Thoughts about investing and the Crypto future from a mountain bike ride on the "Impossible Railroad"

Dear Friends, on Friday before Veterans Day I took off from my start-up work to enjoy an inspiring Mountain Biking adventure with a good friend and former colleague. We brought our bikes to the Mortero Wash in Ansa Borrego State Park, a 95 mile drive east from San Diego. A moderate 6 mile climb on our bikes (average grade 3%) with amazing views of the sandy desert, resilient ocotillos, cactus, and volcanic rocks brought us to the "Impossible Railroad". This truly amazing railroad was carved into the steep sides of the Carrizo Gorge more than 100 years ago to connect the city on the Western coast to the Eastern United States for trade. It is non-operational since 2008. The brittle rocks were causing rock slides and tunnel collapses that made it economically impossible to maintain the rail. When it was created, laying a smooth track into a super rugged canyon required a lot of breathtaking engineering work that we experienced first hand when we crossed many of the 14 wooden trestles and 17 tunnels that were built to create a connection with a grade below 2% through the gorge. Our main destination on our 30 mile adventure was the awesome trestle bridge that spans Goat Canyon. It is the longest curved bridge of its kind in the world and was built after a close-by tunnel collapsed in an earthquake. The shifted and dropped entry to that tunnel is still visible behind the bridge and attests to the temporary nature of man-made structures against mother natures forces. You can find more details about this impressive artifact at the Historical Marker Database: https://www.hmdb.org/m.asp?m=193810

Along this rail line we saw interesting artifacts of the former operation, aside from the prominent tunnels and breath-taking trestle bridges. A water tower, abandoned rail cars (some burned out) with amazing graffiti, and a rail greaser that used to lubricate the wheels to reduce friction along the winding tracks, just to name a few.

You can find many impressive videos on YouTube if you search for "Goat Canyon Trestle" if you like to get a better impression of the Carrizo Gorge.

The endeavor was a great opportunity to think about how investing and even some speculation can create value to investors and society, how investing carries risk, and that technologies and man-made structures have a limited lifetime.

With the background of the "Impossible Railroad" I started to think about the Bitcoin system and how its creation has similarities to the now abandoned rail. At the start there was an idea to fix problems that fiat currencies have. A Bitcoin prototype was created and it has been running now for almost 15 years. Looking back we find that there are several uses of the system:

1. Similar to a railroad, Bitcoins enable to transport value from one place to another in short time, where its use is legal. The anonymous nature of the wallets has made this into the preferred payment system for extortion, ransomware attacks, and funding of terrorist organizations. You may remember my post about one extortion attempt that landed in my Inbox.
2. The limit on the coins and the diminishing payments of the miners over time have created an overall upward trajectory against all fiat currencies. This has provided an opportunity for people in countries with severe inflation in their home currency to preserve and even grow the value of their savings by loading them into Bitcoin rail cars and let them sit on the rail line. Some people are even now speculating with their retirement savings in the hope to multiply their nest egg. Here it is important to remember that buying a Bitcoin is no investment into a productive asset. The money you put in is immediately transferred to the holder of the coin. You can find numerous quotes from Warren Buffett that capture this fact. You may remember the tankless water heater analogy for the Bitcoin system that I shared in one of my YouTube videos. The Bitcoin value is essentially driven by speculation and FOMO (fear of missing out). Nobody needs Bitcoin. Unless a Government would require it's use.
3. Substantial fluctuations in the value of the coins have attracted many speculators. Banks are trying to get into the space because wherever money is flowing they can siphon off fees. Why else would a reputable company like Fidelity support a purely speculative choice in retirement accounts? They could allow you to buy lottery tickets!
4. The massive size of the Crypto currency speculative bubble have created a significant source of money for political corruption. Just look at the political donations to both parties in the last US election. Money is also used to advertise (Super Bowl) and to grease celebrities to attract more speculators to buy crypto coins.

With so many different aspects this reminds my of the story of the six blind men and the elephant.

What do you see when you look at the Crypto space and its future?

Will Bitcoins that are held for a long time ultimately be like the burned-out passenger rail cars on the "Impossible Railroad"? Or will they be like a Rembrandt painting?

Have a wonderful day full of wonder!