Scarcity-Utility Investment Filter
Test an asset's supply, utility, adoption, and downside before investing
- Difficulty
- Advanced
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 91%
Brian explains his cryptocurrency decision through four connected inputs: network utility, constrained supply, adoption, and personal downside capacity. He first separates Bitcoin's transfer network from the stigma surrounding crypto, then asks whether the asset solves a real problem without a banking middleman. He examines the fixed issuance rule and scheduled reductions in new supply, compares that scarcity with limited coastal real estate, and looks for demand growth through user adoption and easier institutional access. Finally, he sizes the risk against his age, liquidity, and ability to earn the money back. The output is an explicit investment thesis rather than a reaction to friends' losses or market excitement. This framework records Brian's reasoning; it does not validate his forecasts or make the investment low-risk.
Origin
Brian says he researched Bitcoin after selling a cannabis investment. He invested $300,000 in Bitcoin and $200,000 in Ethereum after deciding that the loss, while substantial, would be recoverable for him.
Core principles
- 01Scarcity matters only when demand and utility exist
- 02A useful network can be analysed separately from its reputation
- 03Adoption and access can change the demand side
- 04Position size should reflect the ability to recover from a total loss
- 05Independent research is required before accepting a market narrative
How to run it
- 1
Strip away the reputation
Set aside both promotional claims and stories of people who lost money. Analyse what the asset and its network actually do.
Pro tip Explain the mechanism in plain language before considering price forecasts.
Watch out A comprehensible mechanism does not guarantee a valuable asset.
- 2
Test utility
Identify the practical transaction, coordination, or ownership problem the system solves. Brian focused on transferring value without waiting for a bank's permission.
Pro tip Compare the process with the incumbent alternative.
- 3
Verify scarcity
Examine maximum supply, issuance, dilution, and whether the rules can change. Relate scarcity to demand rather than treating limited supply as sufficient by itself.
Pro tip Use primary technical documentation where possible.
Watch out Claims about lost supply and future issuance require independent verification.
- 4
Measure adoption
Look at user growth, network participation, and changes that make ownership easier. Brian cites adoption growth and spot ETFs as demand-side evidence.
Pro tip Separate actual use from account creation or speculative activity.
Watch out Past adoption growth does not establish future returns.
- 5
Map catalysts
Identify dated or structural events that could change new supply, accessibility, or institutional demand. State how each catalyst connects to the thesis.
Pro tip Write down what outcome would disconfirm the catalyst.
Watch out Widely anticipated catalysts may already be reflected in price.
- 6
Set survivable exposure
Decide how much can be lost without destroying financial resilience. Brian explicitly considered whether he could recuperate a complete $500,000 loss.
Pro tip Evaluate the loss in cash terms, not only as a portfolio percentage.
Watch out Brian's willingness to risk roughly 40% of his liquidity is not a universal sizing rule.
In the wild
Brian compared Bitcoin's constrained supply with scarce Newport Beach coastline, examined its peer-validated transfer network, considered its adoption rate, and later viewed spot ETFs as easier access for institutional capital. He also asked whether he could recover if the full investment disappeared before allocating $500,000 across Bitcoin and Ethereum.
→ The investment rose to $7.7 million in 18 months; Brian says he withdrew about $3 million and left the rest invested.
Common mistakes
Treating scarcity as sufficient
A limited supply does not by itself create value; the thesis also needs utility and demand.
Copying another investor's risk
Brian based his position on his own liquidity and ability to recover, not on a position size suitable for everyone.
Confusing a thesis with certainty
Strong conviction and historical returns do not verify future price forecasts.
Is it for you?
Best for
It is best for experienced investors evaluating volatile assets whose value depends on network adoption and constrained supply.
Not ideal for
It is not ideal for anyone who cannot absorb a complete loss or independently verify the underlying claims.
From the transcript
“if I lose all $500,000 of this money I can recuperate”
“what basically bitcoin's network was was it is a banking system that created a new network that basically I no longer needed a middleman”
“here's an asset that there's only ever 21 million of them here's an asset that can't be inflated Away by any government by any printing…”
From the episode
Crypto Serial Entrepreneur Brian Decker