Hey y'all. Welcome back to TCB for another TCB Short. For the Short today we're gonna be tackling the question: Is Bitcoin a bubble? So often people ask if Bitcoin is a bubble, but bubbles don't solve problems. So every bubble in history has eventually popped and has stayed popped. So to ask the better question. Why does Bitcoin keep coming back? So if bubbles don't solve problems, what problem does Bitcoin solve? And is this problem going away? So Bitcoin might look like a bubble at times, but it's better understood as a solution to structurally unsustainable monetary system. So what is a bubble when it comes to kind of financial history? When you look at any speculative bubble, it's usually speculation driven. It results in kind of a rapid price increase. The price kind of becomes. Detached from fundamentals, and then there's a sharp collapse back to reality and that does not ever recover and probably the most. Prominent example of a kind of financial bubble was a tulip mania that happened in the Netherlands in the 16 hundreds, around 1637, and everyone just started speculating on the price of tulips. The price of tulips went sky, sky high, and then it eventually collapsed back to reality and it did not recover. So often people kind of try to equate Bitcoin to tulips or to the tulip mania that the Dutch experienced, but. Bubbles don't create lasting value. There was no need for tulips to be that high. They don't solve systemic problems and then they don't recover. So, and the tulip mania did not recover after it crashed. So just ask yourself, does, does Bitcoin fit? Fit this problem? Did it have a rise up? Did it sharply collapse and then did it never recover? So Bitcoin looks like a bubble at times. Admittedly, just acknowledge that Bitcoin looks like a bubble at times. It's super volatile. It's had multiple 70 to 80% drawdowns. It's had this kind of repeated boom and bust cycle. And there's often kinda speculative narratives, and short term price is often driven by hype cycles. So if you're just looking at a single cycle in Bitcoin's life, it can look like a bubble. Zoomed in Bitcoin behaves like a bubble, but zoomed out. Bitcoin always recovers. So each cycle that Bitcoin has gone through has always produced higher lows. Always resulted in stronger infrastructure being built out. So, bubbles don't do this. Bubbles don't recover and expand repeatedly. So the volatility in Bitcoin's case, more likely to reflects price discovery and not a collapse. So it doesn't appear to be a bubble and kind of the traditional sense. So the real problem that Bitcoin is really solving, perhaps the real bubble is fiat instability. So the global monetary system as currently designed, has a structural flaw. It requires continued monetary expansion to survive, and there's been this kind of historical pattern of fiat currencies all throughout history, and they always trend toward failure, some fantastically. The examples of the Y Mar mark after Germany in World War II or after World War II in Germany. The Zimbabwe dollar has hyperinflated. The Venezuelan bolivar has hyperinflated. But it doesn't always have to be kind of a fantastical collapse. It's often just a slow debasement that doesn't really end in something kind of instant or catastrophic. But on a long enough timeline, all fiat currencies in history have all gone to zero in terms of purchasing power, and there has not been an exception to this rule. And it doesn't look like the dollar is gonna be that exception. You just have to look at. Is the dollar any different from any of these other currencies that have failed throughout history? It looks like it is also in a position of just inevitable accelerating debasement. So if you look at the US debt reality, our national debt is about$39 trillion and counting. We have over$200 trillion of unfunded liabilities. Our debt to GDP ratio is at 120%, which means our debt is larger than the entire productive economy for the year. And we're running annual deficits of$2 trillion, even in stable conditions. So this debt is not a response to a crisis. It's the normal mode of operation of our economy Now. And what this is starting to bring about is kind of an interest spiral. The interest payments on all this outstanding debt is approximately a trillion dollars a year. So that's larger than the entire United States military budget, and it's projected to rise dramatically over the next decade just because it's a compounding math problem. When you're running interest on numbers of that size,$39 trillion, it really starts to add up dramatically. We're borrowing money just to pay interest on the money that we already borrowed, which only means that the day, the debasement of US dollars, the printing of United States dollars is mathematically just guaranteed to continue. We're not printing money because we want to, we're printing money because we have to, and we're in the middle of kind of just an inescapable debt loop where the debt grows, which means the interest burden rises. And this slows growth because the government sucks more and more outta the productive economy every single year and has to issue more and more debt to sustain itself. So the money supply expands and the purchasing power is destroyed. And this just gets repeated at an increasing scale. Every time they've had to intervene, whether it was in 2008'cause of the housing crisis or COVID, every time they intervene, they have to increase at a larger scale than they did the last time. And there's just kind of this inescapable debt game. As this debt grows, it starts to grow exponentially because of that compounding. And the money printing has to increase to support the increased spending and the outcomes are just kinda mathematically determined. It means further currency, debasement, a continued loss of purchasing power, and then an eventual reset of some kind, whether it's kind of a hard or soft default. So it. Are we headed that way? I think when we look at our debt laden system, it's just too debt laden and the money printing must continue. If the money printing were to stop, all asset prices would collapse, defaults on all the outstanding debt would cascade. Banks