Churn: Check Out Anytime You Like, But You Can Never Leave
The Orange Pill
Everyone has a book that fundamentally changed them.
A book that revealed some deep inconsistencies with their map of how the world works, resulting in forced and uncomfortable self-reflection.
It's significantly easier to just ignore these inconveniences and carry on, but you know deep down you'd be operating with an inaccurate map that will ultimately lead you astray.
Some things require you to update your map. Other things are of such great consequence that you have to entirely redraw it from first-principles.
Hodlers Gunna Hodl
When the purchasing power of bitcoin continues to march upwards over multi-year time horizons, the long-term value proposition becomes clear.
It is simply too hazardous in the mind of a bitcoiner to attempt to time the market and risk permanently and uneccessarily reducing their stack (especially so in the current monetary environment).
This results in multiple cohorts of diehard holders (hardened by extreme bear markets), driven by the opportunity to secure a share of what may become the next anchor of the global financial system.
"I got a call Paul Tudor Jones and he says, 'do you know that when Bitcoin went from $17,000 to $3000 that 86% of the people that owned it at $17,000, never sold it?' Well, this was huge in my mind. So here’s something with a finite supply and 86% of the owners are religious zealots. I mean, who the hell holds something through $17,000 to $3000?"
Switching Costs: The 10x Rule
In his 2014 book Zero to One, Peter Thiel proposes that a new technology must be “at least 10 times better” than substitutes at fulfilling some need in order to gain the necessary traction.
Since adoption of a new technology requires effort and risk on behalf of the user to make the switch, they must be adequately compensated by time, energy or cost savings. The 10x improvement, over the status quo, is required to incentivize users into action.
Bitcoin (the network) wasn't born as a 10x improvement over SWIFT nor was bitcoin (the asset) as a 10x over gold/fiat/bonds. But over time, as innovation has progressed, the incentives have flipped.
The adoption pattern of a new technology looks quite different when said technology also represents money. It is then more of a permanent migration to a new system, as can be witnessed by the rarity of cases of people denoucing Bitcoin after truly understanding it.
An Evergrowing Chorus
The adoption of new innovations tend to happen in stages, derisked with each subsequent wave of users, greater regulatory clarity and improved usability.
Bitcoin's continued net growth of nodes and hodlers over more than a decade gives confidence to the yet uninitiated that this isn't a fad but a permanent migration to a superior monetary system.
