Yes, Bitcoin Is Nonsense. And, No, You’re Not Missing Out.

Enthusiasm for bitcoin has peaked again. Its value, hovering around $100,000, is testament to that. Bitcoin ETFs are actively trading. The three largest, iShares, Fidelity and Grayscale have a combined AUM exceeding $100billion.  The US government is currently evaluating a “national digital asset stockpile” which could include up to 1million bitcoins. Influencers and evangelists are everywhere and believe that the upside is limitless. For a dose of perspective, I’m sharing some of a sit-down conversation I had with M. Nicolas Mansoor during which we talked about the current bitcoin run.

Throckmorton Report: Nic, we’re going on record here because you just said something about bitcoin that I thought was an interesting take, or at least one that I’m not seeing everywhere.

M. Nicolas Mansoor: No problem. We just said that bitcoin is old tech. It’s 15 years old and it is the first cryptocurrency that caught on. It wasn’t designed for the use cases being considered now. Because it’s old, it is vulnerable to usurpation by better designed alternatives.

TR: Bitcoin is worth more than ever right now. It’s testing new records weekly. Obviously, you’re not a long-term holder. Let’s get to it. Is there a trade? Where is it going?

NM: Bitcoin’s price has gone up. Nothing about the fundamental case for bitcoin has changed materially. It will close out 2025 in the $60,000 to $70,000 range. There is no trade.

TR: Wow. OK. That’s bearish. Can you elaborate?

NM: The concern for bitcoin is that, today, it has no real-world utility. There is no legitimate use case for which bitcoin is the best form of payment. There are plenty of illegitimate use cases, though. If you’re trafficking in illegal goods or evading taxes…sure, then the currency might hold some value for you.

In a practical sense, this should be bitcoin’s undoing.

TR: How so?

NM: A government should not allow, much less promote, a mechanism that makes it easy to skirt its laws. China recognized this. It’s one of the reasons China restricted bitcoin’s use in 2021. In the US, we don’t limit access to tools and systems that make law breaking possible, provided they have legal uses as well. Other countries behave differently. Bitcoin, therefore, will never have worldwide acceptance.

If that doesn’t persuade you, bitcoin’s energy requirements should convince anyone that it can never achieve any real measure of adoption.  

TR: Can you frame this in economic terms?

NM: Yeah. Bitcoin is massively energy intensive. The annual energy usage of bitcoin is currently equivalent to that of my home state of New York. [TR ed.: 143 TWh.]

Each bitcoin transaction requires as much electricity as the average American household consumes in a month. [TR ed.: 800 kWh.] The same amount of energy facilitates half-a-million credit card transactions. One bitcoin transaction compared to 500,000 credit card transactions.

I don’t have exact figures at hand, but you can fill in the numbers. [TR ed.: OK!]

What’s that saying about crazy, unimaginable energy requirements?

TR: 1.21 gigawatts!

NM: 1.21 GIGAWATTS!

TR: It’s fun with your accent!

NM: What’s does he say in the movie, “how can I have been so careless?”

In economic terms, electricity costs money. It takes a lot of it to verify a bitcoin transaction. Right now, the entities that verify transactions are miners. They are rewarded with newly mined bitcoin for their efforts. These electricity and hardware costs are subsidized by bitcoin mining, but this subsidy will cease in 10 years or so when nearly all 21 million bitcoins have been mined. Companies will only make money on transaction fees. What then?

TR: Transaction fees will rise.

NM: Yes. More significant, there is an expiration date on the current market paradigm. Once mining rewards are reduced, we expect players to leave. The three largest bitcoin mining pools already control 70% of the network. Foundry and, can you fill in their names? [TR ed.: FoundryUSA, AntPool, and ViaBTC.]

This concentration would be worrisome on a conventional assets exchange. It’s more threatening to bitcoin because, to prevent manipulation, no single entity can control more than half the network.

I don’t want to get into the weeds here.  The net-net, as you say, is that transaction costs will rise and network integrity will decrease. Unless there is regulatory intervention.

TR: I knew you’d have a lot to say, Nic, and it’s all very thoughtful. Bitcoin has gone up 100-fold in value…

NM: 500-fold. I was tracking it shortly after Silk Road imploded in 2013. I watched it fall to $200. Realistically, I doubt I or any of my clients would have made anything close to hundred-fold returns. If it doubled or tripled, we all would have traded down.

The reason we’re talking about crypto right now is because of these gains. Maybe it’s worth understanding why these gains have occurred and if they are sustainable.

TR: People will say it’s gaining acceptance. More and more people are turned on to it.

NM: Sure, but most of those people don’t know why. I’m not picking on retail investors. I’m not sure anyone on the outside really understood bitcoin’s rise in 2017. Retrospectively, it seems it was largely due to manipulation by one large entity.

The 2021 twin peaks are better understood. The COVID-19 asset bubble and the NFT craze were major contributors. Perhaps inflows aligned with a genuine business-minded analysis that transactions would move evermore online because of a reshaped, post-pandemic economy. The contribution that the Anti-Money Laundering Act of 2020 made to the price probably hasn’t been studied, but I’d bet it was also a factor.

TR: And now?

NM: You know this. Major players are stockpiling. They don’t sell, so float is very constrained, and we have a lot of volatility. At the same time. ETFs and retail players have come into the tune of $100billion. The trend looks great on paper. There is a lot of optimism related to the favorable stance taken by the Trump administration.

TR: But you don’t think this will pan out?

NM: Cryptocurrency-affiliated groups paid hundreds of millions of dollars to political campaigns in the US. Why? Americans already have unfettered access to cryptocurrency. So why give all the money…so that the US creates a national stockpile? Similar reserve holdings don’t make sense for Europe or China, and the dollar is already showing enormous strength.

Once the US Treasury takes a hard look at this, they’ll discover that it makes a lot more sense for them to develop their own blockchain. It’s painfully obvious. Bitcoin is an imperfect product and its limitations will become ever more apparent.

TR: Last question on this. What’s your long-term outlook?

NM: I’m mean, fractions of cent. Zero dollars. Only because it can’t go negative. I don’t know how long it will take. The whole enterprise is stupidity masked as revolution.

TR: Are you quoting someone?

NM: “Stupidity masked as revolution.” It’s probably [Charles] MacKay, or [Charlie] Munger or maybe even Jamie Dimon, or someone. It’s good, though. I like it.

TR: Thanks so much for sitting down with me and agreeing to do this.

NM: Anytime. I really appreciate what you do. Best of luck with The Report.