Bitcoin is 'almost too big to fail,' Dave Portnoy says (Cryptocurrency:BTC-USD)

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Bitcoin cryptocurrency background. A bunch of golden bitcoin, Digital currency — Tevarak/iStock via Getty Images

Bitcoin (BTC-USD) has "so much money behind it, it's almost too big to fail, almost too big to go away," Barstool Sports' Dave Portnoy said in an interview on Fox Business Network while attending the Bitcoin 2022 conference in Miami. "So I do believe in it."

He's optimistic that the world's largest crypto will gain more traction as a means of payment. "It's all about the Lightning Network, right... all about making bitcoin fast payment so you can use it everywhere from a McDonald's to the Walmart to anybody going shopping," he said.

Volatility, though, has worked against its use in payments. Bitcoin (BTC-USD), which had been rising early in the day, is slipping to ~$43K in midafternoon trading on Friday. In November, bitcoin reached almost $68K.

Portnoy said he has put in a little more than $1M for the 29 bitcoins (BTC-USD) he owns. Currently, 29 bitcoins (BTC-USD) are valued at ~$1.25M.

While he believes in bitcoin, Safemoon (SAFEMOON-USD) is another story. "I bought $40,000 of it and I now have $2,000 left. So I got smoked at that one," Portnoy said, adding that he know it was potentially junk when he bought it.

He also commented on Elon Musk's purchase of Twitter (TWTR) stock, making Musk the largest shareholder in the social media platform. "I like the underlying philosophy of what he does — 'If I don't like you, I'll buy you'. I wish I could do that with anything."

On Thursday, digital payments platform Strike announced a partnership with Shopify (SHOP) to let merchants accept bitcoin (BTC-USD) payments as dollars over the Lightning Network.

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I can shop with my Visa or Mastercard at any retailer anywhere in the world, in any currency with no exchange fees, and anywhere online. So I don't see why I would need Bitcoin. Not only that, if someone ever takes my account number, Visa and Mastercard protect me against all fraudulent charges. Once someone stole my Uber information and took a $1,000 ride up the California coast. No worries for me, because I don't use Bitcoin to pay Uber. I use Visa or Mastercard. All fraud charges dropped. But if someone hacks my crypto accounts and steals my Bitcoins, what protection do I have? None. Just ask anyone with a Coinbase account. So here is another reason why credit cards are vastly superior to owning Bitcoin. But there are even more reasons why crypto is a silly investment. The volatility speaks for itself. My bitcoin could plunge from 68k to 43k in no time at all. But does the cash in my online savings account drop in value by 30% during a bad week of trading? No, it doesn't drop by any value whatsoever. Economists call that "a store of value." One of the basic things you look for in a currency.

These are all great reasons to prefer cash, checking accounts and credit cards to crypto, but they aren't the most important reasons.

Let's start with barriers to entry. Anyone can issue a cryptocurrency. So that means a literally infinite supply of cryptocurrencies, and there are only 6 billion people in the world to buy it all. Intro to Economics 101 is all the education you need to understand what the laws of supply and demand tell you about the value of ANYTHING that is in infinite supply but faces inherently limited demand. Maybe there will ever only be a fixed number of Bitcoins - what about the number of cryptocurrencies that compete with it? The answer is that number is unlimited.

By contrast, with government-backed currencies, there is a limit to how much they can print without causing runaway inflation. Maybe one of the reasons why we are seeing runaway inflation now is because the supply of what people consider to be "money" is expanding explosively as more and more people issue non-government backed cryptocurrencies? If so, that would bring me to the most serious reason to eschew Bitcoin and other crypto currencies. Laws. If world governments decide that on balance, Bitcoin is bad for the economy or anything else the governments care about, they will ban it. Just ask China and Russia if you think outright bans are unlikely. And if the only countries that allow Bitcoin to exist are places like El Salvador.... well..... that ain't so good for the lucky investors who buy Bitcoin today. Unless they plan to move to El Salvador.

I suppose I won't be the most popular person for saying so, but my assumption is that Bitcoin will eventually drop to zero. The same thing will happen for every other cryptocurrency that exists today. Once world governments start to use blockchain to issue, oversee and regulate their own currencies (intermediated by banks that all happen to own the Federal Reserve), that'll be the final nail in the coffin for Bitcoin, Ethereum, and whatever other crypto flavor of the month happens to be in vogue today. 100% losses. That's what I expect every crypto investor today faces. That statement may draw dismissive laughter today... followed by tears of sorrowful remorse in the future.