If you comment here without having bothered to read the paper, the comment will be removed and you will be permanently banned from posting on the site. I am tired of arguments "what about gold? what about fiat?". THEY ARE ANSWERED IN THE PAPER.
It cannot be valued as a security as it has no cash flow. Unlike Amazon who one day is expected to pay a dividend, but never has and may not ever. But it does have earnings.
@@michaelestrinone2111 In common parlance, a security is any type of tradable financial asset. However, the precise definition of a security is a legal definition and thus varies by jurisdiction.
@@SlobberySlob He provided a formula for the value of a security. There is a cash flow term and another one. Bitcoin’s cash flow term is zero but this is also true for many other securities. He wasn’t stating this as a negative, it is simply a fact but this fact alone does not mean Bitcoin has zero value. This fact coupled with the other fact that it has no utility are combined to result in zero. To resolve any confusion over the definition of a security, just assume that anything that can be valued according to the formula provided counts as a security. In a way, that formula is the definition.
@@RedShiftedDollar You missed the absorption barrier. The whole BTC ecosystem takes huge amounts of energy to keep it alive, fractional costs, sentiment, nodes etc.... and has many terminal vulnerabilites, thats mainly why its heading to 0 unlike Gold.
Coward, although it takes some integrity to admit defeat (repeatedly deleting my legitimate comments), except if it's the easier way to be a coward and you're actually trying to hide truth
We are not disabling comments. We will let the trolls spend some time and effort forming sentences, then block them in a nanosecond directly or via bot.
I gonna have you kneeling at 1m dollar/bitcoin, have you begging for sorry as you gonna be fully humiliated by the fact you did this ORBITAL mistake of turning every bitcoiner against you.
Which is better 1. Early buyers of a currency gain value 2. Miners can only create value by spending energy equivalent to the price of the currency 3. Fixed supply. Absolute scarcity. Or 1. Early buyers of a currency lose value 2. Owner of a currency gets to steal value from the early buyers 3. The supply of the currency is unlimited and inflation rates can be manipulated by greedy politicians
Nicely put. Bitcoin is a Digital Commodity, not a currency. In terms of your first point, not all early buyers of bitcoin have gained value relative to USD unless they held for at least 3~ years, but that aside, your 1st point actually it actually links to your 3rd point (1 Bitcoin is always 1 Bitcoin).
@@asmaghani766 why are people unable to grasp that as an entirely new asset/technology, Bitcoin can be viewed as both a commodity AND a currency? And other things too. It simply escapes the boxes. It's all things to all people.
Right! I have such respect for NNT, for all the obvious reasons. I'm addition to "what" I've learned, he's also taught me "how" to think critically. The purposely limited thinking on this topic is disappointing. It's all motivated reasoning. How can he not see that Bitcoin itself is a black swan, or at least an emergent phenomenon of internet technology. Very sad.
@@miraclemaxicl Flaw in premise: assuming it's a currency. Then saying if not then security. Wrong and wrong. It's a non-productive asset just like: gold, undeveloped real estate, or fine art. It's property, not a security. Don't take my word for it, ask the IRS (2014). Using math to prove that gold, real estate, or fine art is not a currency and therefor worthless is absurd. Save the math; go check your premises. To paraphrase Taleb himself: if your model doesn't match the real world, it is your model that is flawed. Not the real world.
@@t.555 Correct. I have failed to find anyone under the age of 50 that makes a full throated defense against Bitcoin. No one under 30 makes *any* defense. It's not hard to see where this is going.
I have been a Nassim Taleb fan before I owned bitcoin( a few thousandth of it to be precise). Always wondered if a day would come when Taleb's Levantine philosophy of "old things retain design because they have function" runs to its limits. I think that day has arrived.
Whether or not it makes sense to bet against this would be the price of holding the short. In Talebs books he disxusses i believe holding exotic binary options that had huge potential pay offs despite being unlikely, but they also were'nt expensive because no one thought those events could happen. Crypto is the opposite - from the second it has hit the publics attention it has divided opinion, so the options tools have from the get go had a big demand and thus would be very costly to invest time in guessing the or 'a' (could still not happen) fall.
@@panaccoman the price of holding matters a lot. It eats into other capital, there's sunk costs and you are speculating on a win. Why dont you ask him if hes currently funding options i guarantee you the answer is no
Nassim you are very special. I would love to meet you someday. I feel like we are related. From childhood I felt something wrong with our world and sensed fake experts with degrees and fake assets but never knew how to express it until you popped up on my UA-cam feed. Thank God!
Agree with all what you said. But is it possible Bitcoin is a new class of assets? It may not have residual intrinsic value, but there is limited supply. Like collectable stamps. It is worth what it's worth because enough people say it is.
@@harrissimo Shit, we could petrify them and use them as a currency! There would be a manageable inflation whenever you take a dump, and government could slightly control the turd supply by feeding you more tacos. If we conservatively estimate a market cap of $600 billion, which is of course totally reasonable for an imaginary currency that nobody uses, paying $1,000,000 for one of your turds is the steal of a lifetime.
@@harrissimo The fact your turds are "yours" doesn't grant them value. Turds can be very valuable with the right characteristics, for example, fossilized dinosaur turds are collected by museums and have significant value, the turds of beautiful women are very valuable to a segment of the cropophagic community, etc.
The BTC comparison to a business is incorrect (Warren buffet) , also dismissing it as a currency is also in part a fact that this theory was based upon which is also not necessarily right, it's value won't cap like the value of gold won't cap, it will continue expanding with the creation of new wealth, the limit of new wealth creation would be the limit of bitcoin. You could say that It is a currency that won't inflate, like gold could be a currency, the difference to gold is that Bitcoin is easily transportable and transferable, and is DIVISIBLE, hence the argument of " if it is a currency what is it doing at 35K" does not stand. You can increase the number of "units" without increasing the supply. It is like saying you can divide the dollar in cents and subcents without being able to print more dollars.
He's reducing everything to a very simple crude model and then shows that the model means the price should be zero. The model is wrong, but he's claiming reality is wrong.
@@SciloMendez What I'm saying is bitcoin can't be compared to gold, or a bakery or anything else, because it has an innate ability to skirt government laws and regulations, and can be verified 100% very quickly. Ex. a gold bar can be faked by containing lead, a share certificate can be forged. And neither of these can be transferred to someone from the USA to Nigeria, without a large amount of cost and red tape, if it's even possible at all. This friction between most goods and securities not being present with BTC is not captured by the model.
I'm having trouble following this. You do realize that miner reward is a combination of fees paid by the sender plus a subsidy of minted new coins, right? When 21 million coins have all been issued, that subsidy goes to zero, but the fees paid by the sender still will be present.
@@SciloMendez Also, here is a chart of the difficuly chart, which is another name for the complexity. As you can see, it goes down many times over the years: www.coinwarz.com/mining/bitcoin/difficulty-chart
The one thing that strikes me in the arguments of both sides (pro or anti-BTC) is that there is most certainly a paradigm shift in things that we designate as "assets, currencies, or otherwise" and how we value them. As much as this transition may be underway, it certainly will take time. Hélas, nous devons garder un esprit ouvert!
Yeah safety and freedom shifted also, WHO changed the definition of herd immunity, and definition of va((ines also changed. I recommend "General Semantics" of Alfred Korzybski and "The Tyranny Of Words" by Stuart Chase.
@@Achrononmaster Changing definitions of words does not sound alarm in your head? Getting vaxxed every six months suddenly became normal. Well, is it? If you are from the states and you talk about unelected group of people, than you are a joke.
@@ivangoran4461 your comment has nothing to do with the video or what the original commentator said and yet you want to give book recommendations? The nerve.
In effect, a DCF valuation for BTC ignores cash flows because there are none, and the terminal value has a non-zero probability of falling to zero given no cash flows and no inherent value. Assuming you hold BTC, you’re banking on the greater fool theory for the market value to be non-zero tomorrow. I agree, but question whether there is any option value in holding BTC for the future potential? IMHO the option value would be deminimus compared to current market value, but it is something.
You say the cash flow & discounting are 0 for Bitcoin? but what about transaction fees (like a payments network) and mining rewards. It makes the asset salable across time, scale and space.
@@christianmaurer96 Taleb has said fundamentally you can't sort bitcoin on some his lecture since long ago.. I research it, but it's only available in form of derivative product, even in reality it's very constricted trade or the broker are not that trusted. I've just tried yesterday, only back to square one. Definitely can't sort millions, let alone billions.
Dear Professor Taleb. I have been largely a fan of your work since I read your book on dynamic hedging as an equity derivatives trader in the late 90s! Thank you very much for sharing your detailed explanation and your paper as well. I definitely appreciate and encourage logical debate on this issue. I just have one question, surely based on your logic, all fragile art would be worth zero? Because there is some non-0 probability, that a piece of art (such as a painting by Picasso or van Gogh), could be destroyed in the future? And also using the argument of gold not being able to be destroyed, the same doesn’t hold for art. So does that mean Art is also irrationally priced? Keen to hear your thoughts on this, especially as I know you are fond of art as well! Thanks & Regards
Yep. His "either currency or security" premise is flawed. And that makes the rest of his logic train silly. Fine art is an excellent counterpoint. He'd try to say that it has aesthetic appeal. Gold does too, as well as industrial use. But this does not explain the high costs of these things. It is their scarcity.
@@Anonymint-vj7bt Agree on all. His framing is really weird af. The "gold isn't either of those either" response is perfect. Also, there's a non-zero probably that Bitcoin becomes a currency.
He said “if it's a currency it's price should be stable” stable relative to what?! to USD?! He really doesn't know what he is talking about, and btw every issue he talked about applied to USD
"Stable relative to what?" -> relative to its own, obviously. In other words, that central banks can exert stabilizing influence on such currency, whatever it is, through monetary policies. "Every issue he talked about applied to USD" -> blatant lie. Who the fvck is going to stabilize bitcoin in place of central governments? Private entities? Come on man. As much as I dislike how the government runs the monetary economy, placing the same on the hands of private interests will only get things even worse. It's not going to work.
Taleb, could you please let me know what are the price drivers of Bitcoin, and why governments are concern about people using it? Is the free flow of capital and privacy the benefits of using Bitcoin? Also, as price of Bitcoin goes down, would the supply of Bitcoin in circulation decrease due to speculators cornering the market? I just want to get my blind spot checked by a finance professional that I trust. Thanks in advance, Taleb!
When your chosen model does not reproduce reality then there is something wrong with the model, not reality. Bitcoin went through long periods of stability and didn't went to zero as your chosen model would predict. You also make a grotesque mistake saying that it is worth "too much" at 35k to be a currency. You should only look at total marketcap, since bitcoin is divisible (check what 1 satoshi means).
No, he explains why the price is not zero. It is similar to the reason why Bernie Madoff’s fund was worth so much as well. His early investors likely made lots of money, which turned them into Madoff’s biggest salesmen who pulled in more investors. Speculative bubbles create real movement in price and in a way the price at each point in time represents the assets true and fair value, it’s just that the momentum responsible for the meteoric rise can flip on a whim to result in a meteoric fall. Bitcoin is different in that it is not a ponzi scheme, but the price dynamics are the same. The price is governed by the greater fool theory. Sure you can argue that investing in Madoff could work out for someone even though they knew they were buying into a scam, but most people would not consider this an attractive financial strategy.
