In my last post, I talked about the disconnect between the bad news stories that we were reading and the solid performance of US equities during 2025. In this one, I want to focus specifically on four news stories from last year - the US announcement of punitive tariffs on the rest of the world, the downgrade of the US, the longest shutdown in US government history and unprecedented challenges to the Fed's perceived independence - and examine how they played out in the rest of the market. I will start with a look at US treasuries, which should have been in the eye of the storm in all of the stories, move on to to currencies, with a focus on the US dollar, then to gold & silver, and close off with a riff on bitcoin. As I look at these diverse markets, with very different outcomes in 2025, I will argue that a loss of trust in institutions (governments, central banks, regulatory authorities) was the thread that best explains their performance.
The Trust Narrative
We often underestimate how much of the global economy and financial markets are built on trust - in central banks to preserve the buying power in currencies, in governments and businesses to honor their contractual commitments, in legal systems to enforce them and in norms restraining behavior. That trust can be tenuous, and when violated, not only can the consequences can be catastrophic, but regaining lost trust can be a long, arduous process. In fact, one of the divides between developed and emerging markets for much of the last century was on the trust dimension, with the implicit assumption that emerging countries were less trustworthy than developed countries. That distinction has been muddied in the twenty first century, as crises and political developments have undercut trust in institutions across the board.
I would argue that 2025 was a particularly testing year, as developments in the United States, a dominant player in the global economy and markets, shook trust, and that loss of trust reverberated across its trading partners and global investors.
The first of the developments was on the tariff front, where decades of progress towards reducing barriers to trade and establishing predictability was upended on Liberation day (on March 31, 2025), where the US imposed what seemed like arbitrary tariffs on countries, but made those tariffs punitively large. In the immediate aftermath, equity markets around the world went into free fall, and I wrote a post in April 2025 about the tariff effect.
Just two weeks later, on April 16, 2025, Moody's, which had been the lone holdout among the ratings agencies in preserving a Aaa rating for the US, lowered its rating, albeit marginally to Aa1, reducing the number of Aaa rated countries in the world to eight. That rating, though not a complete surprise, still had shock value, and created ripple effects for appraisers and analysts, and I made my assessment in a post in May 2025.
On October 1, 2025, the US government went into shutdown mode, as congress balked at increasing the debt limit for the country and on the terms for a new budget, and unlike previous shutdowns, which lasted a few days, this one stretched into weeks, before an agreement was reached to reopen the government on November 12, 2025.
In the final months of the year, the independence of the Federal Reserve became a subject of discussion as news stories and pronouncements on social media suggested that the administration was seeking to put its imprint on monetary policy, through its nominees.
Depending on your political persuasion, you may have been one side of the debate or the other about each of these developments, but each of them chipped away at trust in the US government and its institutions.
While Donald Trump is the easy answer to why trust is slipping, the truth is that in each case, the slippage has been occurring over much longer. The push towards uninhibited global trade started running out of steam a decade or more ago, as the costs created political backlash. The Moody's ratings downgrade followed similar actions by S&P, in 2011, and Fitch, in 2023, partly in reaction to government deficit/borrowing and partly to political dysfunction. The Fed's much-vaunted independence has always been built more on norms rather that legal strictures, and administrations through the decades have managed to nudge central banks to adopt their preferred paths, and especially so in the aftermath of the pandemic.
The Bond Market
The effect of a loss of trust should be visible most clearly and immediately in the bond market, since bond buyers, of US treasuries, are doing so on the expectation that the US government will not default and that the Fed will do its utmost to preserve the dollar's buying power (and keep inflation low). Since the shocks from the news stories listed in the section above have the potential to alter both default risk and expected inflation, I looked at the movement of US treasuries over the course of 2025:
As you can see, there was little movement in 20-year and 30-year treasuries over the course of the year, but rates dropped, and neither the Moody's downgrade nor the government shutdown had much effect, and the rise in rates around the downgrade (in April) were more in response to tariffs and preceded the downgrade announcement. In fact, in the face of all of the bad news, the ten-year treasury rate dropped by 39 basis points (from 4.58% to 4.19%) during the year, and short term treasuries dropped even more, effectively altering the slope of the yield curve. To capture that effect, I looked at the evolution of the difference between rates across different maturities over the course of the year:
During 2025, the spread between the 10-year and 30-year treasury doubled, the spread between the 10-year and 2-year increased by seven basis points, but at the short end of the maturity spectrum, the spread between the two year and three month treasuries decreased. The net effect was a much more upward sloping yield curve at the end of 2025 than at its start, and while I do not attribute the power to to the yield curve as a prognosticator of future economy growth that some do, it is still marginally a positive sign for the US economy.
To gauge how the news stories played out on the perception of US government default, I looked at the sovereign CDS spreads for the US, market-set numbers capturing the cost of buying insurance against US government default, in 2025:
After a blip in April, where the sovereign CDS spreads increased from 0.4% to just over 0.5% in April 2025, spreads have dropped back to levels lower than they were at the start of the year.
To get a sense of how expectation of inflation changed over the course of the year, I turned again to a market-based number from the treasury market, where the difference between the US ten-year treasury bond rate and the ten-year US treasury TIPs rate (a real rate) operates as a measure of expected inflation:
In 2025, these estimates suggest that the expected inflation barely budged, ending the year lower than it was at the start. That would have put the market at odds with experts, who forecasted a surge in inflation especially after the tariffs were announced, but would have put it in sync with actual inflation reported during the rest of the year.
On the final question of why the Fed independence fight has not created more turmoil in markets, I start with a different perspective from most, since I believe that the role of Fed in setting interest rates is vastly overstated. As I note in that post, the Fed's much publicized forays into changing the Fed Funds rate has some effect on the short term treasuries, but long term treasuries are driven less by the Fed’s actions (or inaction) and more by expected inflation and real growth. I capture that relationship every year by estimating an intrinsic ten-year riskfree rate, obtained by summing together actual inflation for the year and real GDP growth and comparing it to the ten-year treasury bond rate:
Over the seventy years of data in this graph, it is clear that the big movements in treasury rates are captured in the intrinsic risk free rate, with higher inflation in the 1970s coinciding with the rise in the treasury rate, and the sustained low rates of the last decade largely in sync with the low inflation and anemic growth during the period. As you can see , after a stint (2021-25) where the intrinsic risk free rate was well above the ten-year treasury rate, largely because of higher inflation, the treasury rate of 4.18%, at the start of 2026, is within reach of the intrinsic rate of 5.10%, obtained by adding inflation and real growth in 2025. That said, though, I do think that the reason that treasury rates stayed well below the intrinsic risk free rate during this period is because markets believed that the Fed would use its powers to try to get inflation under control, even at the expense of a slowing economy (or a recession). It is this belief that will be put at risk if the Fed becomes viewed as an extension of the government, increasing the risks of inflation spiraling out of control, creating a cycle where higher inflation causes higher interest rates, and attempts by central banks to lower these rates actually feed into even higher inflation. It is in the best interests of governments and politicians to let central banks be independent and set rates, because it will lead to better economic outcomes and lower interest rates, while giving politicians cover for unpleasant choices that have to be made to deliver these results.
