BitCON Is Funnier than an Irish Joke — The Value of Bitcoin

Paddy says to Mick ‘Do ya wanna buy a token?

Mick asks, ‘What sort of token?

To which Paddy replied, ‘A bitcoin.

How much is it?’ queries Mick.

‘$72,500’ Paddy proudly boasts.

Holy hell Paddy, that’s a lot of money for a token. What do ya get for it?

Mick, you’ll be buying the right to sell it for even more money to a bigger idjit than you.’

Oh Paddy, sounds great. Where do I get one?

From someone selling the tokens’ says Paddy.

Why would someone want to sell me a token, Paddy.

Because he’s no idjit Mick.

(Idjit in Irish is idiot in English.)

We’ve seen this ‘bigger fool’ story play out many times over the centuries.

The first (and still the best) recorded example of collective stupidity was Tulip Mania in the 1600s (emphasis added):

When word got out, during the 1630s, that tulip bulbs were being sold for ever-increasing prices, more and more speculators piled in to the market.

Tulips even began to be used as a form of money in their own right: in 1633, actual properties were sold for handfuls of bulbs.

BBC Culture

The smart speculators were the ones who figured out how the ‘bigger fool’ game worked.

The bulbs were only worth the price of a house while people believed this to be the case…best to cash out and get your money into hard assets.

How an Aussie Dollar Crash Could Hurt Your Stock Gains. Discover More.

Once the bubble of baseless belief was popped, tulip prices plummeted like a stone.

In 1640 (a few years after the bubble burst) artist Jan Brueghel the Younger painted Satire of the Tulip Mania.

In it, Tulip speculators were depicted by Brueghel the Younger as brainless monkeys.

Satire of the Tulip Mania

Source: BBC Culture

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What parodies await today’s equally enthusiastic and misguided speculators?

Naïve innocents following a Pied Piper? Sheep going to the slaughter? There’s plenty to choose from.


Because we’ve been there and done this so many times throughout history.

South Sea Bubble. Mississippi Land. British Railway mania. The Roaring Twenties. Japan’s ‘miracle’ economy. Tech boom. US housing bubble.

Yet we never learn.

Assets pricing driven more by belief than substance always ends badly.

The following is a screenshot from an interview Jeremy Grantham (the 82-year-old founder of Grantham Mayo Van Otterloo & Co — a Boston-based investment firm with US$120 billion in funds under management) did with Bloomberg in late January 2021:

Bloomberg Frontrow - Interview with Jeremy Grantham

Source: Bloomberg

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History (repeatedly) tells us the answer to the question posed by Jeremy Grantham.

The only people who make money out of manias are the ones who are in on the joke…they laugh all the way to the bank…with the dollars they made from selling something they convinced people was more valuable than cash. Ah, the irony.

The others…well, in the cold light of day, they become the objects of satire.

What’s bitcoin worth?

This was a question pondered by the February 2021 issue of The Gowdie Letter.

Here’s an edited extract:

In 1992, Laguna Quays Resort (located between Mackay and Airlie Beach) was opened to great fanfare. The Japanese owners had spent $250 million developing the luxury resort and golf course.

To promote the development, Greg Norman, Ian Baker-Finch, Nick Price and Craig Parry played (at the owner’s expense) in an internationally televised tournament.

This is an extract from an article on Melbourne property developer, David Marriner, in The Age on 22 February 2003…

“…his latest project is a gargantuan 2400-hectare north Queensland ‘gateway to the Whitsundays’ development that he bought for $25 million after a Japanese banking consortium had spent $250 million on infrastructure there and gone broke.”

Over a decade after the resort opened, it sold for one-tenth of its development cost.

Having lived in North Queensland and, on occasion stayed at Laguna Quays, this lesson in cost versus value has always stayed with me.

What’s this got to do with the price of bitcoin?

The latest line of reasoning as to why bitcoin is worth X thousands of US dollars is…because of what it costs (in electricity usage) to “mine” new coins.