would fail, government revenues would collapse, and the system would. Like contract rapidly if we were just allowed to contract rapidly. This was kind of similar to what happened in the Great Depression, where all the debt that had been levered up on top of the base money just collapsed down to the base money level. So we're kind of in the same situation were we to allow it to unwind. So the money printing isn't optional. It's, it's required at this point for the system's survival. So like I mentioned, the 2008 financial crisis, the COVID-19 pandemic. They could have let this collapse and be let the debt collapse to the base money level again and had something similar to the Great Depression. But they've gotta show the playbook that that's not in the cards every single time. The response has been, more debt, massive liquidity injections, massive money creation, and we're just no longer willing to choose non-intervention, which would relate. Or result in that great depression like collapse. So it's just too easy to hit the easy button to get yourself out of a pinch, and we're not willing to kind of politically take on that pain. So the debt system just survives by expanding or it fails and it looks like it will continue to expand. So what Bitcoin offers is a first real solution to this problem. This is what Bitcoin. Fixes. It is a fixed supply of 21 million coins, so it's immune to supply inflation. It has no reliance on debt like the current financial system. There's no central authority. It's governed by code, not a government or an institution. Nobody can increase the monetary supply, confiscate your wealth or censor any transactions. It's got a predictable monetary policy forever. That's known to everyone. Very different from our current, system where, kinda the federal reserve sets monetary policy and it's always changing and we're always hanging on bated breath on every word that they say. So Bitcoin offers an alternative to this just completely unsustainable monetary system. That we're currently operating under. So if you look at all the problems, kind of directly contrast the problems of fiat to what Bitcoin offers, and Fiat money printing is absolutely acquired. And Bitcoin's solution to this is it's gotta fixed supply money. Printing does not exist. It's gonna be a fixed supply. And everyone knows that's that to be true all the way up to 21 40 and beyond. Uh, the problem in the fiat system is this, we're in the position of just this inevitable debt spiral, whereas a Bitcoin, there's no dependency on debt whatsoever. And fiat, you have centralized control that is constantly changing the monetary policy and intervening in the free market. Bitcoin is just a decentralized system, so nobody's in control and no intervention is possible. So where the Fiat system requires bailouts, continuous bailouts over and over again in Bitcoin, there is no way to bail anything out. So it's the truest free market we have. So the Fiat system is kind of stable in the short term, but very fragile in the long term. And Bitcoin by contrast is volatile Short term. But it's very stable long term, and the rules are known to all the players. So bitcoin's not just an asset, it isn't just a payment system, it isn't a bubble. Uh, Bitcoin's a solution to the monetary instability and a mathematically unsustainable monetary system that we currently are running. So if you've gotta reframe the bubble question in terms of what would a bubble look like? In a monetary system, if a monetary system were to be a bubble, what would that look like? It would probably require perpetual expansion. It would probably be structurally dependent on monetary expansion into perpetuity. It would probably be plagued by artificial asset inflation.'cause as you continually inflate the bubble, all the assets inflate with them far beyond their kind of utility value. You would see unsustainable debt dynamics, but these aren't. These are characteristics of kind of our current fiat based monetary system, not Bitcoin. So the current monetary system is a bubble because it depends on continuous expansion to avoid collapse. So again, bubbles don't solve real problems. Enter Bitcoin. It addresses a real global issue. It is a clear use case. It's continuing. It continues to gain adoption as people really see it as a viable alternative to just an unsustainable system. So if something is like Bitcoin is offering a real solution to a real problem. Is that a bubble? So the current monetary system is the problem. It requires infinite expansion to avoid collapse, and Bitcoin was built to endure without inflation, and it matches the technological deflationary dynamics of the free market economy. So if, if our money was fixed, which Bitcoin is. We're constantly innovating. We're constantly figuring out how to make more and more stuff at cheaper and cheaper price points. So prices in a free market should come down naturally. It should be the natural state of the free market to bring prices down forever as we get more efficient and more productive. But prices are not going down. They're all going up. And that's because the money printing is outpacing that innovation and it's not allowing the innovation to flow to the common man. So Bitcoin actually matches the dynamics of that free market economy. It's deflationary by nature, and it actually reflects the economic reality and makes everything cheaper for us as we become more efficient at producing things. So. Bitcoin kinda looks like a bubble because it's being priced inside a system that actually is one. The fiat system is the bubble. Bitcoin is not. Bitcoin is the exit from that fiat monetary bubble that's headed for inevitable mathematical collapse. So to answer that question, is Bitcoin a bubble? No, Bitcoin has speculative cycles, but it has always recovered, which bubbles do not do. And the fiat system has a structural failure mode from which no recovery is possible. So Bitcoin isn't the bubble. In fact, it may very well save us when the largest financial bubble in history, the current Fiat monetary system, finally breaks and collapses. So, uh, I hope that helps y'all take care till next time and we'll see you.