I complete the assessment of the bond market in 2025 by looking at corporate bonds, and especially at the default spreads of corporate bonds in different ratings classes during the course of the year:
There seems to be a divergence in how the year played out in the corporate bond market, with the higher rated bonds all seeing flat or lower spreads, but bonds below investment grade (below BBB) seeing an increase in spreads.
The Currency Market
Just as bond markets are driven by trust that governments will not default, unless it has run out of options, and that central banks will protect a currency’s buying power, currency markets are swayed by the same concerns. Here, a split emerged between the bond and currency markets. While bond markets, for the most part, took the news stories of the year in stride, the dollar was clearly knocked off balance, and it weakened over the course of the year, as can be seen in the graph below;
The trade-weighted dollar, a broad index of the dollar against multiple currencies, was down 7.24% for the year, but the dollar lost more value against developed market currencies than against emerging market currencies; it was down 8.19% against the former and 6.34% against the latter.
Gold and Silver
When investors lose trust in governments and central banks, it should come as not surprise that their money leaves financial asset markets and goes into collectibles, and in a post in October 2025, I looked at how this played out specifically in the gold market. In 2025, Gold had one of its best years ever, rising 65% during the year, and silver, the other widely held precious metal, had an even bigger year, rising 148% during the year:
The surge in precious metal prices in 2025 was unusual, at least on one dimension. Gold and silver prices tend to rise during periods of unexpectedly high inflation (1970s) or during intense crises, but at least in 2025, neither seemed to be at play. As we noted earlier, inflation came in much tamer than expected, and equity and equity and bond markets, after a brief meltdown in April, showed no signs of trauma. In fact, if you scale gold price to the CPI, the basis for the golden rule, where the argument that gold rises at roughly the inflation rate over time, gold price performance in 2025 broke the indicator, as the ratio of gold price to the CPI exploded well above historic norms.
It is worth noting that a loss of trust in the US government and, by extension, in the US dollar, have translated into increases in gold holdings at central banks, but that increase, while contributing to gold's allure, cannot explain its price rise during the year. If the rise in gold prices was a surprise, the rise in silver prices was even more so, and in 2025, silver prices rose enough to bring the ratio of gold to silver prices to below the long term median value:
It seems like the market is pulling in different directions on the trust question, with stocks and bonds largely underplaying them, the currency markets indicating some worry and gold and silver suggesting much bigger consequence to the loss of trust. That does not surprise me since the market is not a monolith, and while the broad investor base might have adopted the response of "What, me worry?", there is a significant segment of investors that see catastrophic risks emerging, and piling into precious metals.
Bitcoin
I have written off and on about bitcoin over the last fifteen years, and have generally straddled the middle, with both sides of the divide (bitcoin optimists and bitcoin doomsayers) taking issue with me. I have argued that bitcoin can be viewed either as a a central-bank free currency, designed by the paranoid for the paranoid, or millennial gold (a collectible), and that we would know better as we saw how it performed in response to macro developments. In many ways, 2025 provided us with a test, which should, if nothing else, advance our understanding of the endgame for bitcoin. In a year where the dollar was weakened as a global currency and central banking independence was questions, you would have expected to see bitcoin do well, both because of its status as a currency without a central bank and as a collectible. The actual price path for bitcoin, in US dollars and Euros, is captured below:
After setbacks in the first third of the year, bitcoin's price surged upwards in the middle of the year, making those who had built their narratives around it to look good. In my post on bitcoin on July, I focused on the suggestion that other companies should follow the Microstrategy path and put their cash balances into bitcoin, and argued that it was not a good idea. The months following have vindicated that view, as both bitcoin and Microstrategy have seen pricing collapses, and bitcoin ended the year down 6.4% in US dollar terms and 17.4% in Euro terms.
It remains too early in bitcoin's life to pass final judgment, but if the story for bitcoin is that it will draw in investors who have lost trust in governments and central banks, it is clear that gold and silver were the draws, at least in 2025, not bitcoin. As a final assessment of how the different asset classes moved in relation to each other, I looked at weekly returns in 2025 in six markets - bitcoin, gold, silver, large US stocks, small US stocks and the ten-year treasury bond - and computed correlations across the assets:
There are only a few co-movements which are large enough to be statistically significant. The first is that bitcoin is much more highly correlated with US equities than it is with its collectible counterparts, suggesting that it draws in risk seekers, not the risk averse. The second is that notwithstanding the fact that US treasuries did very little over the course of the year, on a week-to-week basis, their movements affected stock prices. At least in 2025, higher interest rates (translating into negative bond returns) were accompanied by higher stock prices, casting doubt on the notion that the stock market is being held afloat by Fed activity or inactivity.
Conclusion
The big news stories of the year, from the ratings downgrade to the government shutdown to the soap opera of who would lead the Fed all fed into a storyline of fraying trust in US institutions. While that trust deficit should have led to rising interest rates and a tough year for bonds, actual bond market performance, like equities in the prior post, suggested that markets were not swayed. That clearly does not mean that no one cared, since a subset of investors were concerned enough about the trust issue to push the dollar down and put gold and silver prices on stratospheric upward paths. Bitcoin remained the outlier, moving more with stocks and bonds, albeit without their upside (at least this year) and less with collectibles.
In this post, I will bring together two disparate and very different topics that I have written about in the past. The first is the role that cash holdings play in a business, an extension of the dividend policy question, with an examination of why businesses often should not pay out what they have available to shareholders. In my classes and writing on corporate finance, I look at the motives for businesses retaining cash, as well as how much cash is too much cash. The second is bitcoin, which can be viewed as either a currency or a collectible, and in a series of posts, I argued that bitcoin can only be priced, not valued, making debates about whether to buy or not to buy entirely a function of perception. In fact, I have steered away from saying much about bitcoin in recent years, though I did mention it in my post on alternative investments as a collectible (like gold) that can be added to the choice mix. While there may be little that seemingly connects the two topics (cash and bitcoin), I was drawn to write this post because of a debate that seems to be heating up on whether companies should put some or a large portion of their cash balances into bitcoin, with the success of MicroStrategy, a high-profile beneficiary of this action, driving some of this push. I believe that it is a terrible idea for most companies, and before Bitcoin believers get riled up, my reasoning has absolutely nothing to do with what I think of bitcoin as an investment and more to do with how little I trust corporate managers to time trades right. That said, I do see a small subset of companies, where the holding bitcoin strategy makes sense, as long as there are guardrails on disclosure and governance.
