, Rusty Wallace drove the Kodiak car. My bro loved Dale Earnheart, but I was a RustyWallace guy.
Let me walk you through my Bitcoin crash logic. I promise it has nothing to do with this chart.
Nor does it have to do with serial bubble identifier Robert Shiller announcing BTC is a bubble.
Nor does it have anything to do with crazy predictions.
It has to do with physics. Hear me out.
How is a new unit of Bitcoin (BTC) created?
It is mined.
How do you mine?
You use electricity.
Electricity has a cost of $X/unit and the BTC sells for $Y/unit.
Y has been increasing relentlessly (see below chart).
This means that $Y/unit>>>$X/unit and $Y/unit continues to increase faster than $X/unit.
This means you can convert energy into a good that buys an increasing amount of energy.
If you create more Y, you can buy more and more X with each new unit of Y.
This violates the conservation of energy.
Energy is being turned into an item that allows you to buy more energy which can be turned into a good that buys even more energy. This is perpetual motion.
Marginal cost of Mining
According to this article https://medium.com/@interdome/how-much-electricity-does-bitcoin-use-c350bd84c64e
“Let’s try the low end, with 0.1 watts per Gh/s, which we might assume a top-of-the-line ASIC mining units burns. The entire Bitcoin network would then consume 835.4 kilowatts, or 7.31 gigawatt-hours per year. That is the same yearly consumption as 674.5 average American homes.”
There are 1,000,000 kilowatts per gigawatt.
According to the EIA the average cost of a kilowatt-hour in the United States is 13.22 cents.
And this site says there are 16.366 million Bitcoins in existence.
So, (1,000,000Kwh/Gwh * 7.31Gwh * 0.1322 $/Kwh)/ 16,366,275 BTC = 0.05904715642 $/BTC
This makes the marginal cost to mine a bitcoin is 6 cents.
That makes BTC overvalued by approximately USD$4500/BTC.
I hope the SEC lists as many BTC ETFs as possible. I need a way to short this. The current continued rise in Bitcoin violates the laws of physics. Baseball cards and beanie babies rose until they crashed. Fiat currencies lose purchasing power as the number of units expand. This ensures they follow the laws of physics and do not create a system of perpetual motion. Bitcoin is violating this.
If BTC does not crash we can make everyone in the world rich by converting all energy into BTC and repeating. Therefore BTC must crash to the marginal cost of mining plus a premium (maybe a multiple of the marginal cost equaling 10*MC).
It will be the greatest crash of all time.
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