Elon Musk’s Bitcoin Fun Continues

I am sorry to keep talking about it because it is so stupid, but there really is something unprecedented and amazing and almost magical about Elon Musk’s continuing ability and inclination to move the prices of Bitcoin and Dogecoin with his slightest whim. Imagine if you had gone to Warren Buffett 30 years ago — or J.P. Morgan 120 years ago — and told him: Here is a lamp. In the lamp is a genie. When you rub the lamp, the genie will come out and invent two assets. They will trade like stocks in many ways, but unlike stocks they (1) will not be subject to U.S. securities laws, (2) will trade 24 hours a day, seven days a week, and (3) will not represent claims on any businesses or cash flows. One will have a market cap — a total circulating supply — of about a trillion dollars; the other will be smaller but still like $65 billion. They will be liquid enough, with lots of people trading many billions of dollars’ worth per day; you can buy or sell lots of them without too much price impact. And: Any time you want the price of either one to go up or down by 10% or more, you can just whisper “price go up” or “price go down” into the lamp, and it will happen instantly. You are the only person who can do this, and you can do it as often as you want.

How much would Warren Buffett pay for that lamp? I suppose its value is not literally infinite: Once you have all the money you could ever spend, you might get bored of whispering to the lamp all the time and go do something else.1 But it is as close to infinite as you’re likely to get, as close to a free-money perpetual motion machine as you’ll ever see in finance. You can quickly, easily, silently buy billions of dollars’ worth of a liquid unregulated financial asset and then tell it to go up, and it will go up. Then you can sell it, tell it to go down, and repeat.