(~9 minute read)

I just got back from a memorable (and last minute) trip in the south of Spain!

Now, when I say last minute, I mean we flew out with Jackson (2.25 years old) in tow, not having a hotel booked yet for the last leg of the adventure…(don’t worry, everything worked out just fine).

And when I say memorable, it’s because last minute, I casually brought up the idea with my parents and sister to come with, not thinking they would be able to pull it off. However, to my surprise, they were able to shuffle around schedules, get time off from work, and join us!

So, not only was the south of Spain a new part of the world we got to explore, but it turned into a surprise family reunion as well.

Time is scarce

The older I get, the more I appreciate how scarce time is.

Between work related obligations, our own travel schedule, and Jackson’s growing list of extracurricular activities, the reality is there aren’t too many times to pull off family reunion trips anymore.

To see just how little time is left, check out this visualization below from Wait But Why.

It shows that after high school, each of us will have already used up 93% of the in-person time with our parents. This is represented by all the red on the chart.

At first, I was depressed knowing there are only a handful of times remaining to see my parents (represented by the black dots on the bottom of the diagram). And even less opportunities to go on big trips together.

But as I get older, I’m more mindful to take advantage of what time there is left. This trip through the south of Spain was the perfect reminder.

Having time to travel

Backing up, in Q1 2023, I was impacted by a company wide reduction in force at Coinbase and unfortunately laid off.

Even though it sucked to lose a recurring paycheck and a job I loved, something wonderful also happened – my schedule completely opened up. All of a sudden, I had time on my side. And with it, an opportunity to travel!

After throwing around some wilder ideas like Japan or Thailand, Tiffany and I settled on the Andalusia region in the south of Spain.

Part of it was inspired from having read “The Alchemist”. Part of it was because in March time frame, it’s warm and sunny in the south of Spain vs. cold and wet and windy in New York City. And finally, a part of it was because this was our first international flight with Jackson and we didn’t feel like dragging him on a 12+ hour plane ride.

Even though it took some work to plan, I am so glad the trip came together.

Jackson was able to spend an extended period of time bonding with his grandparents and aunt. And we stayed in a beautiful house with a grand living room where we hung out throughout the day. And as an extended family, we were able to experience all of it together…which is priceless!

(Before continuing, I want to call out that I fully recognize how privileged I am to go travel after getting laid off. And I’m especially grateful because for most of my childhood, my family lived below the poverty line and would never dream of doing something like this.)

Bitcoin is scarce

Now that we’re on the same page that time is scarce, let me tell you about something else that is just as scarce.

Bitcoin!

I know, I know, I can almost see you furrowing your brows right now, wondering, “how is time scarcity at all related to bitcoin scarcity?”.

On the surface, they don’t seem at all related. But yet, understanding scarcity of time has been one of my key “ah ha” moments with bitcoin.

So let me explain because it may help you to have your own “ah ha” moment about bitcoin too!

Sometimes we understand scarcity. Other times, we don’t.

When it comes to the concept that “time is scarce”, every parent I talk to just “gets” it. For instance, we know once our kids grow up, we won’t be able to rewind the clock and do it again. And we also just “get it” that life is busy and there aren’t too many opportunities to do big family reunion trips anymore.

However, when it comes to the concept that “bitcoin is scarce” and why it matters, almost no one gets it at first. Myself included.

And yet, now that I do deeply understand what “bitcoin is scarce” means, it is a no-brainer why bitcoin belongs in my family’s long term financial portfolio.

Here’s why.

21 million is set in stone

Fact: there will only ever be 21 million bitcoin. And no matter what, no one will be able to create more.

Whether you’ve already heard about this 21 million number before, or if this is the first time, at first glance, I know this number feels trivial and meaningless.

However, 21 million is anything but…

Through thousands of hours of study (and without going too deep into the bitcoin’s monetary policy or game theory or the inner workings of the Nakamoto consensus), my key takeaway is that the 21 million bitcoin limit is set in stone.

I know this feels counterintuitive because after all, bitcoin is just software, and software gets changed all the time…so how could it be limited to only 21 million?

The good news is you don’t have to fully understand how bitcoin works from the inside out (design —> implementation —> incentive structure) before you can have your own “ah ha” moment that 21 million is really set in stone.

That’s because we have real world evidence to point to.

We know that the market cap of bitcoin is ~$500 billion dollars right now.

