Jim Rogers is Dead Wrong about Bitcoin

By John Banks

When it comes to Bitcoin, Jim Rogers is sorely misinformed.

To be clear, Rogers deserves great respect as a macro investor. As a co-founder of the Quantum Fund along with George Soros, Rogers had one of the greatest performance runs of all time.

In the 1990s, he wrote an incredible book called Investment Biker. The book chronicles a two-person trip around the world by motorcycle, with the trip doubling as an investment tour. In the book, Rogers decides whether or not to invest in the countries they visit based on what he sees as they travel through.

In addition, Rogers was profiled in the original Market Wizards by Jack Schwager — one of the best trading and investing books of all time — and has likely forgotten more about commodities than most investors will ever know. On many investing-related topics, he is a human encyclopedia.

Still, with all of that said, an argument should be valued on its own merits, regardless of who puts it forth.

And on that score — purely on the merits — the argument is terrible.

On June 19, speaking with a branch publication of Asahi Shimbun in Singapore, Rogers expressed the view that Bitcoin is destined to be worthless.

“I believe that the virtual currencies represented by Bitcoin will decline and eventually become zero,” Rogers said. His view was based on the notion that governments will outlaw cryptocurrency, and that this will somehow kill it.

“It is hard for us to move money without the government,” Rogers said. “The government wants to know everything. Controllable electronic money will survive, and virtual currencies beyond the influence of the government will be eliminated.”

This is a fatally flawed argument on multiple fronts. We’ll start with some summarized bullet points:

  • Bitcoin cannot be killed. No government can shut it down.
  • China tried banning crypto exchanges in 2017 — it didn’t work.
  • Democratic governments can’t just ban things on a whim.
  • A government that bans Bitcoin could ban gold just as easily.
  • A Bitcoin ban would be logistically impossible to enforce.
  • Any attempt to ban Bitcoin would be fantastic PR for Bitcoin.
  • Bitcoin is already a globally distributed store of wealth.

In the interview, Rogers went on to say cryptocurrency is a form of gambling. That is not just a bad argument, it is outright false. There are more investors than gamblers involved in Bitcoin, and the numbers aren’t even close.

The vast majority of Bitcoins are held as a form of long-term investment. That is simply a fact, based on available public data from blockchain transactions.

According to Chainalysis, a blockchain analytics firm, 60% of Bitcoin’s available supply is held by entities who have never sold or traded more than 25% of their total Bitcoin holdings. Another 20% of Bitcoin’s supply has not moved at all in recent years.

This fits with the dominant use case of Bitcoin as “digital gold,” and the only hard asset known to man that will eventually have an infinite stock-to-flow ratio (because new supply, or “flow,” will wind down to zero).

In addition to this, it is a known fact that top-tier Silicon Valley venture capital firms have long-term investments in Bitcoin, and that a fair number of billionaires have long-term investment holdings in Bitcoin.

None of the above counts as “gambling” in any sense of the word. One can dispute the quality or validity of the Bitcoin investment thesis, but one cannot dispute the intent of most Bitcoin holders — to stick around for the long term.

Then, too, for Bitcoin as a long-term investment, the thesis is grounded in the proven robustness of Bitcoin’s secure technology — which has resisted hacking for 10 years now — and the inherent power of a globally distributed network with deep infrastructure support (which gets deeper all the time).

To briefly highlight the virtues, you can’t hack Bitcoin or it would have been hacked by now; the more widely distributed Bitcoin becomes, the more secure the network becomes; and Bitcoin’s global branding, distribution, and vast infrastructure layers literally cannot be replicated. 

Starting a new version of Bitcoin, with the aim of replacing the existing Bitcoin, would arguably be harder than replacing Facebook, Amazon, or Google today.

This is, in part, because Bitcoin is already globally distributed, and has built up 10 years’ worth of trust as a network. It is also, in part, because no government would allow a new Bitcoin to take hold, or to ever get as far as the old one did.

It is true that governments hate the idea of a sovereign digital currency that can compete with their own fiat offerings. It is also true they will attempt to stamp out credible newcomers.

For example, just look at what happened when Facebook tried to introduce Libra, a quasi-distributed digital currency (in reality controlled by Mark Zuckerberg) that would be instantly global via Facebook’s billions of users. The financial authorities in both the U.S. and Europe had a collective freak-out over Libra, and Facebook had to slam on the brakes.

With the above said, governments are too late to stop Bitcoin — it is already too powerful. If a bureaucrat could step into a time machine and travel back to, say, 2010 to kill Bitcoin, there is little doubt they would.

But Bitcoin has already gone global, and the network has already achieved enough strength and security bona fides and brand recognition to become immortal in a de facto sense of the word.