Cash in a Going Concern
In a world where businesses can raise capital (equity or debt) at fair prices and in a timely manner, there is little need to hold cash, but that is not the world we live in. For a variety of reasons, some internal and some external, companies are often unable or unwilling to raise capital from markets, and with that constraint in place, it is logical to hold cash to meet unforeseen needs. In this section, I will start by laying out the role that cash holdings play in any business, and examine how much cash is held by companies, broken down by groupings (regional, size, industry).
A Financial Balance Sheet
To understand the place of cash in a business, I will start with a financial balance sheet, a structure for breaking down a business, public or private:
On the asset side of the balance sheet, you start with the operating business or businesses that a company is in, with a bifurcation of value into value from investments already made (assets-in-place) and value from investments that the company expects to make in the future (growth assets). The second asset grouping, non-operating assets, includes a range of investments that a company may make, sometimes to augment its core businesses (strategic investments), and sometimes as side investments, and thus include minority holdings in other companies (cross holdings) and even investments in financial assets. Sometimes, as is the case with family group companies, these cross holdings may be a reflection of the company's history as part of the group, with investments in other group companies for either capital or corporate control reasons. The third grouping is for cash and marketable securities, and this is meant specifically for investments that share two common characteristics - they are riskless or close to riskless insofar as holding their value over time and they are liquid in the sense that they can be converted to cash quickly and with no penalty. For most companies, this has meant investing cash in short-term bonds or bills, issued by either governments (assuming that they have little default risk) or by large, safe companies (in the form of commercial paper issued by highly rated firms).
Note that there are two sources of capital for any business, debt or equity, and in assessing how levered a firm is, investors look at the proportion of the capital that comes from each:
Debt to Equity = Debt/ Equity
Debt to Capital = Debt/ (Debt + Equity)
In fact, there are many analysts and investors who estimate these debt ratios, using net debt, where they net the cash holdings of a company against the debt, with the rationale, merited or not, that cash can be used to pay down debt.
Net Debt to Equity = (Debt-Cash)/ Equity
Debt to Capital = (Debt-Cash)/ (Debt + Equity)
All of these ratios can be computed using accounting book value numbers for debt and equity or with market value numbers for both.
The Motives for holding Cash
In my introductory finance classes, there was little discussion of cash holdings in companies, outside of the sessions on working capital. In those sessions, cash was introduced as a lubricant for businesses, necessary for day-to-day operations. Thus, a retail store that had scores of cash customers, it was argued, needed to hold more cash, often in the form of currency, to meet its transactional needs, than a company with corporate suppliers and business customers, with predictable patterns in operations. In fact, there were rules of thumb that were developed on how much cash a company needed to have for its operations. As the world shifts away from cash to digital and online payments, this need for cash has decreased, but clearly not disappeared. The one carve out is the financial services sector, where the nature of the business (banking, trading, brokerage) requires companies in the sector to hold cash and marketable securities as part of their operating businesses.
If the only reason for holding cash was to cover operating needs, there would be no way to justify the tens of billions of dollars that many companies hold; Apple alone has often had cash balances that exceeded $200 billion, and the other tech giants are not far behind. For some companies, at least, the rationale for holding far more cash than justified by their operating needs is that it can operate as a shock absorber, something that they can fall back on during periods of crisis or to cover unexpected expenses. That is the reason that cyclical and commodity firms have often offered for holding large cash balances (as a percent of their overall firm value), since a recession or a commodity price downturn can quickly turn profits to losses.
Using the corporate life cycle structure can also provide insight into how the motives for holding cash can change as a company ages.
For start-ups, that are either pre-revenue or have very low revenues, cash is needed to keep the business operating, since employees have to be paid and expenses covered. Young firms that are money-losing and with large negative cash flows, hold cash to cover future cash flow needs and to fend off the risk of failure. In effect, these firms are using cash as life preservers, where they can make it through periods where external capital (venture capital, in particular) dries up, without having to sell their growth potential at bargain basement prices. As firms start to make money, and enter high growth, cash has use as a business scalar, for firms that want to scale up quickly. In mature growth, cash acquires optionality, useful in allowing the business to find new markets for its products or product extensions. Mature firms sometimes hold cash as youth serum, hoping that it can be used to make once-in-a-lifetime investments that may take them back to their growth days, and for declining firms, cash becomes a liquidationmanager, allowing for the orderly repayment of debt and sale of assets.
There is a final rationale for holding cash that is rooted in corporate governance and the control and power that comes from holding cash. I have long argued that absent pressure from shareholders, managers at most publicly traded firms would choose to return very little of the cash that they generate, since that cash balance not only makes them more sought after (by bankers and consultants who are endlessly inventive about uses that the cash can be put to) but also gives them the power to build corporate empires and create personal legacies.
Corporate Cash Holdings
Given the multitude of reasons for holding cash, it should come as no surprise that publicly traded companies around the world have significant cash balances. Leading into July 2025, for instance, global non-financial-service firms held almost $11.4 trillion in cash and marketable securities; financial service firms held even more in cash and marketable securities, but those holdings, as we noted earlier, can represent their business needs. Using our earlier breakdown of the asset side of the balance sheet into cash, non-operating and operating assets, this is what non-financial service firms in the aggregate looked like in book value terms (global and just US firms):
Note that cash is about 11% of the book value of total assets, in the aggregate, for global firms, and about 9% of the book value of total assets, for US firms. Global firms do hold a higher percentage of their value in non-operating assets, but US firms are more active on the acquisition front, explaining why goodwill (which is triggered almost entirely by acquisitions) is greater at US firms.
The typical publicly traded firm holds a large cash balance, but there are significant differences in cash holdings, by sector. In the table below, I look at cash as a percent of total assets, a book value measure, as well as cash as a percent of firm value, computed by aggregating market values:
As you can see, technology firms, which presumably face more uncertainty about their future hold far more cash as a percent of book value, but the value that the market attaches to their growth brings down cash as a percent of firm value. Utilities, regulated and often stable businesses, tend to hold the least cash, both in book and market terms.