And we know whenever there is a honey pot, there are groups of hackers, companies, and even governments around the world who want to get in on it. That is because these actors (with deep pockets) have a lot to gain if they can change bitcoin in a material way, like the 21 million limit. As an example, “The Blocksize Wars” documents one of these change attempts back in 2017.

And just to be clear, what happened in the book wasn’t an isolated incidence. Rather, this is happening every day.

This is important.

Why should you care?

Instead of just theorizing if / how bitcoin can maintain this 21 million limit, we have real world data on our side.

We can observe that no matter how many people try to change bitcoin, they are unsuccessful. That’s because the 21 million limit is still in place!

It’s now been 14+ years since bitcoin has launched, and the limit hasn’t changed. And with each passing day, we continue to see the 21 million limit enforced.

With this key insight and more real world evidence rolling in each each day (ie. the 21 million limit is still in place), eventually, we come to develop conviction that bitcoin is indeed, scarce.

And the beauty is, since bitcoin is open source software, anyone can verify this limit hasn’t changed. On sites like CoinMarketCap, you can see the bitcoin max supply is, you guessed it, 21 million.

Now, let’s come full circle and talk about why this scarcity is a key component that makes bitcoin work.

Econ 101

Indulge me by going on a slight tangent…back to university days.

Do you remember that in Econ 101, we learned there was a relationship between [a] supply (how much of a thing there is available) and [b] demand (how many people who want that thing)?

Take shoes for example.

Imagine Nike releases a new limited edition shoe. Which happens to be the hottest and most anticipated shoe of the year. And for whatever reason, they decide to only make 100 pairs.

What do you think is going to happen on a shoe marketplace like Flight Club?

It doesn’t take a rocket scientist to figure it out – the price is going up.

This is the key insight so I’m stating it again: when there is more demand (ie. for the shoes) than there is supply of it, the price goes up.

Back to bitcoin

What we’ve established so far is that:

• there will only ever be 21 million bitcoin
• the limit is verifiable

And now, having dusted off some Econ 101, what we also know is that over time, with more demand of a thing AND when there is a fixed supply of that thing (ie. 100 pairs of shoes, 21 million bitcoin, etc), the price goes up in the long run.

Now it gets juicy – what if we can figure out whether bitcoin demand is going up (or down)? If we could, then we can see how bitcoin scarcity becomes a factor.

Luckily, we can see how many people are buying bitcoin and / or have a meaningful allocation already.

Look at the orange line below:

What do you see? To me, directionally, it looks like more and more people are buying bitcoin. And not just a few dollars here and there, but rather, at least 1 whole bitcoin (currently at ~$30k USD).

Is it as high as 1 million people as the chart suggests? Of course not, since one person can have multiple addresses.

But zooming out, directionally, it’s pretty clear what is happening – more people are buying bitcoin.

Bitcoin is really scarce

Now, to bring it all home, let’s put this scarcity into perspective.

Around the world, there are 62 million millionaires (source). These are people who could afford to buy 1 bitcoin (~$30k as of now).

But do you notice a problem already? There are significantly more millionaires in the world (62 million) than there are bitcoin available (21 million).

That means not every millionaire will even be able to buy just ONE bitcoin for their portfolio.

On top of that, this is assuming that all 21 million bitcoin are for sale. Which isn’t the case. Take MicroStrategy with over 140,000 bitcoin or the Winklevoss twins who own over 100,000 bitcoin, as just two examples of bitcoin not available for sale.

Putting all these these separate points together, I can’t help but wonder what happens as more millionaires (62 million of them around the world!) try to buy bitcoin…

Simply put, there isn’t enough bitcoin for sale!

In the long run, due to the 21 million fixed limit, and as more people “get” bitcoin and try to buy it, the price will trend upwards.

Conclusion

Time is valuable because it is scarce. We only have so much of it, and won’t be able to make more.

Bitcoin is valuable because it is also scarce. There are only 21 million of it, and no one can make more of it.

And as more people have their own “ah ha” moment that bitcoin is actually scarce, more and more people will try to buy bitcoin.

How much will price go up? And how soon?

Good questions – the truth is, no one knows! In the short term, there is lots of volatility so you’ll see bitcoin up 5% one day, or down 10% the next. But as a long term investment, one I’ve already held for 10 years, and one that I’ll hold for at least 10+ years more, I know that in the long run, bitcoin is scarce, demand is increasing, and the price will eventually follow.

I hope by better understanding why scarcity matters for bitcoin, it’ll help you evaluate whether you should own some in your family’s long term portfolio too!