Bill Gates Vs. Tommy Lee

Bill Gates said he would short Bitcoin if he could (he can) and Tommy Lee of Fundstrat thinks Bitcoin will go to $25k. Time will tell who is right.^[1]

Dear @BillGates there is an easy way to short bitcoin. You can short #XBT, the @CBOE Bitcoin (USD) Futures contract, and put your money where your mouth is! cc @CNBC @WarrenBuffett https://t.co/4JIhF5vWsZ

— Tyler Winklevoss (@tylerwinklevoss) May 7, 2018

Gates said this on May 8th when Bitcoin was at $9.3k. Tommy Lee has taken the $25k Bitcoin stance for a few months.

Let’s assume they both put their money where their mouth is and let’s put these two head-to-head in a theoretical game.

We will have Gates go short at $9.3k and Lee going long at $9.3k.

Let’s assume they take this position from now until November – December 2018 (meaning they have to stick with their position for the bulk of the year, but can exit their position anytime in the last two months of the year).

Let’s also assume they are very nimble and trade well and we will allow them to take the lowest and highest prices of November – December respectively.

With those terms set, all we have to do is wait until the end of the year, and the winner will be decided by the price of Bitcoin in those final months of 2018 (with the price furthest away from $9.3k in that period determining the winner).

Sure, in reality, they would both probably hedge, and they would potentially have to close and open their positions, but this is a theoretical game, so we will simplify the rules and assume they both have the same starting capital, same leverage, only hold one position, and avoid liquidation no matter what.

My opinion: If I had to take a bet, I’d go with Lee. I don’t disagree with most of the points Gates or his comrades make (see the video), but I think he is vastly underestimating both Bitcoin, the Bitcoin market, and human nature. From an outside perspective crypto might look like a tulip bubble, but from the inside, it is clear that it is a series of tulip bubbles in rapid secession waving in a volatile but upward trajectory. There is no sign I can see that suggests that the last of the bubbles has been blown, and with all the new players entering the space, my assumption is that Gate’s short position has less of a chance of paying off than Lee’s long. In short, while there is likely to be ample opportunities to short Bitcoin, I don’t think the general trajectory is down and thus I wouldn’t be favoring a short position over a long one, in the long term in general, and specifically for the duration of 2018.

1. Bill Gates: I would short bitcoin if I could. cnbc.com.