Bitcoin Investing: A Financial Harakiri Without Precedent

When Bitcoin was introduced as a method for storing data in a decentralized way that prevents tampering or loss, it was claimed that the data it stored was financial in nature. Terms such as "electronic money" were used, and references were made to financial institutions. It was even claimed that Bitcoin solved the problem of trust that causes crises in financial institutions.

Yet financial data is fundamentally about obligations and corresponding claims, which do not exist in Bitcoin. Although some decentralized systems that emerged after Bitcoin, such as Tether or PayPalUSD, do contain financial data because they represent claims on issuers who must redeem them for bank or PayPal balances, this still does not solve the problem of trust. Users must still trust that the issuers will be capable of honoring those claims. Financial crises arise precisely because claims are not honored due to defaults on obligations, issuer insolvency, and similar failures.

No financial crisis has occurred because central securities depositories, banks, or electronic money issuers tampered with client data. Crises occurred because companies issuing stocks went bankrupt, banks issued too many bad loans, or e-money issuers became insolvent. Centralized data storage or bad recordkeeping was never the problem.

So even if Bitcoin stored financial data, it still could not solve anything related to financial crises. In reality, Bitcoin stores only computational performance data. Computers operated by so-called Bitcoin miners solve cryptographic puzzles, and the more puzzles they solve, the larger their score becomes. It is that score that the Bitcoin system stores and transfers. When you pay to have 1 BTC transferred to your address, you are effectively buying proof that some computer in the past expended energy and solved a puzzle. This obviously has nothing to do with finance.

Yet, a global audience accepted the financial narrative surrounding Bitcoin. Driven by the false belief that decentralization is a revolutionary solution to financial problems, investors began pouring capital into the network, unwittingly committing a form of financial harakiri. They are trading away claims and goods that provide future utility for a mere receipt of past computational performance.

This self-destruction is most evident when we examine the logic of scaling. If a person buys 1 BTC, they pay, say, $100,000. If another person buys 10 BTC, they pay ten times more, or one million dollars. Generally, we pay ten times more for an asset because we expect ten times more future utility. Consider a few examples.

Stock shares represent a claim on future cash flows. When you pay ten times more to acquire 10 shares instead of 1, you gain the ability to receive ten times larger dividends or liquidation proceeds.

Fiat currency represents a claim on bank borrowers. When, for instance, you work ten times longer to obtain ten times more currency units, you gain a tenfold larger claim. Because currency units are issued through loans and tied to borrowers’ collateral, borrowers must work more for you, or provide more products and services, if you hold more of those units. If they default, banks themselves must honor the claim, and the more units you hold, the more seized collateral you can receive through bank auctions.

Outside the financial world, the same logic applies. If you pay ten times more to obtain ten times more wheat, gold, or audio files, you receive ten times more future utility in the form of nutrition, rust-free material, or entertainment.

Bitcoin reverses this logic. People pay ten times more not for ten times the future utility, but for a record that computers in the past solved ten times more puzzles. People are massively throwing away future utility for a record of past work. This is not merely a tragedy of logic; it is a mathematical countdown to an inevitable systemic failure.

Bitcoin operates as a pure negative-sum game. Every "profit" realized by an early adopter is a direct loss for a later participant, compounded by the constant drainage of real-world wealth required to pay the network’s astronomical electricity bills.

The system acts as a capital "sink," where money is permanently destroyed to maintain a ledger of historical puzzles. This reality is masked only by the constant influx of new participants sacrificing their claims on the real economy to feed the network's energy hunger. The moment this flow slows, whether due to regulation, energy costs, or the simple realization that a receipt for past work is not a store of future value, the structure will face a terminal liquidity crisis.

In the end, investors will be left with nothing but a perfect, decentralized record of the wealth they set on fire.