@@RedShiftedDollar Check BTC price from 2013-2016 and 2018-2020. There are long periods of stability. And long periods of stability after a "crash". It should've gone to zero multiple times according to the model he used. It is not just a speculative bubble, I would call it a "speculative decentralized currency", or something like that. It does not fit in the commodity model nor in the classical currency definition. Another thing to note is that currencies CAN and DO have instability periods and crashes (just check hyper inflation on the past centuries), BTC and crypto in general just seems to have those instabilities in an amplified manner. He should be worried in finding the correct model, not using the wrong model that provides wrong conclusions about historical data.
@@joaopaulovasquescamargo4733 If Bitcoin is a speculative decentralized currency, and during the speculation period it fails to establish itself as a useable currency, what does this say about whether it has passed the test that speculators are gambling on? Name one vendor who genuinely accepts Bitcoin. Bitcoin was also the first of many. Even if cryptocurrency gains mass adoption someday, the odds that Bitcoin is that currency are the same as the odds that Windows 95 rises to dominance as an operating system again. It won’t happen. If you are going to speculate on a currency, at least speculate on the one that is actually gaining some adoption as a real currency, Monero.
@@RedShiftedDollar Now you are shifting the discussion. You can change Taleb's video to Monero if you wish, everything he says also applies to Monero. The main application of BTC today is to be the standard of crypto, not the most used as a currency. I don't want to shift the discussion. My main argument is that the model is not the correct one to be used here and has no value.
There is one huge misinterpretation most people have regarding the original bitcoin white paper. I bring this up because your black paper quotes the phrase. "A purely peer-to-peer version of electronic cash would..." Ironlically, this phrase is not describing Bitcoin. It is an ideological statement that many people misinterpret as a description of the properties of Bitcoin except Bitcoin is not purely peer-to-peer. The network operators are the third parties and they are required in 100% of transactions. Bitcoin transactions require a minimum of 3 participants whereas gold and USD cash only require two and are truly peer-to-peer. An ideal currency should be peer to peer, and since bitcoin is not, the whitepaper itself concedes that it is not an ideal currency.
Bitcoin require more than 3 participant to have no TRUSTED third party. the tranfer of value is peer to peer tho. (your fund are not moving from one address to another using someone else fund like in the traditional banking)
@@anteeko Tell me, why are trusted third parties within the transaction so bad? Think about all of the bad things they can do. Then I will tell you how the third parties involved in Bitcoin can do the exact same bad things except via different means. Name one adverse third party related scenario you think Bitcoin is immune from.
@@RedShiftedDollar ... Nassim often says ‘most human progress does not come from academics’ ... this entire discussion on ‘bitcoin’ is simply speculation, at best! Obviously, there’s a well organized ‘disinformation’ campaign against ‘bitcoin’ ...cui bono?
@@franciscosousa3947 What is speculative about the fact that all of Bitcoins transactions are forever logged in an open unencrypted ledger? That’s a fact. What is speculative about the fact that third party network operators are involved in 100% of transactions? A subset of these operators called miners literally siphon a portion of the transaction into their accounts. The amount siphoned has no limit and can be selected arbitrarily by the operators. If you are not willing to pay the amount they chose, you cannot transact. These are all facts. Please reference one specific claim I have made in any of these comments and describe why you think it is speculation.
Teacher! Could you leave the automatic subtitles option enabled on the videos? My English is not one of the best. I bet you have a lot of deaf fans too.
If your conclusion is that “it must be worth zero” but the market is pricing it at 40K then a wise man would realize (or at least consider the possibility) that his logic is flawed or his premises are wrong.
@@juliandiaz9367 Especially when one considers markets have been behaving "irrationally" about Bitcoin for the past decade or so. I understand even 20, 30, 40 years don't contain enough data points to make robust assessments, but prima facie, you'd expect an asset worth zero to eventually collapse like all the other scams and penny stocks. This usually takes anywhere between a few months to a few years, not going on two decades!
@@juliandiaz9367it’s only rational until it isnt… this shouldn’t be happening is what he is saying but the worth of bitcoin is given by the hope of people trying to make a come up, an investment, not necessarily for its actual value or use. There are much better coins out there. I like bitcoin though, I wish to see it become a permanent success or at least continue its volatile journey, lots of money to be made (or lost) in volatile markets.
A guy loses his lotto ticket.. a guy loses his password to his e-wallet: same difference. Imagine if Ponzi had access to a computer back in the days.. oh wait.. that was Madoff.
And what value do you want to give Bitcoin? If no-one else gives it a value, would it still have a value to you? Maybe a Picasso would ... but all the people I know who have Bitcoin have been buying purely with the hope that it will go up, up, up. Not because they think it's really worth the money they paid.
@@SteveSmith-jc7pc You should try looking at BTC and cripto currencies alike through the lens of 3rd world countries who live under enslaving financial oppression. It may be refreshing.
@@bautistabaiocchi-lora1339 The poor people in those nations use USD, BTC is useless as a currency and oppressive governments regularly block internet traffic entirely. BTC is stupid and horrendously expensive as a network.
The underlying assumption is seemingly that currency is "stable". in what sense? If we compare it to other currencies it is in fluctuation minute by minute
@@Shadow1986 Honestly can't answer for now. But surely it has pros and cons. Just to mention that any currency starting from that basis, it's by necessity.
I'm been trying to figure out if bitcoins have any use other than as money. Gold has some uses in electronics, but it's main use is for jewelry and art because it's pretty and doesn't corrode. Maybe one day bitcoins can be used for something, but I cannot figure out what. I know the same is true for paper money, but most people tend to hold very little paper money. And at least you can make wallpaper out of paper money.
BTC Dont have smart contracts. Smart contracts would be the utility BSV is the only currencie that wants to be a currencie and have smart contracts. Ethereum is a platform of smart contracts. BTC i dont have a clue what they are trying to do makes no sense is slow and dont have smart contracts..
Bitcoin can be used for many things. The problem is that it is not good enough at any of those things to displace the alternatives that people actually use. For instance, it really could be used as a currency but it is slow, the fees are high, it has counterparty risk, it is less accessible than alternatives, all account balances and transactions are exposed publicly, etc. So what do most people actually use as currency? Visa or MasterCard credit denominated in dollars. This credit is digital, it can be transacted in seconds, fees are relatively high, but still lower than bitcoin’s in most cases, Visa provides fraud protection services, transactions can be reversed, users get rewards and perks like points and rental car insurance, Visa is accepted by millions of merchants around the world, etc. By denominating in USD, users of Visa credit gain the benefit of short term price stability and the ability to pay your credit bill using the same currency most people receive as wages and pay their taxes in. Yes that is a fiat with its own problems, but inflation is a non issue for a one month credit cycle. Visa could also change their denomination very easily or provide currency conversion services. Visa credit is significantly better than Bitcoin for most uses which leaves fringe uses as the potential market scope. However these uses are better served by alternatives as well.
@@joaosilva-ji1ve Money already is digital. CBDCs will add digital serialization and centralized transaction processing. These things don't change money, they only change the ability to track and control the flow, creation, and destruction of money.
Bonjour Monsieur TALEB, je vous remercie pour ces explications. Je suis en train de relire pour la seconde fois d'Incerto. Bien amicalement et encore une fois merci.
In Summary ; BTCs utility value as a currency is 0 due to volatility. If its not a currency what is it? It is not an asset of no cash flow with a rational future expected sale price as it has an absorption barrier (fractional costs, decaying network nodes, eventually too big a block chain, hash rate decay, sentiment and interest die off etc..etc..) where it will disappear one day and die unlike gold. So it has only greater irrational fools as it's model sustaining it's price. Rationally, it's sale price is ultimately 0 as time goes on. Only the bit about the rational bubble I didn't quite get. Excellent overall. Enjoyed it very much. A great model.
Bitcoin's present day volatility is a feature, not a bug. It's growth has closely followed Power Law mathematics, with ever decreasing volatility over time marked by ever slowing price growth rates. It's value as a currency is definitely not 0. That's plainly idiotic.
Interesting point, but I did not understand the not a currency argument. It might be be volatile and new, but I still can see that it satisfy major postulates. Could you elaborate more on why BTC is not a currency?
Basically, a currency is something that is 'widely accepted' as a means of payment for goods or services. Although some people do accept bitcoin it's probably not 'yet' widely accepted as such. It does have the potential for this as a verifiable digital asset. But it needs to cross such a threshold level first. This may or may not happen for various reasons: 1. Many people would not want to accept something that is highly volatile. It's volatility could reduce over time, although it would probably need wider acceptance to do this. So there's a catch-22 here that bitcoin can't necessarily overcome. 2. The lack of government control has some attractions for value maintenance... e.g not affected by large amounts of QE etc. A counter argument to this is citizens benefit from a local free-floating currency that self-adjusts to compensate for potentially poor economic progress compared with supranational currencies like the Euro (and what Bitcoin aspires to be) that caused major economic difficulties for countries like Greece. 3. The environmental cost of bitcoin may also have a major impact on it's perceived value as a digital asset and ultimately, people's willingness to trade it sufficiently to turn it into a proper currency. In summary, an asset is not a currency just because some people call it a currency. The asset has to be widely accepted. If just 5% of the shops and restaurants I visit accepted it, I would call it a currency, but it's not even a fraction of a percent. I'm not sure that it ever will be and everyone I know that has bought bitcoin has done so purely because they think the value will continue to go up .. no other reason. All the hallmarks of a bubble.
@@SteveSmith-jc7pc Thanks for the nice explanation. Term widely sound very arbitrary for me. It is used by a lot of people for transactions, unit of value and store of value. I agree with your points, but seems to me that you guys just asserted that it is not a currency, and you are just moving the goalpost.
Not a currency because it is difficult to set prices using Bitcoin units because of volatility. High costs and latencies for real BTC transactions and the Ponzi like crowd dynamics (ever growing recruitment else valuation collapses) and deflationary design do not help.
@@chrislesner2822 the deflationary nature is the counter argument to the ponzi dynamics. It doesn't need exponential recruitment like a ponzi, it just needs stable usage due to the deflationary charecteristics.
Do you have any thoughts on crypto currencies that try to be more "currency" like, such as monero (not necessarily on monero itself)? Monero is actively used for transactions today, without the insane transaction fees that bitcoin has. Still has huge volatility problems though that might preclude it from being used as a "real" curreny. It's clear bitcoin cannot be used as a a currency and as a store of value is much too susceptible to black swan events. Thank you for fighting the bitcoin psychos out there.
Bahaha. You're awesome Nassim. The error here comes precisely because the securitization is voluntary through a diversified Trust pool of individuals using Bitcoin who are also invested in it. It's the stupidest error. The US government guarantees its security with a giant military and its ability to force people to do things they don't want to do. That's the essence of power. A cooperative model currency voluntarily adopted to be used as an exchange mechanism amongst those people who then invest in that currency and hope for its increase in value so they make it a product rather than a security, is obviously a Ponzi scheme
While your dollar loses values as the FED prints to oblivion..It's called competition of the dollar, and poorer countries will not continue with the dollar holding and trade if it continues the devaluation..
