Will Bitcoin Kill All Stocks?

Today, I want to answer the question: Will Bitcoin kill all stocks? 

It really depends on what “killing all stocks” means. If it means will Bitcoin’s fiat price outperform all stocks over all possible time horizons, I would say definitely not, and this has already been proven true over the last 18 months. Bitcoin has already massively underperformed Nvidia, for example. As we can see here, Bitcoin is up about 300%, and Nvidia is up about 800%.

Now, the other question is, will you be able to trade in and out of stocks and outperform Bitcoin on a post-tax basis over the next decade? 

Will you be able to find the new Nvidia every 18 months and get into it and get out of it in time? 

Definitely not, I would say, and so that’s why I encourage people just to keep it simple and HODL Bitcoin. At least, that’s what I do.

Now, is it bad or sad that Nvidia has outperformed Bitcoin lately? 

I’d say it’s neither. I’m glad that Nvidia makes great GPUs for the world and that its shareholders are being rewarded for this. I’m also glad that I’ve been holding just Bitcoin instead, and I can go hiking every day instead of being glued to my computer trying to pick which new investment I can roll my money into.

Bitcoin and Nvidia really are like comparing apples and oranges. Stocks are not a neutral, censorship-resistant, peer-to-peer money that you can send to anyone or move anywhere in a brain wallet. Rather, stocks are paper assets that are at the mercy of company management, the board, and myriad operational, regulatory, and jurisdictional risks. You also hold stocks in a brokerage account that can easily be closed, frozen, or censored.

Now, sometimes individual stocks will outperform, and sometimes Bitcoin will. I’m quite certain, however, that holding Bitcoin will massively outperform over the next decade, let’s say, holding a diversified basket of stocks like the S&P 500 in the form of the SPY or the NASDAQ 100 in the form of the QQQs. I think Bitcoin will also massively outperform holding cash, bonds, and real estate as well.

Now, there’s another interpretation of today’s title, “Will Bitcoin kill all stocks?” 

That interpretation is, will stocks still exist on a Bitcoin Standard? 

I think it’s a great question and one that I’ve alluded to a few times in recent videos and that people have been asking me to cover. People have been wondering about this free market rabbit hole, this sort of libertarian and 'an-cap' rabbit hole that we’ve been going down recently. 

I want to say now that I made these videos in part to provide the necessary intellectual framework for answering today’s question. This is really what we’ve been building up to, so if you haven’t watched those videos first, I’d encourage you to watch them: Bitcoin and Free Markets, and then, of course, Who Will Build the Roads?

In these videos, I try to answer the basic question of how to coordinate and scale human activity. How do you enable large groups of people to work together to accomplish amazing things? 

Do you just enslave a lot of people and force them to build a pyramid for you? 

I’d say that’s not just ethically reprehensible but also probably doesn’t bring out the best in your workers. Religion and/or nationalism have been other effective ways to coordinate human action:

“Build this pyramid because Amon-Ra or your beloved Pharaoh desires it or because it will make Egypt great again (MEGA).”

Not to imply that I support these kinds of highly reductionist explanations for either religion or nationalism, both of which are extremely complicated and nuanced phenomena, but I would say here that religion and nationalism have certainly been used to coordinate human action and activity.

Another way to motivate people and coordinate their activity is through free markets and money. 

For example, as we spoke about over the past two days, there’s no such thing as a global “Pencil Czar”. Yet somehow, lots of people globally manage to coordinate to work together to collect the necessary raw commodities (wood, rubber, graphite, etc.) and to produce a finished product that is amazing and affordable—just 4 cents for a pencil, which is assembled globally and makes its way to your house.

Milton Friedman’s pencil parable is a wonderful example of how free markets help to coordinate and scale complex human activity.

So now I think we’re ready to answer the question: Will stocks exist on a Bitcoin Standard? 

And I think yes, I think they will, for the following reason: Corporations are another excellent way of coordinating and scaling human activity in the context of money and free markets. How do you get, for example, 200,000 people to work together to design and build a new airplane? 

A great way of doing this is to form a corporation and allow the management team, the workers and outside investors to participate in the upside in exchange for investing either their time or their money? 

Stocks are just shares of ownership; they’re equity in a company, and having shares of ownership in many different companies being publicly traded, I think, is a great idea. It creates deep, liquid markets. It’s definitely a much better use of capital than funneling everything into government bonds like U.S. treasuries, which help to fund an institution that’s stupid, violent, and a terrible allocator of capital.

Good, neutral, sound, scarce, hard commodity money like Bitcoin is the best foundation for a prosperous economy. So that would be sort of layer one. You don’t want to use soft money that can be endlessly printed by central bankers or other insiders, in the case of the U.S. dollar, and crypto, which is really just another form of fiat. 

Now, the next level up from this sound foundation of sound money is the free and voluntary exchange of goods and services for that money, what we call free markets. Markets that are free of government restrictions, capital controls, tariffs, price controls, wage controls, and other forms of interference. And then I’d say the next level up from free markets is the alignment of interests that comes from ownership in a common enterprise like a corporation.

Corporations have given us jet-powered aircraft, modern automobiles, dishwashers, laundry machines, and, of course, the iPhone. 

Now, it’s impossible to design and manufacture a new jet aircraft with your friends in your garage. Rather, it requires the coordination of thousands and thousands of people working on wing design, wing safety, avionics, flight controls, hydraulic and pneumatic systems, etc. 

And for this reason, the modern corporation really is still the best mechanism to enable the creation and manufacture of complex modern items like computers or aircraft.

Now, of course, many industries, many corporations, and many stocks in the modern fiat era are highly captured and corrupt, like, for example, the banks big pharma and food manufacturing companies, just to name a few. But I think they’ll be much less captured on a Bitcoin Standard where the federal government is much smaller, less powerful, and unable to bail out industries or play favorites using its access to the money printers. 

This is really how the game works. 

But, I do think corporations will still exist on a Bitcoin Standard, and their shares will still be publicly traded because corporations remain one of the best tools ever developed to help coordinate and scale human activity in useful and productive ways.

Now, will people still want to invest in these stocks? 

I think absolutely. I think Bitcoiners themselves will use their Bitcoin to fund, for example, life extension companies, space exploration companies, and who knows what other cool ideas. And when the world is mostly on a Bitcoin Standard, Bitcoin will gain purchasing power not through new adoption like today, with new people coming in and adopting Bitcoin and holding it as their reserve asset, but rather at a much slower rate that captures civilizational progress and productivity gains. 

At that point, you’ll be able to outperform the base money, which will be Bitcoin, by building companies that create goods and services that people really want to buy. So Bitcoin will not kill stocks; rather, I think Bitcoin will make stocks great again.

Bitcoin University is an educational channel devoted to Bitcoin, financial freedom, and self-sovereignty. Matthew also covers relevant macro and financial news. 

Learn more at: https://www.bitcoinuniversity.com/  
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