Bitcoin: 5 Reasons it’s Not Going Anywhere
Is it just a fad? A ponzi scheme? Rat poison to be avoided at all costs?
It might be sensible to assume so. After all, there certainly are elements of the above to be found in bitcoin. And remaining sceptical offers protection against financial ruin.
So why hasn’t it collapsed yet? Why has the bitcoin bubble continued to inflate? And why, after 15 years, are intelligent people still promoting this new innovation?
The truth is, no one knows. Bitcoin, and its future, are a mystery. To enthusiasts, the question mark surrounding bitcoin is the cause of excitement and hope, to detractors, the cause of fear and derision.
In light of this, I present five reasons why bitcoin might be more than a fad, a ponzi scheme, or a colossal idiocy. In other words, I will attempt to present some explanation why Bitcoin might not be going anywhere.
Hope is Scarce
Hope in today’s economy is increasingly scarce. The ability of the younger generations to raise a family, buy a house, and retire at a reasonable age, is looking increasingly remote. As each year passes, wealth inequality rises. And as the gap between the rich and poor widens, social mobility becomes ever more impossible.
Escaping poverty and entering the middle class is no longer a feasible aspiration. Increasingly it is becoming nothing more than a pipe dream. Life-long renting and working until death looks to be the predominant fate of those born within the last 30 or 40 years.
It’s no wonder that many are looking to alternatives, and many willing to gamble for a chance to escape.
Bitcoin is one of few innovations that appears to offer an escape from this trap. It is a technology that challenges the status quo and stands in opposition to the traditional banking system.
Through bitcoin, and crypto more broadly, it is not impossible to 10X your money. Moreover, it’s not impossible to retain your wealth over long periods without the forces of inflation devouring it.
Bitcoin, at least in the eyes of its enthusiasts, pulls power away from banks and governments and offers potential gains to its holders beyond the scope of regular financial institutions. While no one knows exactly what it’s worth, it remains a much sought wild card in a game rigged firmly against the majority.
As long as the hopes for a new financial system persist and more traditional routes to wealth fade, bitcoin has a reason to stick around.
Bitcoin is for everyone. Gold is for the rich.
You don’t need bitcoin, a risky new asset, to escape inflation. Just buy gold, so say the gold bugs.
Comparisons have been drawn between gold and bitcoin since its launch. This, of course, was always intended, hence the term ‘mining’ to describe the process through which new bitcoins are created.
As an asset, the primary use of gold is as a store of value. Gold, which has been highly valued for millennia and which, by virtue of its chemical properties, doesn’t tarnish over time, has long been viewed as a safe purchase for those wanting to preserve their wealth.
And, not only does gold retain its physical value over time, but owing to the difficulty of mining it, there is no danger of a rapidly expanding supply inflating its price.
Bitcoin, like gold, is scarce, with a limited supply only being mined into existence each year.
Gold bugs and bitcoin critics (Peter Schiff) will be quick to point out that bitcoin lacks the inherent value of gold. Unlike gold, you can’t make jewellery or electronics with bitcoin.
Critics will argue that since Bitcoin doesn’t have this inherent value, it could never compare with gold. You’re better off just buying gold, they will claim.
But gold is not a viable alternative for most bitcoiners. While bitcoin is for everyone, gold is reserved for the rich.
To own gold, you first need a place to store it. This could be your own house, provided you have the necessary security, or a vault, in which you’d need to pay a third party to guard it for you. Sadly, both options are only for the rich.
Second, gold is only worth buying if you have a significant amount of wealth to store in the first place. Without significant wealth, buying gold is of no use.
Bitcoin, however, requires no storage facilities, offers instant liquidity, and can be bought in any quantity depending on how much money the buyer has available. The Bitcoin accumulator is not restricted to costly bars or coins with minimum size considerations.
On the question of value, while gold is valuable owing to its applications in the manufacturing and jewellery industries, most of its value comes from its use of money. And of course, fiat currency has no inherent value whatsoever.
Perhaps being backed by real, tangible value, is not as important as it once was. Particularly in the digital age.
Demographics Favour Bitcoin
The idea of a digital asset may seem absurd to elders who grew up in an analogue world and for whom technology is something of a novelty (Buffett and Munger?). But to someone who grew up with an Iphone by their bedside, and for whom a day offline is unthinkable, the digital world is more real and more significant.
To the younger generation, digital assets make sense and feel far more natural than to those who remember the day the dollar was taken off the gold standard.
We already know that the younger people are far more accepting of digital currencies and crypto than older people. And as time marches onwards and our lives become increasingly entwined with the digital world, this trend will only continue.
Bitcoin has proved useful
The most frequent criticism of Bitcoin is that it has no use. It’s too slow to be used for retail transactions, too inefficient, and too costly to be of any practical utility. Even as a store of value Bitcoin is useless, critics will argue, as its volatility and wild price swings mean we cannot merely park our money in bitcoin and rest assured that it will retain its value over time.
But there have been some real use cases for bitcoin over the past few years that suggest that, flawed though it may be, Bitcoin is perhaps not completely useless.
As disaster insurance, Bitcoin has unquestionable utility. Those living in precarious circumstances with the fear of losing their life savings hanging over their heads, can find refuge today in bitcoin.
Whether you’re living under fear of wealth confiscation, needing to cross borders with your savings intact, or simply needing a way to safeguard your money against the ravages or high inflation, bitcoin could be your life line.
It hasn’t gone anywhere yet. Why should it?
The crashing and burning of bitcoin and its subsequent fall to zero has been anticipated on multiple occasions since its inception. In 2011 it crashed by 90% down from $30 to around $2; in 2014 the price fell from around $1000 to $111, again by almost 90%; and still today crashes of such magnitude are not unheard of.
But each time, Bitcoin has risen again.
In addition to rising up from mad swings to the downside, bitcoin has survived assassination attempts from all angles. From China’s ban of 2013, to the FTX scandal of 2022, to Billionaires and investors describing it as rat poison, Bitcoin has survived it all.
And, now that Bitcoin is bigger than ever before, more widespread and more respected, why should it go anywhere?
Perhaps we’ll soon accept that it isn’t.
