Written by Jacob Asparian, January 5th 2022

My Open Letter to a Finance Professor

I recently read George Athanassakos’ opinion piece on investing in Bitcoin. I will link to the article but be warned, it is behind a paywall and full of errors and misleading statements.  While the professor seems to have quite the education in finance, it is evident that he has a severe deficiency in understanding Bitcoin. So much so that I felt compelled to write a response.

Now I personally don't teach business at an illustrious university nor did I even attend university, so please take my humble opinion with a grain of salt. In the interest of being transparent, I am the founder of 1Bitcoin.ca - so yes, you could say I am a bit partial towards this revolutionary asset. If anyone would like to correct me and offer feedback I would certainly be open to it. In this letter we will be taking a look at different excerpts from this article, with a response to each. While this author hits on some key points, he also misses the mark on a lot.

“Bitcoin provides the means to avoid government and people have the right to issue their own currencies.”

He is half right here. Bitcoin is a way to avoid the brunt of the governments inflationary monetary practices and to protect your savings. We finally have an asset that can not be inflated, diluted, or controlled by any government - which is why Bitcoin is a savings technology. Now while 1000’s of other cryptocurrencies have popped up over the last 13 years, we are very vocal about the importance of sticking to just Bitcoin. The fundamental value proposition that Bitcoin’s monetary network offers is digital scarcity.  The thousands of altcoins, ponzis, and pump & dumps are part of the speculative casino and penny stocks built on the promises of being the “new Bitcoin” yet they are merely a new form of digital inflation. The difficulty is the public's perception towards Bitcoin and crypto is that they are one in the same when in reality that is quite far from the truth.

“As with gold, central banks cannot print Bitcoin and not unlike the rarity of gold the supply of Bitcoin is fixed, the 21 million Bitcoins is determined by an algorithm.”  

This was the most accurate representation of Bitcoin in the entire blog, as the Bitcoin supply and inflation schedule is predetermined and has operated as it should for the last 13 years. One thing to note is if demand for gold increases, miners around the world can fire up some more mines and increase the supply of gold they produce. The same can not be said about Bitcoin. Bitcoins supply is unforgivingly hard. Increase in demand and mining power will do nothing to the supply schedule. 

“When I teach valuation in my classes at Ivy Business Schools, I define value as economic or fundamental value, which relates to the ability of an asset to produce a stream of after-tax cash flows.”

So does this mean that if something doesn’t produce cash flows, if it does not have value? What about art? Or residential real estate in Canada? Or more simply, gold? Now I know the common response to that is “gold has an intrinsic value because of its jewelry and industrial use cases”, but I think we can all agree that a large portion of the $7.5 trillion gold market cap is used as a store of value primarily. This rehypothecation issue is actually one of the main flaws of gold and why Bitcoin is a better store of value/ Gold 2.0. But that is a conversation for another day. 

The one statement that really provoked me was when the author wrote “Is Bitcoin money? … It is not as it fails the three key functions of money: Store of value, unit of account, and medium of exchange. Bitcoin is extremely volatile, very illiquid, and unable to handle large volumes of transactions.”

Firstly, anything can be money. Over the years, society has used shells, glass beads, stones, iron, gold, credit, and fiat as a form of money. If the two parties involved are voluntarily agreeing to interact with a form of payment, who are we to tell them it is not money? Money goes through an evolution, as it must first be a store of value, then a medium of exchange and finally into a unit of account. This doesn't happen overnight and at the same time. It’s impractical to think just because Bitcoin hasn't done all that yet it is a failure.  Bitcoin is only 13 years old, and I’d say it has already done a pretty good job of becoming a store of value for a teenager. 

Now, while bitcoin's price is volatile, it is because we are going through a price discovery process. You’re not going to go from zero to over a trillion dollars without some volatility - even if the majority of the volatility is to the upside. While price has experienced some ups and downs, it is important to note that Bitcoin, the monetary network and protocol, has operated seamlessly every single day. With all the shutdowns we have dealt with over the last couple years, Bitcoin hasn't skipped a single beat. It has continued to help millions store and send value across the globe.  

Illiquidity was something that was a valid critique pre-2017 when Bitcoin had under a 100 billion market cap. At this point, buyers can get in or out fairly easily. Tesla market bought and sold hundreds of millions worth to test this out, and Bitcoin passed with flying colours. Now that Bitcoin has reached a trillion market cap, and is traded 24/7/365 internationally, I would be curious to see what assets are considered more liquid. 

He states that despite the bull markets of 2018-2019 Bitcoin's value collapsed. I didn't think Bitcoin at $60,000 would be considered collapsed and yet here we are. I am sure we will hear the same thing the next time we go through a parabolic increase and see a price correction to the mid six figures.

“Heavy regulation by governments weaken bitcoin's value proposition”

Again, this is extremely misleading and false. The current government regulations toward Bitcoin are very clear around the world.  First world countries like Canada, the United States, Australia, Japan, and a majority of Europe all view it favourably.  In 2022, we have government officials who are accepting Bitcoin for their donations, states that are offering tax exemptions to attract Bitcoin miners, cities that offer citizens to pay their taxes in Bitcoin, and countries that recognize Bitcoin as legal tender. Canada recognizes Bitcoin as a commodity (just like gold) where you must pay capital gains taxes only and if you sell. Although Turkey, China, and Egypt are a few of the countries that have hostile approaches towards it, that would be an entirely different conversation about the merits of living in a free society vs governments that get to dictate where you get to store your hard earned money. 

“And hostile government policies against bitcoin (for example, in China) increase the vulnerability of bitcoin and reduce its attractiveness”

Since when did we look to China as a guiding light on how other countries should handle their financial regulations? Also to note, China has also banned Facebook, YouTube, and Google to name a few. Here is a link of more things that China has banned, if you are interested. 

While we can debate Bitcoins use case as a money until we are blue in the face, what isn’t debatable is that Bitcoin is a digital property/commodity. 

What isn’t debatable that Bitcoin has a market cap 3 times larger than the big 5 Canadian banks combined. Or that Bitcoin is held on the balance sheets of publicly traded corporations as well as the sovereign nation of El Salvador. 

Having said all this, I'm genuinely curious. At what point will the sceptics acknowledge they were wrong and that they need to take some time to understand this new technology? While everyone has their own journey, we're here to help whenever you are ready to have a conversation. Feel free to reach out to me directly with any questions at Jacob@1Bitcoin.ca