Breaking down the sample by region, I look at cash holdings, as a percent of total assets and firms, across the globe:
The differences across the globe can be explained by a mix of market access, with countries in parts of the world where it can be difficult to access capital (Latin America, Eastern Europe, Africa) holding more cash. In addition, and corporate governance, with cash holdings being greater in parts of the world (China, Russia) where shareholders have less power over managers.
Given the earlier discussion of how the motives for holding cash can vary across the life cycle, I broke the sample down by age decile, with age measured from the year of founding, and looked at cash holdings, by decile:
The results are mixed, with cash holdings as a percent of total assets being higher for the younger half of the sample (the top five deciles) than for the older half, but the is no discernible pattern, when cash is measured as a percent of firm value (market). Put simple, companies across the life cycle hold cash, though with different motives, with the youngest firms holding on to cash as lifesavers (and for survival) and the older firms keeping cash in the hopes that they can use it to rediscover their youth.
The Magic of Bitcoin
I have been teaching and working with investments now for four decades, and there has been no investment that has received as much attention from both investors and the financial press, relative to its actual value, as has bitcoin. Some of the draw has come from its connections to the digital age, but much of it has come from its rapid rise in price that has made many rich, with intermittent collapses that have made just as many poor. I am a novice when it comes to crypto, and while I have been open about the fact that it is not my investment preference, I understand its draw, especially for younger investors.
The Short, Eventful History of Bitcoin
The origin story for Bitcoin matters since it helps us understand both its appeal and its structure. It was born in November 2008, two months into one of the worst financial crises of the last century, with banks and governments viewed as largely responsible for the mess. Not surprisingly, Bitcoin was built on the presumption that you cannot trust these institutions, and its biggest innovation was the blockchain, designed as a way of crowd-checking transactions and preserving transaction integrity. I have long described Bitcoin as a currency designed by the paranoid for the paranoid, and I have never meant that as a critique, since in the untrustworthy world that we live in, paranoia is a justifiable posture.
From its humble beginnings, where only a few (mostly tech geeks) were aware of its existence, Bitcoin has accumulated evangelists, who argue that it is the currency of the future, and speculators who have used its wild price swings to make and lose tens of millions of dollars. In the chart below, I look at the price of bitcoin over the last decade, as its price has increased from less than $400 in September 2014 to more than $110,000 in June 2025:
Along the way, Bitcoin has also found some acceptance as a currency, first for illegal activities (drugs on the Silk Road) and then as the currency for countries with failed fiat currencies (like El Salvador), but even Bitcoin advocates will agree that its use in transactions (as the medium of exchange) has not kept pace with its growth as a speculative trade.
Pricing Bitcoin
In a post in 2017, I divided investments into four groups - assets that generate cash flows (stocks, bonds, private businesses), commodities that can be used to produce other goods (oil, iron ore etc), currencies that act as mediums of exchange and stores of value and collectibles that are priced based on demand and supply:
You may disagree with my categorization, and there are shades of gray, where an investment can be in more than one grouping. Gold, for instance, is both a collectible of long standing and a commodity that has specific uses, but the former dominates the latter, when it comes to pricing. In the same vein, crypto has a diverse array of players, with a few meeting the asset test and some (like ethereum) having commodity features. The contrast between the different investment classes also allows for a contrast between investing, where you buy (sell) an investment if it is under (over) valued, and trading, where you buy (sell) an investment if you expect its price to go up (down). The former is a choice, though not a requirement, with an asset (stocks, bonds or private businesses), though there may be others who still trade that asset. With currencies and collectibles, you can only trade, making judgments on price direction, which, in turn, requires assessments of mood and momentum, rather than fundamentals.
With bitcoin, this classification allows us to cut through the many distractions that pop up during discussions of its pricing level, since it can be framed either as a currency or a collectible, and thus only priced, not valued. Seventeen years into its existence, Bitcoin has struggled on the currency front, and while there are pockets where it has gained acceptance, its design makes it inefficient and its volatility has impeded its adoption as a medium of exchange. As a collectible, Bitcoin starts with the advantage of scarcity, restricted as it is to 21 million units, but it has not quite measured up, at least so far, when it comes to holding its value (or increasing it) when financial assets are in meltdown mode. In every crisis since 2008, Bitcoin has behaved more like risky stock, falling far more than the average stock, when stocks are down, and rising more, when they recover. I noted this in my posts looking at the performance of investments in both the first quarter of 2020, when COVID laid waste to markets, and in 2022, when inflation ravaged stock and bond markets. That said, it is still early in its life, and it is entirely possible that it may change its behavior as it matures and draws in a wider investor base.The bottom line is that discussions of whether Bitcoin is cheap or expensive are often pointless and sometimes frustrating, since it depends almost entirely on your perspective on how the demand for Bitcoin will shift over time. If you believe that its appeal will fade, and that it will be displaced by other collectibles, perhaps even in the crypto space, you will be in the short selling camp. If you are convinced that its appeal will not just endure but also reach fresh segments of the market, you are on solid ground in assuming that its price will continue to rise. It behooves both groups to admit that neither has a monopoly on the truth, and this is a disagreement about trading and not an argument about fundamentals.
The MicroStrategy Story
It is undeniable that one company, MicroStrategy, has done more to advance the corporate holding of Bitcoin than any other, and that has come from four factors;
A stock market winner: The company's stock price has surged over the last decade, making it one of the best performing stocks on the US exchanges:
It is worth noting that almost all of the outperformance has occurred in this decade, with the winnings concentrated into the last two years.
With the rise (increasingly) tied to Bitcoin: Almost all of MicroStrategy’s outperformance has come from its holdings of bitcoin, and not come from improvements in business operations. That comes through in the graph below, where I look at the prices of MicroStrategy and Bitcoin since 2014:
Note that MicroStrategy’s stock price has gone from being slightly negatively correlated with Bitcoin’s price between 2014-2018 to tracking Bitcoin in more recent years.
And disconnected from operations: In 2014, MicroStrategy was viewed and priced as a software/services tech company, albeit a small one with promise. In the last decade, its operating numbers have stagnated, with both revenues and gross profits declining, but during the same period, its enterprise value has soared from $1 billion in 2014 to more than more than $100 billion in July 2025:
It is clear now that anyone investing in MicroStrategy at its current market cap (>$100 billion) is making a bitcoin play.
With a high-profile "bitcoin evangelist" as CEO: MicroStrategy’s CEO, Michael Saylor, has been a vocal and highly visible promoter of bitcoin, and has converted many of his shareholders into fellow-evangelists and convinced at least some of them that he is prescient in detecting price movements. In recent years, he has been public in his plans to issue increasing amounts of stock and using the proceeds to buy more bitcoin.