@@goutfromfriedokra3936 yes but the dollar competes against the securities of the whole world, reinforced by the ability of the US govt to enforce its will, physically, while the Bitcoin COMPETES AGAINST ITSELF
@@dt6822 Nice try....Enforce physically Yes within it's own borders but .If other countries are using less dollars which is true for India,china, Brazil and Argentina--they will hedge some in the form of a harder currency, say, gold, petro,btc..It doesn't compete with itself...it's a small competitor to other currencies, and in Argentina and turkey , more ppl are using it store their wealth as opposed to the argentinana peso , lira.....PPL are sick of their dollar no longer providing full value, inflated away....
@@goutfromfriedokra3936 Bull. It is pointless. Currency is a guarantee by. Government with a monopoly on force that the value of the cash will exist. Bit coin is not backed by a government or even hedged against other currencies. And if you don't think they can enforce the FINTRAC outside of their borders, what happened to Libya? Bitcoin is a scam and is worth nothing
The most fairly distributed and scarce store of value ever created is bitcoin on 21 million forever every transaction is stored on the blockchain. Be sure to diversify
I would agree with your analysis when thinking of a security but Bitcoin is a commodity, and your comparison of Bitcoin to Gold saying that gold have a value but Bitcoin does not is flawed, if I am living in a country that one day decides to come to the rich’s home to confiscate real estate, gold, cash and everything that is valuable. The only thing I will be left with is my Bitcoin. The moment a person realizes this power is when they understand the one of many values of Bitcoin
What if there is no obvious use for Bitcoin. But people value it anyway. Think of it as a Picasso, a piece of human history in the form of technology, that is valued for transaction, store of wealth, and other things that the human mind hasn't conceived of yet. I don't think math as we know it can define a price. Isn't math always evolving as well?
I've read the white paper several times last decade. Bitcoin solved the double spent problem and it's a 'decentralized' network which has value. The value of the token itself is exactly what people are willing to pay for it based on price discovery on the free market and currently it's about $58k at time of writing, that's what it's worth.
It's not a good currency by design and that's fine, it can function as an unconfiscatable (if you handle it right) scarce digital asset with a maximum supply. And there's a demand for that.
Thank u for a reasonable comment, Avengerie. BTC really has security issues, I know it company which makes tool for police helping the to track transactions and IP addresses. And you can see all payments for any wallet on the web. Btc might go to zero if people migrate to monero because of security eventually. Also I'd like to notice that anyone could implement centralised crypto in mid 90ties but as I read, such stuff was prosecuted. Btc is decentralised in theory, but it can't function without group of skilled developers. Value of fiat comes from tax office demand and also central bank and other institutions do hard work to limit inflation.
Forgive my stupidity, but couldn't the same argument said of anything that has no cash flow? i.e. Gold? Is Bitcoin speculative in the same way as Gold then?
Buy the one thing that the US government treats as so valuable that they would rather borrow any amount of dollars at any interest rate or raise taxes to any level than sell a single pound of this stuff to pay their expenses. It is so valuable that the government has not sold any of it in over 50 years. If you think Bitcoin has hodlers, the US government is the ultimate hodler of this stuff. It is so valuable that it was specifically mentioned in the US constitution as the only thing allowable for performing certain tasks. It is so valuable that Bitcoin itself tried but failed to be a digital emulation of it. It is so valuable that the government stores it at an armed military base as far from borders as possible so that it is as difficult as possible for another country to take it. Today the metal coins you use as money are the least valuable things you have in your pocket, but there was a day when the metal coins were the most valuable. Why has this flip flopped? Seriously try to figure out why the US government has not sold any of their stockpile since 1971. They refuse to sell this stuff under any circumstances. Trade your crypto coins out for gold coins. Nassim has likely come to this same conclusion which is why he shows us the hint around his neck. There will be a day when the government starts selling this stuff again, and on that day you will want to have some gold in your physical possession.
Pof.Taleb, I am a big fan of you. I heard you speak in public that you owned cryptocurrency. So, I wanna know if you've changed your mind about that. Thanks!
the main think for me is that if it is neither a currency (heaven help us if we have currency that jumps around like bitcoin does) nor is it an investment tool because it does not create value (other than by speculation which could go the other way and lose value), and yes it takes so much to create it...and i don't the sound of that - as you said - "create"
@@Bigdeadyfps hahahaha and btc has intrinsic value like gold and is government-backed like the dollar or pound, right? so much of the value of btc appears to be coming from the difficulties associated with it, principally the mining part. not arguing or debating people here. this on my part is contemplation and really thinking the basics of this thing... blessings to all
the probability of miners deciding they want to do something else with their life may not be so tiny, because we can have an event where enough people will lose interest in bitcoin that it will no longer be viable (for anybody) to keep it going (high energy costs, very low valuation). and miners will race each-other to the door.
Bitcoin hit $100K tonight. This presentation looks like a midwit who doesn't comprehend that it is a new asset class who is trying to contain it in a box of his own preconceived notions about money. But what do I know, I'm just a polisci major with some worthless Bitcoin.
4:10 But bitcoin is not a business or a company... It's not Macdonald's or Coca-Cola, you're not expecting from bitcoin a dividend... So this formula is false.
Coach redpill does not like nassim and thinks he is arrogant although he respects his achievement. Search coach redpill nassim taleb and watch the video
Structural problems in real estate? I doubt that is viewed as a low-probability event by those in that field. It's already in insurance contracts etc. Black Swans go way beyond what we can currently even dream to imagine. Maybe Nassim Taleb will offer his opinion on this.
People are not rational. Fiat currencies are gonna fail before Bitcoin is hacked/fails in some other way. When fiat currencies implode people will jump into BTC. So if I then sell them my BTC I bought today I will make a fortune. I do not care if it eventually goes to 0. note: this is example, I do not trade BTC
Unironically I came back to this video because there may no longer be the suppressing of real rates if FED buying of treasuries is limited and this could kill bitcoin inadvertently 😂
This demo shows that bitcoin cannot just be considered as a currency or a security as the value is irrational and should be equal to zero in the long run. So bitcoin is more than a currency or a security to explain its price, it is indeed a network, a protocol and a immutable and cryptographic ledger with no central authority. So indeed the expected value is zero when considering a security pricing model, but still bitcoin token has a cost to make the network and ledger work. From a cost pricing model, the expected price should represent the costs involved to maintain the network. Now, it may be questionable to involve such energy (so costs) to maintain it. It must exist some existing or future use cases to justify that the long teem expectation is not zero. In all cases, as long as miners continue to work, the price will continue to be driven by powerful market participants (through the derivative or spot market) and also by the scarcity mechanism.
Good analysis. But unless this network can tap into some kind of independent "free energy" -- it will undoubtedly be worth zero. What happens when energy becomes scarce? The network is starved. Shrinks ---> zero.
@@zpettigrew Why would energy become "scarce"? That's not a real thing. That's like saying your dishwasher won't work one day because energy will be scarce. That's a problem of energy supply, not the dishwasher. Perpetually increasing energy usage is what makes society advance. Imagine the silliness of living in the 1700s and worrying that the next technology might one day result in an energy shortage. Energy shortages are a reflection of idiotic government policies, not rational actions of humans.
@@tbr2025 See also: "Peak Oil". See Also: supply chains. See also: geopolitical instability. All of the EU is rationing energy now due to Nat Gas shortages. Hard to run the ecosystem if you hardly have enough energy to heat your house.
When you first tweeted about dumping Bitcoin, I thought you turned into a cranky old man. When I read your Bitcoin black paper, I got rid of my Bitcoin exposure.
One question: is it Bitcoin which is unstable or is it the dollars or any other currency used to compare its value with that is/are unstable? I am asking not giving an opinion; so would be great to have suggestions and ideas on this. Thé only opinion I have is that unless I go through all the documentation written on the technicality of the topic, I in essence know nothing.
Thanks Professor, this is very clear. I am no sure this is a reasonable question, but here it goes: there is any probability for it become currency in the future? Is that part of the expectation of value (in addition to selling to the next idiot)? Thanks in advance.
I was quite good at math when I was younger, but I have put it away for several years and studied other analytical pursuits (computer programming). If I wanted to get back up to speed so that I can understand technically Taleb's "Elementary Analysis" put forth at the beginning of this video could someone recommend me some books to start reading? EDIT: Doing some quick wikipedia research, to make my question more precise: The Expectation term seems to come from probability theory so I guess first I would want a solid book on that subject and then other supporting books that could help me understand how probability theory specifically applies to rational markets and related quantitative analysis. Yes I understand this is probably a very broad research task, I just want a starting point.
This is very good. It really goes to show that a currency must have a use. All currencies that pass the equation with expected value have some form of usefulness or utility. For the USD we have the fact that it is the only currency that must be used to pay all taxes. For gold we have industrial and artistic uses. Even for the cryptocurrency Monero, it is the only form of payment accepted by the dark web. What is the use of Bitcoin? Bitcoin is old, obsolete technology. Name another software where version 1.0 kept being used as the best despite the release of many upgrades? It's only a matter of time before it goes back to it's true value of zero. The real value of bitcoin was to spark innovation in the cryptoasset sector, and all of its usefullness on this front has already been used up. The only use left is the government's use of it to track down tax criminals.
@Total_Life_Cell No, the Ferrari is art. That’s why it is worth 50 million like a Van Gogh. Even so, nobody drives it. A currency is something to be used by the masses on a daily basis. Please tell me one reason why you think a public open ledger is a good idea? You are really an advocate of this concept? If so please tell me how much is in your bank account and to whom your last 100 transactions were with. This level of transparency is present in Bitcoin. You really think this is the best? It’s like a Ferrari made of glass that you have to drive naked and you have to park it on the street for everyone to see.
@UCDeDZGsh8Ji9uUz9bjKoiKQ A ledger is an accounting tool which is not the same thing as a currency. The currency is that which is transacted and the ledger is simply the record of that transaction. Bitcoin is the currency and the blockchain is its ledger. If you are going to have a public ledger, at least make it anonymous. This is why Monero if far superior to Bitcoin. You are not bothered by transparency? OK then post an image of you last bank statement on Imgur and share the link here. You really have no concerns about doing this? Interesting. And just because I believe Bitcoin is worth zero, as proven by Mr. Taleb, does not mean I am pro fiat. Fiat is a separate topic but of all alternatives, Bitcoin has got to be one of the absolute worst choices because it’s value is zero among other reasons. Why would you hold any object with an intrinsic value of zero? If the market value is nonzero then that just means you should sell before the intrinsic value is realized.
I haven't seen this upload yet. Bin on the internet since the beginning of time and never knew he had a channel on youtube, what the fuck is wrong with me????. Eitherways, the King has spoken on this contentious topic. I look forward to watching it.
So at the end of the comment one part, Nassim meant that for the limit not to be zero, the expectation of the price of bitcoin over t+n should be \infinity to cancel out the exponential term before it. Am I getting that right?
