To understand the reason behind why some people (like me) buy bitcoin you need to think about the problem we think bitcoin is trying to solve. When you use a government currency, like USD, the Government can effectively steal value from your bank account via money printing. How does this work?
To understand that you need to understand what the point of money is. Money is just a measurement of the value of something. We have all been trained that the value of things goes up over time because the price goes up over time. But just because a house rises in value by $100k over 5 years, does not mean its intrinsic value has risen. It’s the same house providing the same amount of shelter. It really shouldn’t gain value. What has really happened is the money, used to measure the value of the house, has lost value! It’d be like if you used a tape measure with 12 inches to 1 foot to measure a board and then you changed the tape measure to use 13 inches to 1 foot, where the foot is still the same length but each inch is smaller so you have “more inches”. But is the 1 foot board actually any more useful or longer if you use 13 shorter inches or 12 inches to 1 foot? No. This is how the government confuses us. They print more money and then our houses “go up” in value, but it’s because the measuring stick is changing. Why does the government do this though? They do it because that’s how they pay for the $1 trillion to $4 trillion budget deficit the Government has each year.
In WW1, while we were on the gold standard (every dollar was supposedly able to be converted back to gold at a bank), the government had to sell “war bonds” to pay for the war. This at least provided a little link between Americans turning over money for what they thought was a just cause. If people didn’t buy the bonds the government couldn’t pay for the war.
Since the US dollar was removed from the gold standard in 1971, the Government has had no restrictions on how much money they can print. The US government is able to fund any war ad infinitum via money printing. When this new money is printed the government uses it to buy good (ships, tanks, steel, sometimes roads, etc). Since they have unlimited purchasing power they can keep printing money until they can pay for what they need. Meanwhile, the average person might be unable to buy a new truck because the price of steel was pushed up by the government demanding 200 billion tons of steel for planes and warships.
When thinking about if you should buy bitcoin this is the fundamental issue you need to consider, how is my purchasing power being diluted via inflation?
Since bitcoin has a limited supply (21 million) as more US dollars are printed a single bitcoin’s value, measured in USD, or any other currency, will continue to go up.
In fact bitcoin recently hit all time highs, when measured in Argentine pesos, Lebanese pounds and Venezuelan bolivars
This is due to those countries experiencing extremely high levels of inflation 50%-100% a year. I can’t even imagine what that would be like to live in. At 100% inflation, or even 50% you need a raise every paycheck! Your money would lose 1% of its value every week at 50% inflation.
While it seems like high inflation only happens in “far away” places with bad Governments that’s not the case. It has happened thousands of times in history
We, every person in the world, is in a fight with their own government to keep as much of the value they create as they can. The government explicitly taxes you, which we can debate but at least it is obvious. But the government also stealthy steals value from your bank account or savings via inflation and money printing that you have no control over.
Because in the USA inflation has been a relatively small issue (1%-3%) for most of the last 25 years most people in the USA haven’t thought about wealth preservation much. Now that we’ve seen 10% inflation it’s new to people and they aren’t sure how to protect their purchasing power! A bond paying 5% is really losing 5% a year to inflation if inflation is 10%.
I know bitcoin is volatile but the inherent properties of it (ultimate scarcity, 21 million total coins ever), make it the best chance we have ever had to get out of the system and protect our wealth. If bitcoin doesn’t succeed then we will have lost every opportunity to preserve value!
I think that is a cause worth supporting, by buying and holding Bitcoin. And you’re not just supporting it, but you’re protecting your wealth!
I have written politicians and blog posts trying to encourage people to understand this while bitcoin is relatively cheap ($30k). I know once it is $50k or $100k more people will have Fear Of Missing Out and will buy in which could happen in the next year or 2. It’s best to learn about bitcoin when it’s price isn’t rising like crazy and you aren’t having FOMO.
If you’ve wondered this last year or 2 how to avoid losing value to inflation I’d enjoy talking to you more about bitcoin. I only recommend 1% of your net worth in it to start. So if you have $100,000 of net worth you can just buy $1,000 worth of bitcoin. That’s a small risk to be part of a monetary revolution that just might pay off.
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