In sum, MicroStrategy is now less a software company and more a Bitcoin SPAC or closed-end fund, where investors are trusting Saylor to make the right trading judgments on when to buy (and sell) bitcoin, and hoping to benefit from the profits.
The “Put your cash in bitcoin” movement
For investors in other publicly traded companies that have struggled delivering value in their operating businesses, MicroStrategy’s success with its bitcoin holdings seems to indicate a lost opportunity, and one that can be remedied by jumping on the bandwagon now. In recent months, even high profile companies, like Microsoft, have seen shareholder proposals pushing them to abandon their conventional practice of holding cash in liquid and close-to-riskless investments and buying Bitcoin instead. Microsoft’s shareholders soundly rejected the proposal, and I will start by arguing that they were right, and that for most companies, investing cash in bitcoin does not make sense, but in the second part, I will carve out the exceptions to this rule.
The General Principle: No to Bitcoin
As a general rule, I think it is not only a bad idea for most companies to invest their cash in bitcoin, but I would go further and also argue that they should banned from doing so. Let me hasten to add that I would make this assertion even if I was bullish on Bitcoin, and my argument would apply just as strongly to companies considering moving their cash into gold, Picassos or sports franchises, for five reasons:
Bitcoin does not meet the cash motives: Earlier in this post, I noted the reasons why a company holds cash, and, in particular, as a shock absorber, steadying a firm through bad times. Replacing low-volatility cash with high-volatility bitcoin would undercut this objective, analogous to replacing your shock absorbers with pogo sticks. In fact, given the history of moving with stock prices, the value of bitcoin on a company's balance sheet will dip at exactly the times where you would need it most for stability. The argument that bitcoin would have made a lot higher returns for companies than holding cash is a non-starter, since companies should hold cash for safety.
Bitcoin can step on your operating business narrative: I have long argued that successful businesses are built around narratives that incorporate their competitive advantages. When companies that are in good businesses put their cash in bitcoin, they risk muddying the waters on two fronts. First, it creates confusion about why a company with a solid business narrative from which it can derive value would seek to make money on a side game. Second, the ebbs and flows of bitcoin can affect financial statements, making it more difficult to connect operating results to story lines.
Managers as traders? When companies are given the license to move their cash into bitcoin or other non-operating investments, you are trusting managers to get the timing right, in terms of when to buy and sell these investments. That trust is misplaced, since top managers (CEOs and CFOs) are for the most part terrible traders, often buying at the market highs and selling at lows.
Leave it to shareholders: Even if you are unconvinced by the first three reasons, and you are a bitcoin advocate or enthusiast, you will be better served pushing companies that you are a shareholder in, to return their cash to you, to invest in bitcoin, gold or any other investment at your chosen time. Put simply, if you believe that Bitcoin is the place to put your money, why would you trust corporate managers to do it for you?
License for abuse: I am a skeptic when it comes to corporate governance, believing that managerial interests are often at odds with what's good for shareholders. Giving managers the permission to trade crypto tokens, bitcoin or other collectibles can open the door for self dealing and worse.
While I am a fan of letting shareholders determine the limits on what managers can or cannot do, I believe that the SEC (and other stock market regulators around the world) may need to become more explicit in their rules on what companies can (and cannot) do with cash.
The Carveouts
I do believe that there are cases when you, as a shareholder, may be at peace with the company not only investing cash in bitcoin, but doing so actively and aggressively. Here are four of my carveouts to the general rule on bitcoin:
The Bitcoin Savant: In my earlier description of MicroStrategy, I argued that shareholders in MicroStrategy have not only gained immensely from its bitcoin holdings, but also trust Michael Saylor to trade bitcoin for them. In short, the perception, rightly or wrongly, is that Saylor is a bitcoin savant, understanding the mood and momentum swings better than the rest of us. Generalizing, if a company has a leader (usually a CEO or CFO) who is viewed as someone who is good at gauging bitcoin price direction, it is possible that shareholders in the company may be willing to grant him or her the license to trade bitcoin on their behalf. This is, of course, not unique to bitcoin, and you can argue that investors in Berkshire Hathaway have paid a premium for its stock, and allowed it leeway to hold and deploy immense amounts of cash because they trusted Warren Buffett to make the right investment judgments.
The Bitcoin Business: For some companies, holding bitcoin may be part and parcel of their business operations, less a substitute for cash and more akin to inventory. PayPal and Coinbase, both of which hold large amounts of bitcoin, would fall into this carveout, since both companies have business that requires that holding.
The Bitcoin Escape Artist: As some of you may be aware, I noted that Mercado Libre, a Latin American online retail firm, is on my buy list, and it is a company with a fairly substantial bitcoin holding. While part of that holding may relate to the operating needs of their fintech business, it is worth noting that Mercado Libre is an Argentine company, and the Argentine peso has been a perilous currency to hold on to, making bitcoin a viable option for cash holdings. Generalizing, companies in countries with failed currencies may conclude that holding their cash in bitcoin is less risky than holding it in the fiat currencies of the locations they operate in.
The Bitcoin Meme: There is a final grouping of companies that I would put in the meme stock category, with AMC and Gamestop heading that list. These companies have operating business models that have broken down or have declining value, but they have become, by design or through accident, trading plays, where the price bears no resemblance to operating fundamentals and is instead driven by mood and momentum. If that is the case, it may make sense for these companies to throw in the towel on operating businesses entirely and instead make themselves even more into trading vehicles by moving into bitcoin, with the increased volatility adding to their "meme" allure.
Even with these exceptions, though, I think that you need guardrails before signing off on opening the door to letting companies hold bitcoin.
Shareholder buy-in: If you are a publicly traded company considering investing some or much of the company's cash in bitcoin, it behooves you to get shareholder approval for that move, since it is shareholder cash that is being deployed.
Transparency about Bitcoin transactions/holdings: Once a company invests in bitcoin, it is imperative that there be full and clear disclosure not only on those holdings but also on trading (buying and selling) that occurs. After all, if it is a company's claim that it can time its bitcoin trades better than the average investor, it should reveal the prices at which it bought and sold its bitcoin.
Clear mark-to-market rules: If a company invests its cash in bitcoin, I will assume that the value of that bitcoin will be volatile, and accounting rules have to clearly specify how that bitcoin gets marked to market, and where the profits and losses from that marking to market will show up in the financial statements.
As bitcoin prices rise to all time highs, there is the danger that regulators and rule-writers will be lax in their rule-writing, opening the door to corporate scandals in the future.
Cui Bono?
