School Bus Jenga. Plus Bitcoin.

I had never heard of School Bus Jenga.

My daughter explained it to me this winter. When her teammates and she travel on a school bus to Nordic ski meets, they start a game of Jenga on the floor, in the aisle, stacking the little blocks, hoping not to be the person that triggers a fall. The bus bouncing and turning adds a significant unknown to the game. Potentially random, if you believe in randomness.

Whether or not a school bus is involved, Jenga provokes anxiety because you know what's coming. You know what, but not when.

Stock market participants don't know what, and they don't know when. Many participants perceive that they know one or both, but the reality is the school bus could hit a pothole at any moment. It's the perception of control that changes. The uncertainty remains.

With the Covid stock market plunge fading from memory, anxiety has receded as people perceive the future to be more predictable. It's not, but mapping the recent past onto the recent future is a common, and large, investment mistake.

I feel compelled to talk about crypto.

Charlie Munger's description of crypto as "rat poison squared" remains memorable, but it has had little effect on coin prices. Regardless, let's go over a few things we've learned:

- Economically, Bitcoin and inflation seem to want to be related.

- Socially, if anyone questions you as to the value of Bitcoin, you bring up the blockchain and pretend you know something about software and distributed systems. When the price of Bitcoin plunges, the value is in the 'chain!

- Educationally, you might feel curious about the blockchain. When you read the foundational paper on Bitcoin, you realize this is complex stuff and wonder how anyone whose body mass is less than 70% Red Bull can understand it.

- Politically, the Swiss may be miffed that they have stable currency competition. Especially when the "stable value" argument of Bitcoin's resume seems shaky, unless you consider 30% daily swings stable.

- Linguistically, a language that celebrates misspellings is sprouting. HOLDR? BUIDL?

- Environmentally, it appears we will bake the planet mining the last remaining million blocks of the Bitcoin ledger.

- Finally, you can now create a new coin type in under 10 minutes.1

This is fascinating on so many levels! As you can see above, it's a financial movement wrapped in a cultural one. Let's look at the basic scenarios:

Outside of the criminal underground, the usage argument of crypto is pretty weak. At least in America, it's hard to argue with the liquidity, availably, and acceptability of U.S dollars.

The inflation argument is next. There is logic in owning real assets if the currency depreciates, though an entry in a distributed ledger being considered "real" might be a stretch, particularly one that has a habit of disappearing.2

This leaves the gambling argument. That's hard to contest with Vegas shut down.

Dan Cunningham

1. Tools now exist to create a new coin in minutes, where the naming and promotion are the differentiators. More...
2. Roughly 20% of Bitcoin is lost forever due to passwords being lost or chains broken. There is irony here: if Bitcoin were valued like a business, it would produce something for its owners, and a password would not be needed. But value by Bitcoin owners is measured in U.S. dollars (Bitcoin is almost always quoted in dollars), and they perceive loss when they cannot convert back to U.S. dollars. Dollars, and businesses, do not need to be converted to anything to be valuable. More...

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