24 BARRON’S December 7, 2020
Many remain cautious or outright bearish on Bitcoin.
You could argue, if you were a skeptic like my old friend
Nouriel Roubini, that this is just another bubble. But the
adoption of a new financial technology tends to be quite
volatile, and each time Bitcoin rallies and then folds, it
folds to a higher level than the time before. So you could
probably take a little bit of downside risk, but hold Bit-
coin for a year to five years and feel pretty good about it.
What might drive Bitcoin higher?
In a new edition of my book,The Ascent of Money,two
years ago, I observed that if all the millionaires in the
world collectively decided to hold 0.2% of their assets in
Bitcoin, the Bitcoin price would be $15,000, which it
reached this year. If it was 1%, then the price would be
$75,000 per Bitcoin. So, as people adopt this as a new
form of asset that has a respectable place in a diversified
portfolio, there is still quite a bit of upside.
There are about 18.5 million Bitcoins outstanding,
and the total amount is capped at 21 million. That
values Bitcoin at $350 billion now, versus about $10
trillion for all the world’s gold. What makes Bitcoin
distinctive?
Bitcoin is the only digital asset or token that has scarcity
built in. Everything in the internet is defined by a super-
abundance; Bitcoin is the exception.
PayPal Holdings [ticker: PYPL] and others are allow-
ing people to use Bitcoin to buy stuff. Will that help?
I don’t think Bitcoin is for buying things at Starbucks. It’s a
peculiar form of asset, and isn’t highly correlated to other
assets. A friend told me to think of Bitcoin as an option on
digital gold. I like that formulation, because it has behaved
kind of like that. So, I don’t think PayPal is the cure. It is
more that, if every millionaire is adding a little bit of Bit-
coin, that has a lot of power to bid the price up.
How hard is it to buy and hold Bitcoin?
It’s getting easier. Coinbase, for instance, has made it very
easy to trade cryptocurrencies, but quite expensive each
time you transact. That will change over time. That again
is typical of an early stage of a financial innovation.
What are some key policy issues the U.S. will face in
a post-Covid world?
On foreign policy, China is the big issue. The Biden ad-
ministration can’t simply turn the clock back to 2016 and
revert to the late Obama years when the U.S. essentially
acquiesced to China’s rise. That is the main challenge for
Biden, whose instincts are not especially hawkish on
China. But his foreign-policy team will be telling him to
stay tough, because public sentiment has changed.
Also, the pandemic revealed that our bureaucracy gen-
erally has become sclerotic. You can blame the poor re-
sponse to Covid on President Trump if you like, but it
wasn’t all his fault. The Centers for Disease Control and
Prevention completely screwed up testing; HHS [the U.S.
Department of Health and Human Services] was clueless
about the nature of the challenge it faced. And state gov-
ernments, not least New York, did abysmally, too. So, the
question I would put to Biden’s team is, if that’s how we
fail at the pandemic, what other disasters could we fail at
on your watch? It isn’t likely that the next disaster will be
another pandemic. History never works that way. So, there
is a general problem at both the federal and state level. We
have dysfunctional bureaucracies, and they don’t handle
crises well. This isn’t peculiar to a pandemic. Look back
over the past 20 years to [Hurricane] Katrina or even 9/11.
Will fixing the problem require more money or
a different approach?
It is definitely not more money. It is about the incentives
within the public sector and the curious ways in which
federal agencies grow larger and more bureaucratic.
Other countries don’t seem to suffer to the same extent.
Germany is better run than the U.S., and Taiwan is far
better run than the U.S. We need to recognize that there
is something wrong in the state of our government.
What can we learn from Taiwan or South Korea?
If you are a government or a country that has reason to be
paranoid, whether you are Taiwan next to the People’s
Republic of China or South Korea next to North Korea, you
are generally anti-fragile. This is a term from Nassim Taleb
[the author ofThe Black Swan]. You are on the lookout for
trouble without necessarily putting all your eggs in one
basket of preparedness. The flexibility of the Taiwanese
and South Korean response tells you something about the
way they are set up, with a sort of built-in insecurity. But if
you are the No. 1 superpower, you can get complacent
about risks. The challenge for any new administration is to
try to get away from highly detailed regulatory solutions to
problems, which fill pages and pages of the federal register,
and instead have a more responsive, flexible attitude to-
ward the multitude of potential crises that we face.
Where would you most like to go when the
pandemic ends?
The pandemic has made big cities hazardous places,
and I’ve spent most of this year in a rural backwater. So,
the place I’d most want to go is London because two of
my children live there and I haven’t seen them since
February. Also, because I just love the idea of being in a
crowded pub in London, preferably just before an Arse-
nal game at Emirates [the Arsenal soccer club’s home
stadium in London], surrounded by fellow Arsenal
fans, having a pint and not worrying when somebody
coughs in my face. That’s what I am really looking for-
ward to.
Thanks, Niall.
—Andrew Bary
JENS NORDVIG
Founder, Exante Data
New York
Barron’s: How worried should investors be about the
spike in Covid cases in the U.S.?
Jens Nordvig:When I look at the parts of the U.S. that
matter from an economic perspective, a lot have taken
action that will be sufficient to slow the spread. You have
to do it early enough that you have some weeks to see it
bear fruit, and that’s what they’ve done in California, and
what they’re doing in New York City, too. Michigan and
Illinois are places that have taken action recently.
market driver because as soon as you see them, you will
think, we need to shut down factories or provide stimu-
lus [if pollution measures are bad.]
How else will investing change?
There will be more investing that tries to achieve goals
beyond profits, and thinks about how we are affecting
the planet. In the U.S. there has been more shyness in
saying clearly, “I care about having impact with my
money.” There is more comfort [about that] in Europe.
I think that will accelerate.
You have spent part of the pandemic in Israel. What
is the one place on Earth that you’d most like to visit
when the pandemic ends?
I’m really curious to see India postpandemic.
Thanks, Karen.
—Reshma Kapadia
NIALL FERGUSON
Senior Fellow, Hoover Institution,
Stanford University
Palo Alto, Calif.
Barron’s: What will be the best investment opportu-
nity coming out of the pandemic?
Niall Ferguson:I’m going to go with Bitcoin. It has had
a stellar year, up 165% year to date. [It’s now above
$19,000.] If, at the beginning of the year, you had said,
“The pandemic is coming. It’s going to be very disrup-
tive. Should I choose gold or Bitcoin?” you would have
been right to choose Bitcoin because gold is only up
21%. So Bitcoin returns have been an order of magni-
tude higher.
Why has that happened?
In a pandemic, financial history can be accelerated.
We’ve seen that in just the same way that the use of coins
as money was accelerated by the Black Death. Payments
in kind were yielding to a cash economy in Europe, and
this was accelerated in the 1340s. The acceptance of Bit-
coin as a digital asset, a quasi-digital gold, has been accel-
erated by this pandemic. Almost every month, some ma-
jor figure in the mainstream investment world has said,
“OK, now I’ll take Bitcoin seriously.” This process of in-
stitutional adoption has further to run. Kiyoshi Ota/Bloomberg