The platypus is perhaps the most bizarre creature on the planet. It’s a venomous, egg-laying, duck-billed, beaver-tailed, otter-footed mammal. Those things simply aren’t supposed to go together.
In fact, when leading scientists first read accounts of the platypus, they dismissed it as a joke—and for good reason: the platypus is a seemingly impossible animal that combines features from three different animal classes and four different animal orders.
Enjoying the joke, the scientists asked the perpetrators of the seemingly-fraudulent platypus scheme to humor them with a sketch of the animal—the product of which was even funnier than imagined.
Even after the initial inspection of the physical specimen, the conclusion was the same: “The first preserved platypus body was thought to have been a fake, made of several animals sewn together, when it was first looked at by scientists." [1]
Only upon the most careful and minute examination did some scientists finally come to believe the creature was real. Still, two decades after the platypus was confirmed, leading anatomists like Robert Knox still doubted the authenticity of the “freak imposture” which “the scientific [community] felt inclined to class this rare production of nature with eastern mermaids and others works of art"[2].
Register Now: A Beginner's Guide To Bitcoin And Other Cryptocurrencies Free Webcast
Even once the platypus was broadly accepted as a real and legitimate animal, classification provoked arguments: What type of animal is it? As it turns out, the platypus isn’t good at being a duck, it’s not good at being an otter, nor is it good at being a beaver or a reptile. The platypus is, however, great at being a platypus!
In the end, the platypus was so distinct that scientists had to create a new animal category to accommodate its unique features. The platypus is a category creator.
Bitcoin is very similar. It exhibits characteristics that cross asset classes: Bitcoin is used for payments like a currency, it’s scarce like a commodity, distributes “special dividends” (hard forks) like a stock, and derives additional value from developer contributions like a technology platform.
The initial reaction to Bitcoin resembles that of the platypus[3]:
- “I would be, at this point, pretty skeptical of bitcoin” – William Dudley, President of the Federal Reserve Bank of New York
- “It’s a fraud” – Jamie Dimon, CEO of JPMorgan Chase
- “it seems to me it ought to be outlawed. It doesn’t serve any socially useful function.” – George Stiglitz, Nobel Prize-Winning Economist
- “You can’t value bitcoin because it’s not a value-producing asset.” – Warren Buffett
- “Digital currencies are nothing but an unfounded fad… They are "not real!!!!! Nobody has been able to make sense to me of these currencies.” – Howard Marks, Co-Chairman and co-founder of Oaktree Capital Group
Bitcoin is truly a strange beast—and that’s a primary reason investors struggle to understand it: While Bitcoin has features from many different assets, it doesn’t fit neatly into any pre-existing categories. This creates a psychological hurdle to contextualizing Bitcoin as an asset.
Currency investors will tell you that Bitcoin isn’t a currency because it’s not broadly used as a unit of account (goods aren’t typically priced in Bitcoin), commodity investors will tell you it isn’t a commodity because you can’t touch it, and Bitcoin certainly isn’t a FinTech company because there’s no CEO or headquarters.
However, all this completely misses the point because while Bitcoin isn’t good at being a currency, a commodity or a FinTech company, Bitcoin is great at being Bitcoin. Like the platypus, Bitcoin is a category creator.
Footnote: If you’d like to learn more about some of the unique features the define Bitcoin and its crypto-asset brethren as a unique asset class, I’d highly recommend the phenomenal white paper “Bitcoin: Ringing the Bell for a New Asset Class” from my friends and industry colleagues Chris Burniske and Adam White.
[1] Walters, Martin; Johnson, Jinny (2003). Encyclopedia of Animals. Marks and Spencer p.l.c. p. 192. ISBN 1-84273-964-6
[2] “Why 19th-Century Naturalists Didn’t Believe in the Platypus”, Zarrelli, Natalie (2016). Atlas Obscura.
[3] “Bitcoin Bulls and Bears: Who’s Hot and Who’s Not on Crypto”, Russo, Camila (2016); Bloomberg. Accessed 12/3/2017.