@@portal_libertarianismo Could you name someone you think is smart? Let's limit it to someone who's still alive and have spoken their mind on the topic.
Is this a joke? A currency that is not considered a currency generally has a value of zero (approximately the value of the paper). No need for a mathematical formula.
Hi Nassim, Makes complete sense. If Bitcoin is not a currency and it has no cash flow it must necessarily be worth zero. I suppose the only question I have is about time: if people believe that Bitcoin is, or will be a currency, I suppose it could be above zero for some time, even years? Perhaps it is as with all fragile things, we can note the fragility but we cannot say when it will break? How do you think about time here? Thank you.
@@nntalebproba Thank you! I should have been more precise. My question is around how soon it could go to zero. Through backward induction we arrive at zero price today using rational expectations, but could the irrationality of the 'religious cult' keep it above zero for a long time? Without falling into the trap of trying to forecast, I guess we could use Lindy principle to form some rough view how long it may stay above zero? PS: I have never owned Bitcoin. Just trying to understand more.
Thank you for the video Mr. Taleb! The problem I see is the assumption that bitcoin is a security. Even without the mathematical analysis, we can see that investment in bitcoin as a security is pure speculation, analogous to ponzi. The interesting question is, however, if bitcoin or some alt-coin can happen as a currency. There is a number of holders who already use crypto (like monero) as a currency for privacy reasons. And the question becomes, as the speculators exit, would remaining people still use it as a currency.
Sorry but wrong model applied to valuation of this asset. You've non-chalantly discarded consideration of bitcoin as money. If we assume bitcoin is not money Rest of the video doesnt need to be 13 minutes to prove the value is zero. It would be intellectually and practically a lot more valuable to compute bitcoin's value as money with a growing user base. Volatile price in its current state does not invalidate butcoin's use as money but does make it harder to mathematcally compute value at a given time.
There is a lot of rules surrounding trading shares of a bakery, and verifying those shares are real. Bitcoin sidesteps all that. Two people anywhere in the world can transact, securely, privately, and verifiably. Your model doesn't capture that.
As he said, his model is about securities, not currencies. He states that he doesn't regard Bitcoin as a currency. See my reply to the comment below this one on Bitcoin as a potential currency.
@@SteveSmith-jc7pc There are 500+ comments in this thread, I can't find your other reply. The problem is his model relies on the future value of bitcoin being zero, which means if bitcoin ever became stable enough (and it is becoming more and more stable all the time) to become a currency any time in the future, then his whole model blows up. Also, regardless of whether you label bitcoin a security, a currency, or a duck, it doesn't refute any of the arguments I was saying.
@@jimaylan6140 Sorry you couldn't see my reply - the ordering of UA-cam comments means it isn't the one below. (It was actually my reply to zarathustravideo (comment 1 day ago at time of writing this) who was asking about definition of a currency. I agree all your points are extremely valid in determining good traits for a currency. I also agree with your pre-condition "if bitcoin ever became stable enough", which I think is the key. I am not convinced that it is becoming more stable. I hope you are right and that it does. (In which case, yes, his model is invalid as currencies need acceptance, not intrinsic value ... most currency is digital anyway, some is paper and a tiny amount is pretty worthless metals.) I think the volatility problem comes from the fact that a large number of people are treating it as an investment ... They don't want to spend their bitcoins (i.e. transact in them), they just want to invest in them in the belief that they will only increase in value. I think Taleb's video is really aimed at them. Anyway, it's an interesting story and I'll continue to follow it.
I feel like there’s a lot hanging on “is it a currency”. What if it’s just a rubbish currency in most (but not quite all) circumstances? Can it have some non-zero value then?
Exactly. The term "crypto-currency" is a bad analogue and unfortunately it stuck. It's much more like an asset, but ultimately I think it might be it's own thing,.
Taleb himself has said he wouldn't be surprised if it reaches $1 million. Also $70k is still below BTC's peak when adjusted for inflation. Childishly pointing at the price as if it means anything only reflects on your critical thinking skills, not Taleb's logic. Taleb has written thousands of pages of brilliant arguments about the idiocy of trying to make specific predictions in terms of when something will happen or the exact path it will take to reach its destination, and you have obviously never attempted to understand his arguments. You just animalistically react to the latest stimuli that makes you feel good.
Taleb logic: Proof-of-Stake cryptocurrencies cannot be valued at 0 because they have a cash flow component that allows users to earn interest on their stake. The professor has just made a succinct argument for speculating on ETH 2.0, DOT, anything DeFi, anything with yields, etc. instead of the boomer pet rock.
btc produces yield if you deploy it in gemini, blockfi,celsisus...Also network effects produce value of btc...He's denigrating btc to set up the next play: shill bitcoin sv.....
@@jeffyeah4256 It's not actually yield as in economic yield, BTC etc... 'yield' comes from straddle options on It's volatility. It therefore is merely a bet based on price action, and that needs someone to take the other side of the bet and risk losing. A net zero sum game unlike economic yield where there is a real gain to be distributed and no-one loses.
@@SlobberySlob btc is not a zero sum game...it is 21 million, fixed amount. You are betting on fiat that is losing value, and. a stock market propped up by QE....I would think the bigger Ponzi is propped up real estate,stock market...BTC is pretty much fine art and religion, enough ppl like it. It's not worth zero
@@jeffyeah4256 But what if more people don't like it as much as the ealier ones? ... Price stagnation. Greater Fool's theory just fizzles out of power.
Entirely agree. However, we don't live in "rational" markets at the moment. We haven't for some time. I formulated an argument based off of the physics and energy limitations involved that is a bit more robust and even gives predicative market moves. Buut... this also shows that BTC is = to zero (actually of negative value - being a vacuum for real physical energy). Metabolically "expensive" ponzi.
That wouldn't be as fun as you think. Saylor is really good at communicating verbally, and Nassim is better at communicating in written form. Also Saylor is all narrative, which doesn't make him wrong. I think he's right about the technology implications, but the fulfillment of his theory might not be Bitcoin as he thinks it will be. Nassim's math seems to indicate that it won't (can't) be Bitcoin. But at any rate they would be having different conversations, and Saylor would likely appear the victor just for being better at telling a story on the fly. Maybe they could have a Twitter fight.
If you comment here without having bothered to read the paper, the comment will be removed and you will be permanently banned from posting on the site. I am tired of arguments "what about gold? what about fiat?". THEY ARE ANSWERED IN THE PAPER.
It cannot be valued as a security as it has no cash flow. Unlike Amazon who one day is expected to pay a dividend, but never has and may not ever. But it does have earnings.
@@michaelestrinone2111 In common parlance, a security is any type of tradable financial asset. However, the precise definition of a security is a legal definition and thus varies by jurisdiction.
@@SlobberySlob He provided a formula for the value of a security. There is a cash flow term and another one. Bitcoin’s cash flow term is zero but this is also true for many other securities. He wasn’t stating this as a negative, it is simply a fact but this fact alone does not mean Bitcoin has zero value. This fact coupled with the other fact that it has no utility are combined to result in zero.
To resolve any confusion over the definition of a security, just assume that anything that can be valued according to the formula provided counts as a security. In a way, that formula is the definition.
@@RedShiftedDollar You missed the absorption barrier. The whole BTC ecosystem takes huge amounts of energy to keep it alive, fractional costs, sentiment, nodes etc.... and has many terminal vulnerabilites, thats mainly why its heading to 0 unlike Gold.
Coward, although it takes some integrity to admit defeat (repeatedly deleting my legitimate comments), except if it's the easier way to be a coward and you're actually trying to hide truth
We are not disabling comments. We will let the trolls spend some time and effort forming sentences, then block them in a nanosecond directly or via bot.
Where is CRP's comment?
@@sabinmanimala7003 switch from "top comments" to "newest first" it worked for me 👍
I gonna have you kneeling at 1m dollar/bitcoin, have you begging for sorry as you gonna be fully humiliated by the fact you did this ORBITAL mistake of turning every bitcoiner against you.
@@karozagorusSo what if it goes to 1 million per bitcoin. That doesn't invalidate his points.
Which is better
1. Early buyers of a currency gain value
2. Miners can only create value by spending energy equivalent to the price of the currency
3. Fixed supply. Absolute scarcity.
Or
1. Early buyers of a currency lose value
2. Owner of a currency gets to steal value from the early buyers
3. The supply of the currency is unlimited and inflation rates can be manipulated by greedy politicians
Nicely put. Bitcoin is a Digital Commodity, not a currency. In terms of your first point, not all early buyers of bitcoin have gained value relative to USD unless they held for at least 3~ years, but that aside, your 1st point actually it actually links to your 3rd point (1 Bitcoin is always 1 Bitcoin).
Being able to manipulate the currency, if the agent is competent, can also help stabilize it. #3 is a double edged sword
@@asmaghani766 why are people unable to grasp that as an entirely new asset/technology, Bitcoin can be viewed as both a commodity AND a currency? And other things too. It simply escapes the boxes. It's all things to all people.
@@haldanesghost ha. How idealistic. They’re always playing catch attempting to correct their own mistakes.
i ownder why no currencies around the world are backed by anything....interesting...hmmmmm.
Thank You for changing the set up. Now the with the white board is more readable.
Interesting talk.
Big flaw in the premise though.
“If it’s not a currency, it must be a security. It’s not a security, it’s worth zero”.
Right! I have such respect for NNT, for all the obvious reasons. I'm addition to "what" I've learned, he's also taught me "how" to think critically. The purposely limited thinking on this topic is disappointing. It's all motivated reasoning. How can he not see that Bitcoin itself is a black swan, or at least an emergent phenomenon of internet technology. Very sad.
If its not a currency then its useless so then its Value to society is zero
@@TheMongolianWay So with that logic gold also has no value to society. Got it.
what is the flaw?
@@miraclemaxicl Flaw in premise: assuming it's a currency. Then saying if not then security. Wrong and wrong. It's a non-productive asset just like: gold, undeveloped real estate, or fine art. It's property, not a security. Don't take my word for it, ask the IRS (2014). Using math to prove that gold, real estate, or fine art is not a currency and therefor worthless is absurd. Save the math; go check your premises. To paraphrase Taleb himself: if your model doesn't match the real world, it is your model that is flawed. Not the real world.
I own Bitcoin but I have to listen to both sides to be educated
rarely do people think like that( i own bitcoin aswell) always listen to both sides you are a gem!
@@t.555 Correct. I have failed to find anyone under the age of 50 that makes a full throated defense against Bitcoin. No one under 30 makes *any* defense. It's not hard to see where this is going.
I have been a Nassim Taleb fan before I owned bitcoin( a few thousandth of it to be precise). Always wondered if a day would come when Taleb's Levantine philosophy of "old things retain design because they have function" runs to its limits.
I think that day has arrived.
Nassim owns some bitcoin too.
@@cantatanoir6850 that's a very underrated comment, if not factual shows a great understanding of his philosophy
@NNT Presumably, you are short? Otherwise, why should I believe someone without skin in the game?