Bitcoin advocates have been aggressively pushing both institutional investors and companies to include Bitcoin in their investment choices, and it is true that at least first sight, they will benefit from that inclusion. Expanding the demand for bitcoin, an investment with a fixed supply, will drive the price upwards, and existing bitcoin holders will benefit. In fact, much of the rise of bitcoin since the Trump election in November 2024 can be attributed to the perception that this administration will ease the way for companies and investors to join in the crypto bonanza.
For bitcoin holders, increasing institutional and corporate buy-in to bitcoin may seem like an unmixed blessing, but there will be costs that, in the long run, may lead at least some of them to regret this push:
Different investor base: Drawing in institutional investors and companies into the bitcoin market will not only change its characteristics, but put traders who may know how to play the market now at a disadvantage, as it shifts dynamics.
Here today, gone tomorrow? Bitcoin may be in vogue now, but what will the consequences be if it halves in price over the next six months? Institutions and companies are notoriously ”sheep like” in their behavior, and what is in vogue today may be abandoned tomorrow. If you believe that bitcoin is volatile now, adding these investors to the mix will put that volatility on steroids.
Change asset characteristics: Every investment class that has been securitized and brought into institutional investing has started behaving like a financial asset, moving more with stocks and bonds than it has historically. This happened with real estate in the 1980s and 1990s, with mortgage backed securities and other tradable versions of real estate, making it far more correlated with stock and bonds, and less of a stand alone asset.
If the end game for bitcoin is to make it millennial gold, an alternative or worthy add-on to financial assets, the better course would be steer away from establishment buy-in and build it up with an alternative investor base, driven by different forces and motives than stock and bond markets.
My last post on Bitcoin got me some push back and I am glad that it did. I would rather be read, and disagreed with, than not read at all. I have been told that I know very little about crypto currencies and that I have much to learn, and I agree. The crux of the disagreements though lay in my classifying Bitcoin as a currency, not as an asset or as a commodity. Since this classification is central to how you should think about investing versus trading, and value versus price, and goes well beyond Bitcoin, I decided to dig deeper into the classification and provide even more ammunition for those who disagree with me to tell me how wrong I am.
Classifying Investment: The What and the Why
We are products of our own world views, and mine, for better or worse, are built around my interest in valuation. It is that perspective that led me to classifying investments into cash flow generating assets, commodities, currencies and collectibles. To value an investment, I need that investment to generate future cashflows (at least on an expected basis) and that was my basis for separating cash flow generating assets (which range the spectrum from a bond to a stock to a business) from the rest.
The pushback that I got did not surprised me, partly because my definition may be at odds with the definitions used by other entities. Accountants, for instance, classify items as assets that I think are pure fiction, such as goodwill. There are others who argue that any investment on which you can make money is an asset, broadening it to include just about everything from baseball cards to government bonds. In fact, crypto currencies have been at the center of many of these disagreements, with the SEC recently deciding to treat ICOs as securities (and thus assets) and the Korean central bank categorizing Bitcoin as a commodity. Since the judgment made by these entities have regulatory and tax consequences, I am sure that they will be debated, discussed and disagreed with.
Why Bitcoin is a currency and not an asset..
One reason that people are uncomfortable drawing the line between currency, commodity and asset is that the line can sometimes shift quickly. Take the US dollar, for instance. Its primary purpose is to serve as a medium of exchange and as a store of value, and it is thus a currency. However, you can lend US dollars to a business or individual and generate interest income. That is true, but it is not the currency that is then the asset, but the loan that you make with it, or the bond that is denominated in it. Building further, if I create a bank that takes in deposits in dollars (and pays an interest rate on them) and lends out those dollars as loans, I have a business and that business is an asset. I can value the loan and the bond based upon the interest rate you earn and the default risk that you face, or the bank, based upon the interest rate spread it earns and the risk of default that it faces on its collective portfolio, but I cannot value the US dollar.
Can I construct investments denominated in Bitcoin or another crypto currency that earn me interest or a return? Of course, but I can do that in any currency, and it is in fact one of the functions of a currency. That does not make Bitcoin an asset! You can already see that the question of whether Initial Coin Offerings (ICO) are currencies or assets becomes trickier, because an ICO can be constructed to give you a share of the ownership in a business (and the cash flows from that business), making it more of an asset than a currency (thus giving credence to the SEC's view that it is a security). The lack of standardization in ICO structures, though, makes it difficult to generalize, since loosely put, an ICO can be constructed to be anything from a donation (at least, according to Kathleen Breitman at Tezos) to quasi common stock (without the voting rights).
A few of you have pointed to the networking benefits that might create value for Bitcoin, but I am afraid that I don't see that as a basis for assigning value to it. A network can become an asset, but only when you can make money off the network. The value of Facebook to me, as an investor, is not that I am part of the Facebook network (I am not, since I have not posted on Facebook in almost three years) but that I get a share of the money made from selling advertising to those on the network. Unless you can trace monetary benefits to being part of the Bitcoin network, there is no value to being part of the network. (Visa and MasterCard are assets, not because they have wide networks and are accepted globally, but because every time they are used, they make 1-2% of the transaction value.) To the argument that Bitcoin miners can make money as the network expands, that value is for providing a service, not for holding Bitcoin.
Why Bitcoin is more currency than commodity
The essence of a currency is that its primary uses are as a medium of exchange or as a store of value. The key to a commodity is that it is an input into a process that has a utilitarian function. Oil and coal are clearly commodities, since they derive their value from the fact that they can be used to produce energy. It is true, as with currencies, that you can create an asset based upon a commodity. A share of an oil well is an asset not because you like or even need oil, it is because you hope to sell the oil to generate cash flows. It is also true that gold is a commodity, but as I noted in the prior post, I think it is more currency than commodity, because the quantity of gold that we have on the face of the earth vastly exceeds whatever utilitarian needs it might serve. It is shiny, durable, makes beautiful jewelry and has some industrial uses, but if that is all we valued gold for, it would be worth a lot less than it is trading for, and there would be less of it around.
The question with Bitcoin then becomes whether it can become (or perhaps already is) like gold. Here is my test: If tomorrow, humanity collectively decided to abandon its attachment to gold as a value store, would its price go to zero? I don't think so, because it does have uses and while its price will drop, it will be priced based on those uses. Applying the same test to Bitcoin, I am left nonplussed about what value to attach to a digital currency if at the end, no one uses it in transactions, it has no aesthetic value and it produces nothing utilitarian.
