As you’ve probably noticed, people buy Bitcoin for all sorts of individual reasons.
This can range from short-term speculation to actually using it in commerce, or even for diversifying long-term portfolios.
But let’s zoom out to the bigger picture – what really makes Bitcoin so valuable in the long-run?
If you asked me a couple months ago what the number one reason was for Bitcoin being so valuable, I might have given you one of these answers:
All of the above features of Bitcoin are highly important and give us – as investors – confidence that Bitcoin is here to stay.
However, based on the way things in the world have been changing recently, my answer has also changed…
In my opinion, Bitcoin is so valuable because I consider it Gold 2.0.
Gold has always been the asset with the most simple and reliable store of value.
For centuries, it’s been universally agreed upon as a scarce and precious metal, which can be used as a reliable means of transferring value.
It’s the prime example of “hard money”, as some like to call it.
Because of this, gold has provided a hedge against people’s worst economic fears in the 20th century.
Over the years, it’s given holders insurance against:
Typically when these things happen, people tend to move their funds into hard assets like gold.
Since spikes in the price of gold tend to accompany these moments of fear and uncertainty in the economy, some people refer to the price of gold as a “fear index”.
Run-ups in the price of gold in 2008-2012, as well as right now in 2020, are prime examples of this phenomenon in action – people flocking to gold to escape these economic fears.
In the 21st century, people have a whole new set of fears – some of which overlap with those from the previous century.
People in the 21st century fear:
In the same way that gold provided a hedge against 20th century issues, Bitcoin provides a brand new solution to the new fears of the modern world.
This is why I call it Gold 2.0.
Let’s take a look at how Bitcoin is able to address each of the fears above:
Bitcoin cannot be seized.
As long as you have your private keys or seed phrase, you have access to your coins. They’ll remain on the blockchain, forever.
Bitcoin transactions cannot be censored.
No bank or other centralized organisation can stop you from making a transaction on the blockchain.
In a world where theft and fraud can come from any direction, Bitcoin is much harder for a criminal to take off your hands than regular fiat money.
If your coins are held in a secure way – like on a hardware wallet – almost no type of fraud or robbery will be successful in taking it off your hands.
Our personal data is sensitive – especially our financial data.
Rather than trusting banks or other payment processors with the ability to access, view, or sell data related to our everyday spending habits and purchases, the near-anonymous nature of the blockchain prevents this to a high degree.
Money printing is a huge issue, now more than ever.
Interest rates can no longer be dropped, and money printing looks like it’s the last resort of governments to keep the financial system going.
Whereas the value of our money keeps dropping due to money printing, Bitcoin has a guaranteed maximum supply of 21 million coins.
The previous point is also one of the reasons that people no longer trust their national currencies.
Countries have no limit on how much they can print, leaving us with no ceiling on how far our fiat money can be devalued.
Venezuela and Zimbabwe are prime examples of what can happen when currency debasement is taken to the extreme.
Once again, Bitcoin can’t be printed at will; its supply is set in stone for good.
Governments have too much power to print money, or even seize it from the people’s bank accounts to solve their own shortcomings.
A key example of this is what happened in Greece, when the government started seizing half a million bank accounts in the first half of 2016.
Governments might be able to seize your bank account, but they can’t steal your Bitcoin.
When using the traditional financial system, it’s the banks who have the final say in where you can and can’t spend your money… Or if you can transact at all.
Nobody is safe from this. Even the ex-CFO of PayPal had his account shut down by the Bank of America once with no explanation – essentially shutting him out of the financial system.
Nobody can shut down your Bitcoin wallet or prevent you from spending your coins.
Many societies force people to play by their rules – or be excluded from the system entirely.
A lawyer in China was barred from buying a plane ticket in 2017, due to a blacklisting of his social credit score. The reason? A court finding his apology “insincere”.
With Bitcoin, there’s no central authority who can prevent you from making purchases without their permission. Anyone with an internet connection can use Bitcoin, and nobody can disallow you from using it.
In summary, Bitcoin is the first asset of its kind to provide a solution to all the key fears of the 21st century.
With all the properties of gold and more, Bitcoin has established itself as gold 2.0 – the modern-day king of safe-haven assets.
I believe Bitcoin is the ONLY currency that represents a digital safe haven against modern day fears – and THAT is exactly what makes it so valuable.
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