Whether or not it makes sense to bet against this would be the price of holding the short. In Talebs books he disxusses i believe holding exotic binary options that had huge potential pay offs despite being unlikely, but they also were'nt expensive because no one thought those events could happen. Crypto is the opposite - from the second it has hit the publics attention it has divided opinion, so the options tools have from the get go had a big demand and thus would be very costly to invest time in guessing the or 'a' (could still not happen) fall.
@@panaccoman the price of holding matters a lot. It eats into other capital, there's sunk costs and you are speculating on a win. Why dont you ask him if hes currently funding options i guarantee you the answer is no
@@panaccoman are you going to cry bro?
Touche Zer!
"it's going to get a little technical"
I was barely following along already, I need to polish my math skills 😅
Nassim you are very special. I would love to meet you someday. I feel like we are related. From childhood I felt something wrong with our world and sensed fake experts with degrees and fake assets but never knew how to express it until you popped up on my UA-cam feed. Thank God!
Please do a video demonstrating the math on where the value of a hard earned dollar ends up with negative interest rates.
You don't need math to understand that
Literally just demand and supply. When supply is greater than demand you have negative interest rates. Really that simple.
Thank you for doing these Sir. Many thanks my friends in India. Thanks to the Internet too.
Agree with all what you said. But is it possible Bitcoin is a new class of assets?
It may not have residual intrinsic value, but there is limited supply. Like collectable stamps. It is worth what it's worth because enough people say it is.
There is a limited supply of my turds. How much will give me for them? I have a hot fresh batch coming up in a few minutes.
@@harrissimo Shit, we could petrify them and use them as a currency! There would be a manageable inflation whenever you take a dump, and government could slightly control the turd supply by feeding you more tacos. If we conservatively estimate a market cap of $600 billion, which is of course totally reasonable for an imaginary currency that nobody uses, paying $1,000,000 for one of your turds is the steal of a lifetime.
@@harrissimo hahah what an actually great answer
@@harrissimo The fact your turds are "yours" doesn't grant them value. Turds can be very valuable with the right characteristics, for example, fossilized dinosaur turds are collected by museums and have significant value, the turds of beautiful women are very valuable to a segment of the cropophagic community, etc.
There is no limited supply when those 21 million "coins" can be broken down into infinitly smaller units. That 21 million soon becomes 21 quadrillion
I love you man! Hope you are having a wonderful day!
I wonder if he’ll do the same for Ethereum
Why would he? Ethereum is no threat and is unlikely to survive long term. It simply doesn't have censorship resistant properties necessary.
@Opressa Era I don't think no one knows what the code does. You don't know doesn't mean no one knows 🤔🤔🤔
@@nilskp We'll see about that one, cupcake.
Why would it be any different??
@@AltumNovo Enlighten me please.
The BTC comparison to a business is incorrect (Warren buffet) , also dismissing it as a currency is also in part a fact that this theory was based upon which is also not necessarily right, it's value won't cap like the value of gold won't cap, it will continue expanding with the creation of new wealth, the limit of new wealth creation would be the limit of bitcoin. You could say that It is a currency that won't inflate, like gold could be a currency, the difference to gold is that Bitcoin is easily transportable and transferable, and is DIVISIBLE, hence the argument of " if it is a currency what is it doing at 35K" does not stand. You can increase the number of "units" without increasing the supply. It is like saying you can divide the dollar in cents and subcents without being able to print more dollars.
A brief look into comment section shows that most "critics" didn't even understand the point made in the video (anime avatar is a big red flag).
rofl. Then why don't you simplify it? You talk liked the math he "used" really captures all the nuances with bitcoin.
He's reducing everything to a very simple crude model and then shows that the model means the price should be zero. The model is wrong, but he's claiming reality is wrong.
@@SciloMendez What I'm saying is bitcoin can't be compared to gold, or a bakery or anything else, because it has an innate ability to skirt government laws and regulations, and can be verified 100% very quickly. Ex. a gold bar can be faked by containing lead, a share certificate can be forged. And neither of these can be transferred to someone from the USA to Nigeria, without a large amount of cost and red tape, if it's even possible at all.
This friction between most goods and securities not being present with BTC is not captured by the model.
I'm having trouble following this. You do realize that miner reward is a combination of fees paid by the sender plus a subsidy of minted new coins, right? When 21 million coins have all been issued, that subsidy goes to zero, but the fees paid by the sender still will be present.
@@SciloMendez Also, here is a chart of the difficuly chart, which is another name for the complexity. As you can see, it goes down many times over the years:
www.coinwarz.com/mining/bitcoin/difficulty-chart
The one thing that strikes me in the arguments of both sides (pro or anti-BTC) is that there is most certainly a paradigm shift in things that we designate as "assets, currencies, or otherwise" and how we value them. As much as this transition may be underway, it certainly will take time. Hélas, nous devons garder un esprit ouvert!
Yeah safety and freedom shifted also, WHO changed the definition of herd immunity, and definition of va((ines also changed. I recommend "General Semantics" of Alfred Korzybski and "The Tyranny Of Words" by Stuart Chase.
@@ivangoran4461 Shifting your "freedom" to an unregulated private anonymous unelected group really sounds like a good idea huh.
@@Achrononmaster Changing definitions of words does not sound alarm in your head? Getting vaxxed every six months suddenly became normal. Well, is it? If you are from the states and you talk about unelected group of people, than you are a joke.
@@ivangoran4461 your comment has nothing to do with the video or what the original commentator said and yet you want to give book recommendations? The nerve.
@@OM-el6oy So you read these books and came up with that conclusion? Wow. You`re really talented. Did someone help you or you did it all by yourself?
In effect, a DCF valuation for BTC ignores cash flows because there are none, and the terminal value has a non-zero probability of falling to zero given no cash flows and no inherent value. Assuming you hold BTC, you’re banking on the greater fool theory for the market value to be non-zero tomorrow. I agree, but question whether there is any option value in holding BTC for the future potential? IMHO the option value would be deminimus compared to current market value, but it is something.
Meastro, appreciate you taking the time out to do this for us.
You say the cash flow & discounting are 0 for Bitcoin? but what about transaction fees (like a payments network) and mining rewards. It makes the asset salable across time, scale and space.
This has no meaning without action. If it goes to zero and your thinking is right; buy a billion short.
false
I agree!
Can you short bitcoin?
@@andromaxbse6459 yes
@@christianmaurer96 Taleb has said fundamentally you can't sort bitcoin on some his lecture since long ago.. I research it, but it's only available in form of derivative product, even in reality it's very constricted trade or the broker are not that trusted.
I've just tried yesterday, only back to square one. Definitely can't sort millions, let alone billions.
Dear Professor Taleb. I have been largely a fan of your work since I read your book on dynamic hedging as an equity derivatives trader in the late 90s! Thank you very much for sharing your detailed explanation and your paper as well. I definitely appreciate and encourage logical debate on this issue. I just have one question, surely based on your logic, all fragile art would be worth zero? Because there is some non-0 probability, that a piece of art (such as a painting by Picasso or van Gogh), could be destroyed in the future? And also using the argument of gold not being able to be destroyed, the same doesn’t hold for art. So does that mean Art is also irrationally priced? Keen to hear your thoughts on this, especially as I know you are fond of art as well! Thanks & Regards
Yep. His "either currency or security" premise is flawed. And that makes the rest of his logic train silly. Fine art is an excellent counterpoint. He'd try to say that it has aesthetic appeal. Gold does too, as well as industrial use. But this does not explain the high costs of these things. It is their scarcity.
@@Anonymint-vj7bt Agree on all. His framing is really weird af. The "gold isn't either of those either" response is perfect. Also, there's a non-zero probably that Bitcoin becomes a currency.
He said “if it's a currency it's price should be stable” stable relative to what?! to USD?! He really doesn't know what he is talking about, and btw every issue he talked about applied to USD
"Stable relative to what?"
-> relative to its own, obviously. In other words, that central banks can exert stabilizing influence on such currency, whatever it is, through monetary policies.
"Every issue he talked about applied to USD"
-> blatant lie. Who the fvck is going to stabilize bitcoin in place of central governments? Private entities? Come on man. As much as I dislike how the government runs the monetary economy, placing the same on the hands of private interests will only get things even worse. It's not going to work.
Taleb, could you please let me know what are the price drivers of Bitcoin, and why governments are concern about people using it? Is the free flow of capital and privacy the benefits of using Bitcoin? Also, as price of Bitcoin goes down, would the supply of Bitcoin in circulation decrease due to speculators cornering the market? I just want to get my blind spot checked by a finance professional that I trust. Thanks in advance, Taleb!
he's a banker, and against dollar competition..He believes in FULL CONTROL by the gov, while our useless gov.. debases the dollar..
The paper you're writing there is actually a physics paper @ NNT, you just haven't realized it yet
When your chosen model does not reproduce reality then there is something wrong with the model, not reality. Bitcoin went through long periods of stability and didn't went to zero as your chosen model would predict.
You also make a grotesque mistake saying that it is worth "too much" at 35k to be a currency. You should only look at total marketcap, since bitcoin is divisible (check what 1 satoshi means).
Nailed him with his own model quote! Well played, sir! I was going with domain dependent thinking. 👍
No, he explains why the price is not zero. It is similar to the reason why Bernie Madoff’s fund was worth so much as well. His early investors likely made lots of money, which turned them into Madoff’s biggest salesmen who pulled in more investors. Speculative bubbles create real movement in price and in a way the price at each point in time represents the assets true and fair value, it’s just that the momentum responsible for the meteoric rise can flip on a whim to result in a meteoric fall. Bitcoin is different in that it is not a ponzi scheme, but the price dynamics are the same. The price is governed by the greater fool theory. Sure you can argue that investing in Madoff could work out for someone even though they knew they were buying into a scam, but most people would not consider this an attractive financial strategy.
@@RedShiftedDollar Check BTC price from 2013-2016 and 2018-2020. There are long periods of stability. And long periods of stability after a "crash". It should've gone to zero multiple times according to the model he used. It is not just a speculative bubble, I would call it a "speculative decentralized currency", or something like that. It does not fit in the commodity model nor in the classical currency definition. Another thing to note is that currencies CAN and DO have instability periods and crashes (just check hyper inflation on the past centuries), BTC and crypto in general just seems to have those instabilities in an amplified manner.
He should be worried in finding the correct model, not using the wrong model that provides wrong conclusions about historical data.
@@joaopaulovasquescamargo4733 If Bitcoin is a speculative decentralized currency, and during the speculation period it fails to establish itself as a useable currency, what does this say about whether it has passed the test that speculators are gambling on? Name one vendor who genuinely accepts Bitcoin. Bitcoin was also the first of many. Even if cryptocurrency gains mass adoption someday, the odds that Bitcoin is that currency are the same as the odds that Windows 95 rises to dominance as an operating system again. It won’t happen.
If you are going to speculate on a currency, at least speculate on the one that is actually gaining some adoption as a real currency, Monero.
@@RedShiftedDollar Now you are shifting the discussion. You can change Taleb's video to Monero if you wish, everything he says also applies to Monero. The main application of BTC today is to be the standard of crypto, not the most used as a currency. I don't want to shift the discussion. My main argument is that the model is not the correct one to be used here and has no value.