A Commodity Argument for Crypto Currencies (but perhaps not for Bitcoin)
Some of you have pointed to Bitcoin's scarcity (created by the hard cap on production) and the fact that time and energy are spent on its production. Scarcity is neither a sufficient nor even a necessary condition for something to be a commodity. Sand is a scarce resource but it is not a commodity because I cannot think of a good use for it; so is bull manure, but that is a discussion for another time and day. The fact that time and energy went into the production of Bitcoin cannot be used to justify paying for it unless you can show that it is necessary for something that does create utility or value. If, as argued by someone who commented on my last post, Bitcoin is a synthetic commodity, I can see that it is synthetic but what conceivable use does it have that makes it a commodity? Therein lies an opening for a “crypto currency as commodity” defense, though it works better for crypto currencies like Ethereum than it does for Bitcoin, and it require three building blocks:
Block Chains and Smart Contracts will create large disruptions in businesses: You have to believe that block chains and the smart contracts that emerge from them will replace conventional contracts in many businesses, and that will generate cash flows to the contract providers. Your argument can be based upon either economic (that the transactions costs willl be lower) or security (that the contracts will be more secure) rationales.
Crypto Currencies are the lubricants for smart contracting: The discussion of block chains and crypto currency have become entangled into one discussion, but it is worth remembering that block chains predate crypto currencies and can work with fiat currencies. Thus, you will have to argue that crypto currencies are a necessary ingredient to make smart contracts work efficiently, and that the demand for them will then rise as smart contracting expands.
“Your” crypto currency will be one of the winners: Even if you can make the first two legs of this argument, it remains an argument for growth in digital or crypto currencies, not an argument for a specific one. To seal the deal, you will have to explain why your crypto currency of choice (Bitcoin, Ethereum etc.) will become the winner or at least one of the winners in the smart contracting currency race, perhaps because it has the “best technology” for smart contracting or has the most buy in by the institutional players in the game.
I think that the first leg of this argument will be easy to make, the second leg a little more difficult and the third leg will need the most convincing. Even if you can show, based upon today's technology, that you have the "best" smart contracting currency, how do you build barriers to entry that prevent you being pre-empted by another innovation or technology down the road?
Conclusion
The game is still early, and there is much that we do not know about crypto currencies. I remain willing to learn both from people who know more than I do (and there are many out there) as well as events on the ground. As you listen to arguments for or against crypto currencies, my only advice is that you go back to basics about the needs that they are filling and that you ask questions about their long term staying power. I think it is also time for us to separate arguments about block chains/smart contracts from arguments about crypto currencies, since you can have one without the other, and to differentiate between crypto currencies, rather than defend them or abandon them all, as a bundle. To me, Bitcoin, Ethereum, Ripple and ICOs are different enough from each other, not only in structure but also in terms of end game, that they need to be assessed independently.
As I have noted with my earlier posts on crypto currencies, in general, and bitcoin, in particular, I find myself disagreeing with both its most virulent critics and its strongest proponents. Unlike Jamie Dimon, I don't believe that bitcoin is a fraud and that people who are "stupid enough to buy it" will pay a price for that stupidity. Unlike its biggest cheerleaders, I don't believe that crypto currencies are now or ever will be an asset class or that these currencies can change fundamental truths about risk, investing and management. The reason for the divide, though, is that the two sides seem to disagree fundamentally on what bitcoin is, and at the risk of raising hackles all the way around, I will argue that bitcoin is not an asset, but a currency, and as such, you cannot value it or invest in it. You can only price it and trade it.
Assets, Commodities, Currencies and Collectibles
Not everything can be valued, but almost everything can be priced. To understand the distinction between value and price, let me start by positing that every investment that I will look at has to fall into one of the following four groupings:
Cash Generating Asset: An asset generates or is expected to generate cash flows in the future. A business that you own is definitely an asset, as is a claim on the cash flows on that business. Those claims can be either contractually set (bonds or debt), residual (equity or stock) or even contingent (options). What assets share in common is that these cash flows can be valued, and assets with high cash flows and less risk should be valued more than assets with lower cash flows and more risk. At the same time, assets can also be priced, relative to each other, by scaling the price that you pay to a common metric. With stocks, this takes the form of comparing pricing multiples (PE ratio, EV/EBITDA, Price to Book or Value/Sales) across similar companies to form pricing judgments of which stocks are cheap and which ones are expensive.
Commodity: A commodity derives its value from its use as raw material to meet a fundamental need, whether it be energy, food or shelter. While that value can be estimated by looking at the demand for and supply of the commodity, there are long lag and lead times in both that make that valuation process much more difficult than for an asset. Consequently, commodities tend to be priced, often relative to their own history, with normalized oil, coal wheat or iron ore prices being computed by averaging prices across long cycles.
Currency: A currency is a medium of exchange that you use to denominate cash flows and is a store of purchasing power, if you choose to not invest. Standing alone, currencies have no cash flows and cannot be valued, but they can be priced against other currencies. In the long term, currencies that are accepted more widely as a medium of exchange and that hold their purchasing power better over time should see their prices rise, relative to currencies that don't have those characteristics. In the short term, though, other forces including governments trying to manipulate exchange rates can dominate. Using a more conventional currency example, you can see this in a graph of the US $ against seven fiat currencies, where over the long term (1995-2017), you can see the Swiss Franc and the Chinese Yuan increasing in price, relative to the $, and the Mexican Peso, Brazilian Real, Indian Rupee and British Pound, dropping in price, again relative to the $.
Collectible: A collectible has no cash flows and is not a medium of exchange but it can sometimes have aesthetic value (as is the case with a master painting or a sculpture) or an emotional attachment (a baseball card or team jersey). A collectible cannot be valued since it too generates no cash flows but it can be priced, based upon how other people perceive its desirability and the scarcity of the collectible.
Viewed through this prism, Gold is clearly not a cash flow generating asset, but is it a commodity? Since gold's value has little to do with its utilitarian functions and more to do with its longstanding function as a store of value, especially during crises or when you lose faith in paper currencies, it is more currency than commodity. Real estate is an asset, even if it takes the form of a personal home, because you would have had to pay rental expenses (a cash flow), in its absence. Private equity and hedge funds are forms of investing in assets, currencies, commodities or collectibles, and are not separate asset classes.
Investing versus Trading
The key is that cash generating assets can be both valued and priced, commodities can be priced much more easily than valued, and currencies and collectibles can only be priced. So what? I have written before about the divide between investing and trading and it is worth revisiting that contrast. To invest in something, you need to assess its value, compare to the price, and then act on that comparison, buying if the price is less than value and selling if it is greater. Trading is a much simpler exercise, where you price something, make a judgment on whether that price will go up or down in the next time period and then make a pricing bet. While you can be successful at either, the skill sets and tool kits that you use are different for investing and trading, and what makes for a good investor is different from the ingredients needed for good trading. The table below captures the difference between trading (the pricing game) and investing (the value game).