At this point, any government attempt to attack or ban Bitcoin would just create favorable publicity for Bitcoin, making it stronger. 

Also, because of its distributed nature, there is literally no way to shut Bitcoin down or turn it off, short of completely dismantling the internet itself.

This means that, if a government really wanted to ban Bitcoin, that government would have to use a threat of violence against its own citizens, e.g. “if you are caught owning Bitcoin, you go to prison.”

But the idea that a democratic government could just choose, on a whim, to ban ownership of a crypto asset has all sorts of associated problems.

First and foremost, in democracies that value free speech, and at least some semblance of civil liberty and property rights, governments are not able to ban whatever they want. (Thank goodness.)

What’s more, a government that was actually powerful enough to ban Bitcoin — for reasons of whim, or no stated reason at all — would also be powerful enough to ban gold, silver, diamonds, or any other store of value one might think of, which means the citizens under the jurisdiction of said government have a much bigger problem on hand.

Any government that fully bans a cryptocurrency would likely be doing so as an authoritarian act, to protect a monopoly on issuing a medium of exchange it has full control over.

A government like that can ban anything it wants — and the citizenry of such a country would almost certainly revolt behind closed doors, or should.

We saw this in action in late 2017, when the Chinese government tried to ban crypto exchanges. It didn’t work. China’s citizens wanted to continue trading cryptocurrency and mining bitcoin — so they did.

If not even China, a digital authoritarian state in its own right, can keep crypto activity reigned in, how could any government in the West? To truly make a Bitcoin ban effective, a government might have to ban electricity and internet access, too. How realistic is that? Not very.

Or just imagine, for example, if an ambitious politician tried to ban Bitcoin in the United States.

A ban like that would not be a simple decree. It would require passing a law, which would require debate in the halls of Congress. And unless notions of American liberty were completely dead at this point, there would certainly be opposition in the halls of Congress to a full-on crypto ban.

Then, too, if cryptocurrency were banned, deep pockets in Silicon Valley and elsewhere would immediately issue legal challenges. After all, on what grounds could a government restrict the right to hold a digital asset made of electrons?

In a contested ban with the courts involved, the United States government would have to answer that question, and the case could go all the way to the Supreme Court.

And if it did, imagine what the government’s side of the case would be — some version of “our national currency is so fragile and vulnerable we need to protect it from dangerous internet money,” or perhaps, “for the good of the republic we need the ability to print like crazy and not have a sovereign asset outside the system holding us to account.”

It would be the greatest public relations coup of all time — for Bitcoin, that is, as the naked shortcomings of fiat currency were laid out, on a global stage, for all the world to see.

Then, too, when it comes to Bitcoin specifically, government issuers of fiat currency have a publicity problem in that, if they openly acknowledge Bitcoin as a threat, they have already lost the game.

Think of the commercial bank that has to deal with rumors of insolvency. If a credible rumor of insolvency is going around, the bank is already in deep trouble, because account holders will rush to withdraw their funds and turn the rumor into a self-fulfilling prophecy.

Comparably, if a government was having severe issues with its fiat currency losing value, attempting to outlaw hard assets would just inspire citizens and investors to dump the currency even faster.

It is true that government-issued crypto is coming. Central Bank Digital Currencies (CBDCs) are already on the drawing board and could show up sooner rather than later. China’s digital yuan is likely to be first.

But government-controlled digital currencies will provide no competition for Bitcoin — absolutely none at all — because government cryptos will still be “fiat” in the sense of having theoretically infinite supply, expandable at the touch of a keyboard, whereas Bitcoin will remain the hardest form of money known to man (because new Bitcoin supply is fixed and falling, eventually to zero).

So, to sum up, Jim Rogers thinks Bitcoin will die because governments will outlaw it, and thus kill it off, and furthermore that cryptocurrency is a form of gambling that will disappear.

This is wrong in every respect, and, in some ways, not even “wrong” but badly misinformed.

Bitcoin is impossible to kill, unless one can kill off the entire internet. Bitcoin is primarily held as a form of long-term investment and a store of value, in line with the “digital gold” use case, with speculative transactions occurring at the margins. Bitcoin is already globally distributed, which means any single-country ban would have little effect (China already showed this).

And last but not least, the notion of “banning” a cryptocurrency is deeply problematic, requiring either an authoritarian government with the capability of banning anything, or a democratic government so desperate to shore up a failing fiat system that it winds up highlighting its own systemic weakness, while having no means to enforce a real Bitcoin ban even if the courts actually authorized one.

If Rogers, or anyone else for that matter, has better arguments as to why Bitcoin is doomed, we’d love to hear them. (And by all means, send them our way). If not, this case feels closed.