There is one huge misinterpretation most people have regarding the original bitcoin white paper. I bring this up because your black paper quotes the phrase. "A purely peer-to-peer version of electronic cash would..." Ironlically, this phrase is not describing Bitcoin. It is an ideological statement that many people misinterpret as a description of the properties of Bitcoin except Bitcoin is not purely peer-to-peer. The network operators are the third parties and they are required in 100% of transactions. Bitcoin transactions require a minimum of 3 participants whereas gold and USD cash only require two and are truly peer-to-peer. An ideal currency should be peer to peer, and since bitcoin is not, the whitepaper itself concedes that it is not an ideal currency.
Bitcoin require more than 3 participant to have no TRUSTED third party. the tranfer of value is peer to peer tho. (your fund are not moving from one address to another using someone else fund like in the traditional banking)
@@anteeko Did you know every Bitcoin transaction involves a third address? Do you know who this third address belongs to and why it is there?
@@anteeko Tell me, why are trusted third parties within the transaction so bad? Think about all of the bad things they can do. Then I will tell you how the third parties involved in Bitcoin can do the exact same bad things except via different means. Name one adverse third party related scenario you think Bitcoin is immune from.
@@RedShiftedDollar ... Nassim often says ‘most human progress does not come from academics’ ... this entire discussion on ‘bitcoin’ is simply speculation, at best! Obviously, there’s a well organized ‘disinformation’ campaign against ‘bitcoin’ ...cui bono?
@@franciscosousa3947 What is speculative about the fact that all of Bitcoins transactions are forever logged in an open unencrypted ledger? That’s a fact. What is speculative about the fact that third party network operators are involved in 100% of transactions? A subset of these operators called miners literally siphon a portion of the transaction into their accounts. The amount siphoned has no limit and can be selected arbitrarily by the operators. If you are not willing to pay the amount they chose, you cannot transact. These are all facts.
Please reference one specific claim I have made in any of these comments and describe why you think it is speculation.
The price of Bitcoin is infinity indeed.
For your infinity money you need to buy 1/BTC
Hilarious
@@pikaso6586 you know I am right ultimately.
@@HassanWorld of course, so I presume that all your money is in bitcoin?
@@bradynields9783 Wouldn't you say the same for most, if not all, assets?
Teacher! Could you leave the automatic subtitles option enabled on the videos? My English is not one of the best. I bet you have a lot of deaf fans too.
If your conclusion is that “it must be worth zero” but the market is pricing it at 40K then a wise man would realize (or at least consider the possibility) that his logic is flawed or his premises are wrong.
he prefaced it by saying a rational market
@@yugioh8810 there’s only one market, labeling it “irrational” is the definition of denying reality.
@@juliandiaz9367 Especially when one considers markets have been behaving "irrationally" about Bitcoin for the past decade or so. I understand even 20, 30, 40 years don't contain enough data points to make robust assessments, but prima facie, you'd expect an asset worth zero to eventually collapse like all the other scams and penny stocks. This usually takes anywhere between a few months to a few years, not going on two decades!
@@juliandiaz9367it’s only rational until it isnt… this shouldn’t be happening is what he is saying but the worth of bitcoin is given by the hope of people trying to make a come up, an investment, not necessarily for its actual value or use. There are much better coins out there. I like bitcoin though, I wish to see it become a permanent success or at least continue its volatile journey, lots of money to be made (or lost) in volatile markets.
Which is bigger: the risks associated with owning BTC or number of idiots in the universe?
Both numbers are unknowable
A guy loses his lotto ticket.. a guy loses his password to his e-wallet: same difference. Imagine if Ponzi had access to a computer back in the days.. oh wait.. that was Madoff.
Number of existing idiots is limited, the risk might be infinite.
The greatest risk for an investor is missing an opportunity.
Few.
Things have the value that one wants to give to it. A collector pays millions for things that some find useless.
And what value do you want to give Bitcoin?
If no-one else gives it a value, would it still have a value to you?
Maybe a Picasso would ... but all the people I know who have Bitcoin have been buying purely with the hope that it will go up, up, up. Not because they think it's really worth the money they paid.
@@vladimirkazakov3033 it's worth more than it did last year? I don't think you understand what you are saying.
@NRG not a guarantee but the trend seem to suggest btc will rebound.
@@SteveSmith-jc7pc You should try looking at BTC and cripto currencies alike through the lens of 3rd world countries who live under enslaving financial oppression. It may be refreshing.
@@bautistabaiocchi-lora1339 The poor people in those nations use USD, BTC is useless as a currency and oppressive governments regularly block internet traffic entirely. BTC is stupid and horrendously expensive as a network.
i resently discovered Nassim Taleb and my life has changed ever since
The underlying assumption is seemingly that currency is "stable".
in what sense? If we compare it to other currencies it is in fluctuation minute by minute
Stable to buy goods and services on their particular country.
@@andromaxbse6459 cheers
@@andromaxbse6459 is it really a good base to form a thesis off in a globalised world?
@@Shadow1986 Honestly can't answer for now. But surely it has pros and cons. Just to mention that any currency starting from that basis, it's by necessity.
I'm been trying to figure out if bitcoins have any use other than as money. Gold has some uses in electronics, but it's main use is for jewelry and art because it's pretty and doesn't corrode. Maybe one day bitcoins can be used for something, but I cannot figure out what. I know the same is true for paper money, but most people tend to hold very little paper money. And at least you can make wallpaper out of paper money.
BTC Dont have smart contracts. Smart contracts would be the utility BSV is the only currencie that wants to be a currencie and have smart contracts. Ethereum is a platform of smart contracts. BTC i dont have a clue what they are trying to do makes no sense is slow and dont have smart contracts..
Bitcoin can be used for many things. The problem is that it is not good enough at any of those things to displace the alternatives that people actually use. For instance, it really could be used as a currency but it is slow, the fees are high, it has counterparty risk, it is less accessible than alternatives, all account balances and transactions are exposed publicly, etc. So what do most people actually use as currency? Visa or MasterCard credit denominated in dollars. This credit is digital, it can be transacted in seconds, fees are relatively high, but still lower than bitcoin’s in most cases, Visa provides fraud protection services, transactions can be reversed, users get rewards and perks like points and rental car insurance, Visa is accepted by millions of merchants around the world, etc. By denominating in USD, users of Visa credit gain the benefit of short term price stability and the ability to pay your credit bill using the same currency most people receive as wages and pay their taxes in. Yes that is a fiat with its own problems, but inflation is a non issue for a one month credit cycle. Visa could also change their denomination very easily or provide currency conversion services. Visa credit is significantly better than Bitcoin for most uses which leaves fringe uses as the potential market scope. However these uses are better served by alternatives as well.
@@RedShiftedDollar Also now money Will be digital with cbdc's
@@joaosilva-ji1ve Money already is digital. CBDCs will add digital serialization and centralized transaction processing. These things don't change money, they only change the ability to track and control the flow, creation, and destruction of money.
@@RedShiftedDollar you Will stop havibg physical money
The link for the paper in the video description is broken
Hi Nassem (or whoever runs this channel). The link to the paper in the description is broken. Thanks.
If Deity of gods Exits there will be GOD .No Deity no GOD .
Bonjour Monsieur TALEB, je vous remercie pour ces explications. Je suis en train de relire pour la seconde fois d'Incerto. Bien amicalement et encore une fois merci.
Any chance you can permanently use the second mic you use? The first one doesn’t sound very clear
In Summary ; BTCs utility value as a currency is 0 due to volatility. If its not a currency what is it? It is not an asset of no cash flow with a rational future expected sale price as it has an absorption barrier (fractional costs, decaying network nodes, eventually too big a block chain, hash rate decay, sentiment and interest die off etc..etc..) where it will disappear one day and die unlike gold. So it has only greater irrational fools as it's model sustaining it's price. Rationally, it's sale price is ultimately 0 as time goes on. Only the bit about the rational bubble I didn't quite get. Excellent overall. Enjoyed it very much. A great model.
But plug in a negative discount rate into the model and BTC goes to infinity....;)
Bitcoin's present day volatility is a feature, not a bug. It's growth has closely followed Power Law mathematics, with ever decreasing volatility over time marked by ever slowing price growth rates. It's value as a currency is definitely not 0. That's plainly idiotic.
Interesting point, but I did not understand the not a currency argument. It might be be volatile and new, but I still can see that it satisfy major postulates. Could you elaborate more on why BTC is not a currency?
Basically, a currency is something that is 'widely accepted' as a means of payment for goods or services.
Although some people do accept bitcoin it's probably not 'yet' widely accepted as such.
It does have the potential for this as a verifiable digital asset. But it needs to cross such a threshold level first. This may or may not happen for various reasons:
1. Many people would not want to accept something that is highly volatile. It's volatility could reduce over time, although it would probably need wider acceptance to do this. So there's a catch-22 here that bitcoin can't necessarily overcome.
2. The lack of government control has some attractions for value maintenance... e.g not affected by large amounts of QE etc. A counter argument to this is citizens benefit from a local free-floating currency that self-adjusts to compensate for potentially poor economic progress compared with supranational currencies like the Euro (and what Bitcoin aspires to be) that caused major economic difficulties for countries like Greece.
3. The environmental cost of bitcoin may also have a major impact on it's perceived value as a digital asset and ultimately, people's willingness to trade it sufficiently to turn it into a proper currency.
In summary, an asset is not a currency just because some people call it a currency. The asset has to be widely accepted. If just 5% of the shops and restaurants I visit accepted it, I would call it a currency, but it's not even a fraction of a percent. I'm not sure that it ever will be and everyone I know that has bought bitcoin has done so purely because they think the value will continue to go up .. no other reason. All the hallmarks of a bubble.
@@SteveSmith-jc7pc Thanks for the nice explanation. Term widely sound very arbitrary for me. It is used by a lot of people for transactions, unit of value and store of value. I agree with your points, but seems to me that you guys just asserted that it is not a currency, and you are just moving the goalpost.
Not a currency because it is difficult to set prices using Bitcoin units because of volatility. High costs and latencies for real BTC transactions and the Ponzi like crowd dynamics (ever growing recruitment else valuation collapses) and deflationary design do not help.
@@chrislesner2822 the deflationary nature is the counter argument to the ponzi dynamics. It doesn't need exponential recruitment like a ponzi, it just needs stable usage due to the deflationary charecteristics.
the value is that it is not corruptible. Its funny for me how such a genius is not able to see that as valueable.
@@Isacc143 bitcoin is not an IQ test, it’s an ego test.
I actually like the old school audio EQ, it reminds me of old instructional films from the 1960s- kind of comforting.
Do you have any thoughts on crypto currencies that try to be more "currency" like, such as monero (not necessarily on monero itself)? Monero is actively used for transactions today, without the insane transaction fees that bitcoin has.
Still has huge volatility problems though that might preclude it from being used as a "real" curreny.
It's clear bitcoin cannot be used as a a currency and as a store of value is much too susceptible to black swan events.
Thank you for fighting the bitcoin psychos out there.
@@yeetdeets No one uses it as a currency because it has none of the characteristics of a currency. You disagree with reality.