To quote from

“Using our above assumptions and the current network hash rate of (~113,000,000 TH/s) and the number of bitcoin mined per block (~12.73, which includes transaction fees), the gross cost to mine one bitcoin at current levels with current device types would be US$6,851.

“Our breakeven price estimate of US$6,851 is in line with similar break evens calculated in other reports: Cost to breakeven US$8,000 (11/11/19); Cost to breakeven US$7,600-3,600 (12/5/19).”

These are the assumptions used to calculate the “mining” cost…

Mining Cost Assumptions


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I wonder if the environmentally conscious millennials who are buying bitcoin realise how much additional CO2 their responsible for creating?


Using the “cost to mine” as a floor in the price, makes about as much sense as the original developer of Laguna Quay’s saying “well that’s what it cost me to develop, so that’s the price.”

The market couldn’t give a flying fig about your cost…it’ll offer a price based on prevailing supply and demand.

And at present, for bitcoin, demand exceeds supply.

The only reason these coding whiz kids are spending serious money on high tech computer “rigs” and paying eye-watering power bills, is because crypto cult members have made it well worth their while.

But what if that demand wanes?

I can hear the howls of protests now…that won’t EVER Happen.


Can you state with absolute confidence that in the next year or two or 10 that someone else won’t come up with an even better computer code or that government won’t intervene to regulate the market or that some hacker/s won’t penetrate the firewalls and destroy the value?

Ray Dalio (founder of Bridgewater Associates) recently published an article titled “What I really think of Bitcoin”

Here’s a teaser (emphasis added):

“Although Bitcoin is limited in supply, digital currencies are not limited in supply because new ones have come along and will continue to come along to compete so the supply of Bitcoin-like assets should, and competition will, play a role in determining Bitcoin and other cryptocurrency prices. In fact I assume that better ones will come along and displace this one because that is the way the evolution of everything works—i.e., new ways of doing things and new things always have and always will replace old ways of doing things and old things. Since the way Bitcoin works is fixed, it won’t be able to evolve and I presume that a better alternative will be invented and pass it by. I see that as a risk.”

Whereas, gold is gold…it cannot be replaced by a process of evolution. Gold has remained gold for many thousands of years…and will continue to do so.

What’s the price of bitcoin?

Whatever Ponzi-scheme members decide to push it to before someone finally starts laughing at the “naked Emperor”.

But more importantly, what’s the value of bitcoin?

Not a lot.

Don’t let the bitCON joke be at your expense.

Happy Saint Paddy’s Day.


Vern Gowdie Signature

Vern Gowdie,
Editor, The Rum Rebellion

PS: Vern is also the Editor of The Gowdie Letter and The Gowdie Advisory — investment services designed to help everyday Australians avoid the financial pitfalls of a volatile economy and make informed decisions to grow their wealth for generations to come.

Vern has been involved in financial planning since 1986.

In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners.

His previous firm, Gowdie Financial Planning, was recognised in 2004, 2005, 2006 & 2007, by Independent Financial Adviser magazine as one of the top five financial planning firms in Australia.

In 2005, Vern commenced his writing career with the ‘Big Picture’ column for regional newspapers and was a commentator on financial matters for Prime Radio talkback.

In 2008, he sold his financial planning firm due to concerns about an impending economic downturn and the impact this would have on the investment industry.

In 2013, he joined Fat Tail Investment Research as editor of Gowdie Family Wealth. In 2015, his book The End of Australia sold over 20,000 copies and launched his second premium newsletter, The Gowdie Letter.

Vern has since published two other books, A Parents Gift of Knowledge, all about the passing of investing intelligence from father to daughter, and How Much Bull can Investors Bear, an expose on the investment industry’s smoke and mirrors.

His contrarian views often place him at odds with the financial planning profession today, but Vern’s sole motivation is to help investors like you to protect their own and their family’s wealth.

Vern is Founder and Chairman of The Gowdie Advisory and The Gowdie Letter advisory service.

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