The Pricing Game
The Value Game
Underlying philosophy
The price is the only real number that you can act on. No one knows what the value of an asset is and estimating it is of little use.
Every asset has a fair or true value. You can estimate that value, albeit with error, and price has to converge on value (eventually).
To play the game
You try to guess which direction the price will move in the next period(s) and trade ahead of the movement. To win the game, you have to be right more often than wrong about direction and to exit before the winds shift.
You try to estimate the value of an asset, and if it is under(over) value, you buy (sell) the asset. To win the game, you have to be right about value (for the most part) and the market price has to move to that value
Key drivers
Price is determined by demand & supply, which in turn are affected by mood and momentum.
Value is determined by cash flows, growth and risk.
Information effect
Incremental information (news, stories, rumors) that shifts the mood will move the price, even if it has no real consequences for long term value.
Only information that alter cash flows, growth and risk in a material way can affect value.
(1) Faith in “value” (2) Faith in markets (3) Patience (4) Immunity from peer pressure
Biggest Danger(s)
Momentum shifts can occur quickly, wiping out months of profits in a few hours.
The price may not converge on value, even if your value is “right”.
Added bonus
Capacity to move prices (with lots of money and lots of followers).
Can provide the catalyst that can move price to value.
Most Delusional Player
A trader who thinks he is trading based on value.
A value investor who thinks he can reason with markets.
As I see it, you can play either the value or pricing game well, but being delusional about the game you are playing, and using the wrong tools or bringing the wrong skill set to that game, is a recipe for disaster.
What is Bitcoin?
The first step towards a serious debate on bitcoin then has to be deciding whether it is an asset, a currency, a commodity or collectible. Bitcoin is not an asset, since it does not generate cash flows standing alone for those who hold it (until you sell it). It is not a commodity, because it is not raw material that can be used in the production of something useful. The only exception that I can think off is that if it becomes a necessary component of smart contracts, it could take on the role of a commodity; that may be ethereum's saving grace, since it has been marketed less as a currency and more as a smart contracting lubricant. The choice then becomes whether it is a currency or a collectible, with its supporters tilting towards the former and its detractors the latter. I argued in my last post that Bitcoin is a currency, but it is not a good one yet, insofar as it has only limited acceptance as a medium of exchange and it is too volatile to be a store of value. Looking forward, there are three possible paths that I see for Bitcoin as a currency, from best case to worst case.
The Global Digital Currency: In the best case scenario, Bitcoin gains wide acceptance in transactions across the world, becoming a widely used global digital currency. For this to happen, it has to become more stable (relative to other currencies), central banks and governments around the world have to accept its use (or at least not actively try to impede it) and the aura of mystery around it has to fade. If that happens, it could compete with fiat currencies and given the algorithm set limits on its creation, its high price could be justified.
Gold for Millennials: In this scenario, Bitcoin becomes a haven for those who do not trust central banks, governments and fiat currencies. In short, it takes on the role that gold has, historically, for those who have lost trust in or fear centralized authority. It is interesting that the language of Bitcoin is filled with mining terminology, since it suggests that intentionally or otherwise, the creators of Bitcoin shared this vision. In fact, the hard cap on Bitcoin of 21 million is more compatible with this scenario than the first one. If this scenario unfolds, and Bitcoin shows the same staying power as gold, it will behave like gold does, rising during crises and dropping in more sanguine time periods.
The 21st Century Tulip Bulb: In this, the worst case scenario, Bitcoin is like a shooting star, attracting more money as it soars, from those who see it as a source of easy profits, but just as quickly flares out as these traders move on to something new and different (which could be a different and better designed digital currency), leaving Bitcoin holders with memories of what might have been. If this happens, Bitcoin could very well become the equivalent of Tulip Bulbs, a speculative asset that saw its prices soar in the sixteen hundreds in Holland, before collapsing in the aftermath.
I would be lying if I said that I knew which of these scenarios will unfold, but they are all still plausible scenarios. If you are trading in Bitcoin, you may very well not care, since your time horizon may be in minutes and hours, not weeks, months or years. If you have a longer term interest in Bitcoin, though, your focus should be less on the noise of day-to-day price movements and more on advancements on its use as a currency. Note also that you could be a pessimist on Bitcoin and other crypto currencies but be an optimist about the underlying technology, especially block chain, and its potential for disruption.
Reality Checks
Combining the section where I classified investments into assets, commodities, currencies and collectibles with the one where I argued that Bitcoin is a "young" currency allows me to draw the following conclusions:
Bitcoin is not an asset class: To those who are carving out a portion of their portfolios for Bitcoin, be clear about why you are doing it. It is not because you want to a diversified portfolio and hold all asset classes, it is because you want to use your trading skills on Bitcoin to supercharge your portfolio returns. Lest you view this as a swipe at cryptocurrencies, I would hasten to add that fiat currencies (like the US dollar, Euro or Yen) are not asset classes either.
You cannot value Bitcoin, you can only price it: This follows from the acceptance that Bitcoin is a currency, not an asset or a commodity. Any one who claims to value Bitcoin either has a very different definition of value than I do or is just making up stuff as he or she goes along.
It will be judged as a currency: In the long term, the price that you attach to Bitcoin will depend on how well it will performs as a currency. If it is accepted widely as a medium of exchange and is stable enough to be a store of value, it should command a high price. If it becomes gold-like, a fringe currency that investors flee to during crises, its price will be lower. Worse, if it is a transient currency that loses all purchasing power, as it is replaced by something new and different, it will crash and burn.
You don't invest in Bitcoin, you trade it: Since you cannot value Bitcoin, you don't have a critical ingredient that you need to be an investor. You can trade Bitcoin and become wealthy doing so, but it is because you are a good trader.
Good trader ingredients: To be a successful trader in Bitcoin, you need to recognize that moves in its price will have little do with fundamentals, everything to do with mood and momentum and big price shifts can happen on incremental information.
Would I buy Bitcoin at $6,100? No, but not for the reasons that you think. It is not because I believe that it is over valued, since I cannot make that judgment without valuing it and as I noted before, it cannot be valued. It is because I am not and never have been a good trader and, as a consequence, my pricing judgments are suspect. If you have good trading instincts, you should play the pricing game, as long as you recognize that it is a game, where you can win millions or lose millions, based upon your calls on momentum. If you win millions, I wish you the best! If you lose millions, please don't let paranoia lead you to blame the establishment, banks and governments for why you lost. Come easy, go easy! YouTube Video