Bahaha. You're awesome Nassim. The error here comes precisely because the securitization is voluntary through a diversified Trust pool of individuals using Bitcoin who are also invested in it. It's the stupidest error. The US government guarantees its security with a giant military and its ability to force people to do things they don't want to do. That's the essence of power. A cooperative model currency voluntarily adopted to be used as an exchange mechanism amongst those people who then invest in that currency and hope for its increase in value so they make it a product rather than a security, is obviously a Ponzi scheme
@@_swagmeister Yes
While your dollar loses values as the FED prints to oblivion..It's called competition of the dollar, and poorer countries will not continue with the dollar holding and trade if it continues the devaluation..
@@goutfromfriedokra3936 yes but the dollar competes against the securities of the whole world, reinforced by the ability of the US govt to enforce its will, physically, while the Bitcoin COMPETES AGAINST ITSELF
@@dt6822 Nice try....Enforce physically Yes within it's own borders but .If other countries are using less dollars which is true for India,china, Brazil and Argentina--they will hedge some in the form of a harder currency, say, gold, petro,btc..It doesn't compete with itself...it's a small competitor to other currencies, and in Argentina and turkey , more ppl are using it store their wealth as opposed to the argentinana peso , lira.....PPL are sick of their dollar no longer providing full value, inflated away....
@@goutfromfriedokra3936 Bull. It is pointless. Currency is a guarantee by. Government with a monopoly on force that the value of the cash will exist. Bit coin is not backed by a government or even hedged against other currencies. And if you don't think they can enforce the FINTRAC outside of their borders, what happened to Libya? Bitcoin is a scam and is worth nothing
The most fairly distributed and scarce store of value ever created is bitcoin on 21 million forever every transaction is stored on the blockchain. Be sure to diversify
El esfuerzo que hago pero no te entiendo una garcha hermano! abrazo! excelente paper querido! sos un capo!
Che ¿Where's he from?
@@lesliethomson2441 don´t know
I would agree with your analysis when thinking of a security but Bitcoin is a commodity, and your comparison of Bitcoin to Gold saying that gold have a value but Bitcoin does not is flawed, if I am living in a country that one day decides to come to the rich’s home to confiscate real estate, gold, cash and everything that is valuable. The only thing I will be left with is my Bitcoin. The moment a person realizes this power is when they understand the one of many values of Bitcoin
Audio quality could be greatly improved. Your mic acts as an extreme low pass filter.
If he was telling you where the pot of gold in the wood was, you would listen with intent and not care about the mic.
What if there is no obvious use for Bitcoin. But people value it anyway. Think of it as a Picasso, a piece of human history in the form of technology, that is valued for transaction, store of wealth, and other things that the human mind hasn't conceived of yet. I don't think math as we know it can define a price. Isn't math always evolving as well?
Can this formula value gold?
I've read the white paper several times last decade. Bitcoin solved the double spent problem and it's a 'decentralized' network which has value. The value of the token itself is exactly what people are willing to pay for it based on price discovery on the free market and currently it's about $58k at time of writing, that's what it's worth.
It's not a good currency by design and that's fine, it can function as an unconfiscatable (if you handle it right) scarce digital asset with a maximum supply. And there's a demand for that.
Your formulae doesn't take into account benefits which BTC owner gets as soon as he can perform tax evasion.
Thank u for a reasonable comment, Avengerie. BTC really has security issues, I know it company which makes tool for police helping the to track transactions and IP addresses. And you can see all payments for any wallet on the web. Btc might go to zero if people migrate to monero because of security eventually. Also I'd like to notice that anyone could implement centralised crypto in mid 90ties but as I read, such stuff was prosecuted. Btc is decentralised in theory, but it can't function without group of skilled developers. Value of fiat comes from tax office demand and also central bank and other institutions do hard work to limit inflation.
Forgive my stupidity, but couldn't the same argument said of anything that has no cash flow? i.e. Gold? Is Bitcoin speculative in the same way as Gold then?
@@doko2nd very clear non techincal explanation, thanks
After watching this, I decided to dump my coins. Crypto-currencies are a scam for me at this point.
Buy the one thing that the US government treats as so valuable that they would rather borrow any amount of dollars at any interest rate or raise taxes to any level than sell a single pound of this stuff to pay their expenses. It is so valuable that the government has not sold any of it in over 50 years. If you think Bitcoin has hodlers, the US government is the ultimate hodler of this stuff. It is so valuable that it was specifically mentioned in the US constitution as the only thing allowable for performing certain tasks. It is so valuable that Bitcoin itself tried but failed to be a digital emulation of it. It is so valuable that the government stores it at an armed military base as far from borders as possible so that it is as difficult as possible for another country to take it.
Today the metal coins you use as money are the least valuable things you have in your pocket, but there was a day when the metal coins were the most valuable. Why has this flip flopped?
Seriously try to figure out why the US government has not sold any of their stockpile since 1971. They refuse to sell this stuff under any circumstances.
Trade your crypto coins out for gold coins. Nassim has likely come to this same conclusion which is why he shows us the hint around his neck.
There will be a day when the government starts selling this stuff again, and on that day you will want to have some gold in your physical possession.
Well done, the whole crypto market is fools gold.
I think you just proved that Bitcoin isn't a security, which Bitcoin specifically insisted it's not too begin with.
Pof.Taleb, I am a big fan of you. I heard you speak in public that you owned cryptocurrency. So, I wanna know if you've changed your mind about that. Thanks!
He rage quit after a personal fallout with the author of The Bitcoin Standard (for which Taleb wrote the foreword).
The value of BTC is not 0 in that case, it is negative due to the massive amount of energy to create it
the main think for me is that if it is neither a currency (heaven help us if we have currency that jumps around like bitcoin does) nor is it an investment tool because it does not create value (other than by speculation which could go the other way and lose value), and yes it takes so much to create it...and i don't the sound of that - as you said - "create"
@@alejoturcatti6358 at least Wall Street generates far more value than the energy it consumes. BTC generates no value per se.
Much more power are used to impress money or on gold mining
@@Bigdeadyfps hahahaha and btc has intrinsic value like gold and is government-backed like the dollar or pound, right? so much of the value of btc appears to be coming from the difficulties associated with it, principally the mining part. not arguing or debating people here. this on my part is contemplation and really thinking the basics of this thing... blessings to all
@@paulbraga4460 Look up "Rai stones" to understand why bitcoin has value
the probability of miners deciding they want to do something else with their life may not be so tiny,
because we can have an event where enough people will lose interest in bitcoin that it will no longer be viable (for anybody) to keep it going (high energy costs, very low valuation).
and miners will race each-other to the door.
The rewards of a single miner is a ratio of the total miners power, so when miners exit they increase the reward of miners who stay
so he's saying bitcion going to zero is inevitable. it's just a matter of when?
with a long enough time horizon everything is going to zero
Bitcoin hit $100K tonight. This presentation looks like a midwit who doesn't comprehend that it is a new asset class who is trying to contain it in a box of his own preconceived notions about money. But what do I know, I'm just a polisci major with some worthless Bitcoin.
You are a fake professional. Lol. Also you clearly didn’t hear his argument or understand it.
4:10 But bitcoin is not a business or a company... It's not Macdonald's or Coca-Cola, you're not expecting from bitcoin a dividend... So this formula is false.
I’d love to see a collaboration with CoachRedPill, and hear your guys’ discussion on this topic and others. Hope something can be arranged.
Coach redpill does not like nassim and thinks he is arrogant although he respects his achievement.
Search coach redpill nassim taleb and watch the video
coach redpill is a joke.
@@user-xo5zu1lw2w kinda like u
@@user-xo5zu1lw2w nope
@@DAIIIVA ahahahha. Coach moronpilled doesn't know shoes from shit.
How about TSLA?
if btc is ponzi, then eth is also ponzi?
Mr Taleb, do you see the Chaplain Tower disaster as a Black Swan for Real Estate?
Structural problems in real estate? I doubt that is viewed as a low-probability event by those in that field. It's already in insurance contracts etc. Black Swans go way beyond what we can currently even dream to imagine. Maybe Nassim Taleb will offer his opinion on this.
Yield farming?
People are not rational.
Fiat currencies are gonna fail before Bitcoin is hacked/fails in some other way. When fiat currencies implode people will jump into BTC. So if I then sell them my BTC I bought today I will make a fortune. I do not care if it eventually goes to 0.
note: this is example, I do not trade BTC
Unironically I came back to this video because there may no longer be the suppressing of real rates if FED buying of treasuries is limited and this could kill bitcoin inadvertently 😂
Interesting.
This demo shows that bitcoin cannot just be considered as a currency or a security as the value is irrational and should be equal to zero in the long run. So bitcoin is more than a currency or a security to explain its price, it is indeed a network, a protocol and a immutable and cryptographic ledger with no central authority. So indeed the expected value is zero when considering a security pricing model, but still bitcoin token has a cost to make the network and ledger work. From a cost pricing model, the expected price should represent the costs involved to maintain the network. Now, it may be questionable to involve such energy (so costs) to maintain it. It must exist some existing or future use cases to justify that the long teem expectation is not zero. In all cases, as long as miners continue to work, the price will continue to be driven by powerful market participants (through the derivative or spot market) and also by the scarcity mechanism.
Good analysis. But unless this network can tap into some kind of independent "free energy" -- it will undoubtedly be worth zero. What happens when energy becomes scarce? The network is starved. Shrinks ---> zero.
@@zpettigrew Why would energy become "scarce"? That's not a real thing. That's like saying your dishwasher won't work one day because energy will be scarce. That's a problem of energy supply, not the dishwasher. Perpetually increasing energy usage is what makes society advance. Imagine the silliness of living in the 1700s and worrying that the next technology might one day result in an energy shortage. Energy shortages are a reflection of idiotic government policies, not rational actions of humans.
@@tbr2025 See also: "Peak Oil". See Also: supply chains. See also: geopolitical instability. All of the EU is rationing energy now due to Nat Gas shortages. Hard to run the ecosystem if you hardly have enough energy to heat your house.
@@zpettigrew Peak Oil???? Omg lol
When you first tweeted about dumping Bitcoin, I thought you turned into a cranky old man. When I read your Bitcoin black paper, I got rid of my Bitcoin exposure.
@@vladimirkazakov3033 he only lost if he has a short term perspective and decided to sell at a loss.
🤦🏼♂️
Well said, N N Taleb. Best wishes from Iowa.
One question: is it Bitcoin which is unstable or is it the dollars or any other currency used to compare its value with that is/are unstable? I am asking not giving an opinion; so would be great to have suggestions and ideas on this. Thé only opinion I have is that unless I go through all the documentation written on the technicality of the topic, I in essence know nothing.
Thanks Professor, this is very clear. I am no sure this is a reasonable question, but here it goes: there is any probability for it become currency in the future? Is that part of the expectation of value (in addition to selling to the next idiot)? Thanks in advance.
The future will be that each country have their own legitimate stable crypto currency.
It can’t be a widely adopted currency with such fluctuation in price like right now.
Love it!!!!!!!!!!!!!!!!
