I expect Forbes to understand opportunity cost

Eric Mack writes today for Forbes about Eric Stromber, the man who placed the first Bitcoin ATM in the US. Stromber purchased the Lamassu last summer at a cost of $5,000, for which he paid about 43 bitcoins.


Today that much coin trades at about $30,000. According to Mack, Stromber told Coindesk:

If I had held those bitcoins, they would be worth six times as much now. But that’s looking in the rearview mirror.

The punch line from Mack follows:

That opportunity cost makes it unlikely that Stromberg’s investment in the first American bitcoin ATM to operate will pay off anytime soon.

Why not write about the opportunity cost of Stromber not taking his $5,000 to Vegas and placing it all on 00? The cost of that decision is 3,500% or $175,000. That’s not a reasonable use of opportunity cost because the risk is close to 35x higher than holding the cash or holding the $5,000 ATM asset. An expectation that BTC would rise 6x in 9 months was similarly incomparable. The “opportunity” in both cases only existed in an unforeseeable future, which makes the analysis bogus.

Mack lobs in:

So the road to profitability could be long for Stromberg and his ATM, but such has been the tale of most things bitcoin so far.

Stromber will have earned back his investment once he clears $71,429 in transactions, just as every other business will do once clearing expenses – despite the ever-present Vegas opportunity. This opportunity cost line is a less-than-subtle knock on the idea of a deflationary currency. Mack also offhands that the Lamassu isn’t really an ATM:

And to call the machine a true ATM is something of a misnomer — it’s more of a currency exchanger that simply takes in cash and converts it to the digital currency.

I’ve made this argument myself, but for some reason he’s spinning this as some sort of flaw. The fact that it converts USD (paper) to BTC (digital) and a “true ATM” converts USD (paper) to USD (digital) is hardly a knock on the Lamassu.

Sorry, but this just feels like another old money press hit piece. We can expect a lot more of this.

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