Antifragility: Bitcoin is a Muscle

It is ironic that some of the most helpful frameworks and concepts for thinking about bitcoin stem from one of its most ardent critics.

A quote from Nassim Taleb's 2012 book (Antifragile: Things That Gain From Disorder):

“A mechanism by which the system regenerates itself continuously by using, rather than suffering  from, random events, unpredictable shocks, stressors, and volatility.”

Bitcoin is not just difficult to kill, it actually strengthens with each attempt or unpredictable shock. Like muscle tissue that tears slightly during a workout, only to self-repair even stronger.

#1 China Mining Ban

Bitcoin’s hashrate has now more than fully recovered after a significant and historic exodus of mining infrastructure from China.

#2 The Fed

Manipulation of the money supply by the Federal Reserve (continuously pumping and draining liquidity at ever-increasing scales) has certainly contributed to the boom-and-bust cycle of bitcoin denominated in fiat terms. However, with each cycle, weak hands and leveraged players are shaken out. Coins are then transferred to more convicted holders and the clock resets at a higher value.

#3 Centralized Failures

Each time an exchange gets hacked, a lender goes bankrupt, or a custodian goes dark, a hard lesson is learned. More market participants become aware of the importance of holding one's own keys.

The theme of this cycle has been the lure of yield.

Remember: Bitcoin does not produce cash flows or dividends. It is a monetary good. Bitcoin's value comes from its increase in purchasing power over the long term (all prices eventually deflate against money with a perfectly inelastic supply that's moving along an adoption curve).

#4 Shitcoin Tsunami

The number of altcoins has grown exponentially as there is zero cost associated with their creation. However, value derives from the strength of monetary properties, and this cannot be faked or achieved by a marketing team. Ever since the first altcoin (Namecoin in 2011) appeared on the scene, bitcoin has never lost its dominant position. In fact, it has only furthered its lead as the dominant digital money and monetary network.

Remember: Money tends to one.

“Bitcoin is antifragile because it thrives off global monetary disorder within the dollar pyramid [..] It has become the first ever government-free, universally accessible digital currency. And for these reasons, all currencies in the purely digital realm will face price discovery in BTC terms." —Nik Bhatia

Now let's consider the implications of a monetary good that is not going away.

Further Reading:

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