I was quite good at math when I was younger, but I have put it away for several years and studied other analytical pursuits (computer programming). If I wanted to get back up to speed so that I can understand technically Taleb's "Elementary Analysis" put forth at the beginning of this video could someone recommend me some books to start reading?
EDIT: Doing some quick wikipedia research, to make my question more precise: The Expectation term seems to come from probability theory so I guess first I would want a solid book on that subject and then other supporting books that could help me understand how probability theory specifically applies to rational markets and related quantitative analysis. Yes I understand this is probably a very broad research task, I just want a starting point.
ua-cam.com/play/PLUl4u3cNGP60hI9ATjSFgLZpbNJ7myAg6.html
Read up on capital asset pricing model
Just watch the Probability Theory and Stochastic Processes video playlists from MIT or Harvard on UA-cam.
With great respect, I am a big fan, but are you teaching birds how to fly?
Thank you for the explanation and also the paper. I think I agree with your position regarding bitcoin.
This is very good. It really goes to show that a currency must have a use. All currencies that pass the equation with expected value have some form of usefulness or utility. For the USD we have the fact that it is the only currency that must be used to pay all taxes. For gold we have industrial and artistic uses. Even for the cryptocurrency Monero, it is the only form of payment accepted by the dark web. What is the use of Bitcoin? Bitcoin is old, obsolete technology. Name another software where version 1.0 kept being used as the best despite the release of many upgrades? It's only a matter of time before it goes back to it's true value of zero. The real value of bitcoin was to spark innovation in the cryptoasset sector, and all of its usefullness on this front has already been used up. The only use left is the government's use of it to track down tax criminals.
@Total_Life_Cell No, the Ferrari is art. That’s why it is worth 50 million like a Van Gogh. Even so, nobody drives it. A currency is something to be used by the masses on a daily basis. Please tell me one reason why you think a public open ledger is a good idea? You are really an advocate of this concept? If so please tell me how much is in your bank account and to whom your last 100 transactions were with. This level of transparency is present in Bitcoin. You really think this is the best? It’s like a Ferrari made of glass that you have to drive naked and you have to park it on the street for everyone to see.
@UCDeDZGsh8Ji9uUz9bjKoiKQ A ledger is an accounting tool which is not the same thing as a currency. The currency is that which is transacted and the ledger is simply the record of that transaction. Bitcoin is the currency and the blockchain is its ledger. If you are going to have a public ledger, at least make it anonymous. This is why Monero if far superior to Bitcoin.
You are not bothered by transparency? OK then post an image of you last bank statement on Imgur and share the link here. You really have no concerns about doing this? Interesting.
And just because I believe Bitcoin is worth zero, as proven by Mr. Taleb, does not mean I am pro fiat. Fiat is a separate topic but of all alternatives, Bitcoin has got to be one of the absolute worst choices because it’s value is zero among other reasons. Why would you hold any object with an intrinsic value of zero? If the market value is nonzero then that just means you should sell before the intrinsic value is realized.
Great comment.
What about Rai Stones or Art? Everything goes to zero eventually, but for bitcoin it could be hundreds or thousands of years (like Rai stones)
Would BTC feel more at home in the art market next to a Banksy?
Ben Hunt view, BTC = art ~ identity I get that
No, it would not. Gold would.
I haven't seen this upload yet. Bin on the internet since the beginning of time and never knew he had a channel on youtube, what the fuck is wrong with me????.
Eitherways, the King has spoken on this contentious topic. I look forward to watching it.
So at the end of the comment one part, Nassim meant that for the limit not to be zero, the expectation of the price of bitcoin over t+n should be \infinity to cancel out the exponential term before it. Am I getting that right?
If he is getting infinity ♾ and is canceling it out, then he’s math utter trash
Taleb: financial system is doomed.
Also Taleb: Bitcoin is Worth Exactly 0.
What should I do?
Buy bitcoin. Taleb is dumb.
@@portal_libertarianismo Could you name someone you think is smart? Let's limit it to someone who's still alive and have spoken their mind on the topic.
Run to the hills…
@@thomasandersen9310 Lyn Alden - she's probably the best brain in the whole financial space.
Buy Bitcoin. Taleb is wrong on this.
ua-cam.com/video/3Uh0RcuaSJI/v-deo.html
Is this a joke?
A currency that is not considered a currency generally has a value of zero (approximately the value of the paper).
No need for a mathematical formula.
I couldn't agree with you more! "The Emperor's New Clothes"
Hi Nassim, Makes complete sense. If Bitcoin is not a currency and it has no cash flow it must necessarily be worth zero. I suppose the only question I have is about time: if people believe that Bitcoin is, or will be a currency, I suppose it could be above zero for some time, even years? Perhaps it is as with all fragile things, we can note the fragility but we cannot say when it will break? How do you think about time here? Thank you.
Reread the paper. By iterated expectations.
@@nntalebproba Thank you! I should have been more precise. My question is around how soon it could go to zero. Through backward induction we arrive at zero price today using rational expectations, but could the irrationality of the 'religious cult' keep it above zero for a long time? Without falling into the trap of trying to forecast, I guess we could use Lindy principle to form some rough view how long it may stay above zero?
PS: I have never owned Bitcoin. Just trying to understand more.
Thank you for the video Mr. Taleb!
The problem I see is the assumption that bitcoin is a security. Even without the mathematical analysis, we can see that investment in bitcoin as a security is pure speculation, analogous to ponzi.
The interesting question is, however, if bitcoin or some alt-coin can happen as a currency. There is a number of holders who already use crypto (like monero) as a currency for privacy reasons. And the question becomes, as the speculators exit, would remaining people still use it as a currency.
So helpful, thank you Dr. Taleb.
Sorry but wrong model applied to valuation of this asset. You've non-chalantly discarded consideration of bitcoin as money. If we assume bitcoin is not money Rest of the video doesnt need to be 13 minutes to prove the value is zero. It would be intellectually and practically a lot more valuable to compute bitcoin's value as money with a growing user base. Volatile price in its current state does not invalidate butcoin's use as money but does make it harder to mathematcally compute value at a given time.
There is a lot of rules surrounding trading shares of a bakery, and verifying those shares are real. Bitcoin sidesteps all that. Two people anywhere in the world can transact, securely, privately, and verifiably. Your model doesn't capture that.
As he said, his model is about securities, not currencies.
He states that he doesn't regard Bitcoin as a currency. See my reply to the comment below this one on Bitcoin as a potential currency.
@@SteveSmith-jc7pc There are 500+ comments in this thread, I can't find your other reply. The problem is his model relies on the future value of bitcoin being zero, which means if bitcoin ever became stable enough (and it is becoming more and more stable all the time) to become a currency any time in the future, then his whole model blows up.
Also, regardless of whether you label bitcoin a security, a currency, or a duck, it doesn't refute any of the arguments I was saying.
@@jimaylan6140 Sorry you couldn't see my reply - the ordering of UA-cam comments means it isn't the one below. (It was actually my reply to
zarathustravideo (comment 1 day ago at time of writing this) who was asking about definition of a currency.
I agree all your points are extremely valid in determining good traits for a currency. I also agree with your pre-condition "if bitcoin ever became stable enough", which I think is the key. I am not convinced that it is becoming more stable. I hope you are right and that it does. (In which case, yes, his model is invalid as currencies need acceptance, not intrinsic value ... most currency is digital anyway, some is paper and a tiny amount is pretty worthless metals.) I think the volatility problem comes from the fact that a large number of people are treating it as an investment ... They don't want to spend their bitcoins (i.e. transact in them), they just want to invest in them in the belief that they will only increase in value. I think Taleb's video is really aimed at them.
Anyway, it's an interesting story and I'll continue to follow it.
I feel like there’s a lot hanging on “is it a currency”. What if it’s just a rubbish currency in most (but not quite all) circumstances? Can it have some non-zero value then?
Exactly. The term "crypto-currency" is a bad analogue and unfortunately it stuck. It's much more like an asset, but ultimately I think it might be it's own thing,.
$70k and counting. Thanks a lot Maestro!
Taleb himself has said he wouldn't be surprised if it reaches $1 million. Also $70k is still below BTC's peak when adjusted for inflation. Childishly pointing at the price as if it means anything only reflects on your critical thinking skills, not Taleb's logic. Taleb has written thousands of pages of brilliant arguments about the idiocy of trying to make specific predictions in terms of when something will happen or the exact path it will take to reach its destination, and you have obviously never attempted to understand his arguments. You just animalistically react to the latest stimuli that makes you feel good.
@@matta5749 blah blah, some people get rich while others writing useless comments like you. That’s life
@@matta5749 it can go to zero it cans to a million I’m so smart 🤡 seriously whatttt
Taleb logic: Proof-of-Stake cryptocurrencies cannot be valued at 0 because they have a cash flow component that allows users to earn interest on their stake.
The professor has just made a succinct argument for speculating on ETH 2.0, DOT, anything DeFi, anything with yields, etc. instead of the boomer pet rock.
True?
btc produces yield if you deploy it in gemini, blockfi,celsisus...Also network effects produce value of btc...He's denigrating btc to set up the next play: shill bitcoin sv.....
@@jeffyeah4256 It's not actually yield as in economic yield, BTC etc... 'yield' comes from straddle options on It's volatility. It therefore is merely a bet based on price action, and that needs someone to take the other side of the bet and risk losing. A net zero sum game unlike economic yield where there is a real gain to be distributed and no-one loses.
@@SlobberySlob btc is not a zero sum game...it is 21 million, fixed amount. You are betting on fiat that is losing value, and. a stock market propped up by QE....I would think the bigger Ponzi is propped up real estate,stock market...BTC is pretty much fine art and religion, enough ppl like it. It's not worth zero
@@jeffyeah4256 But what if more people don't like it as much as the ealier ones? ... Price stagnation. Greater Fool's theory just fizzles out of power.
One objection to this paper
Why use π as a variable name??????
Common with probability.
@@nntalebproba My physicist brain needs some rewiring
What's with the sweater? So easy to theow the thing away..
5:20 for those who want a summary.
Entirely agree. However, we don't live in "rational" markets at the moment. We haven't for some time. I formulated an argument based off of the physics and energy limitations involved that is a bit more robust and even gives predicative market moves. Buut... this also shows that BTC is = to zero (actually of negative value - being a vacuum for real physical energy). Metabolically "expensive" ponzi.
markets were never rational and they will never be rational
What a joke of a comment. Bitcoin will continue to rise and shine.
Thanks, that was fun.
Where is his debate with Micheal Saylor?
That wouldn't be as fun as you think. Saylor is really good at communicating verbally, and Nassim is better at communicating in written form. Also Saylor is all narrative, which doesn't make him wrong. I think he's right about the technology implications, but the fulfillment of his theory might not be Bitcoin as he thinks it will be. Nassim's math seems to indicate that it won't (can't) be Bitcoin. But at any rate they would be having different conversations, and Saylor would likely appear the victor just for being better at telling a story on the fly. Maybe they could have a Twitter fight.
@@sillyfarmerbilly8872 Alas for poor me, Taleb’s maths goes over my head. Good luck with the micro greens!