Whenever a new and disruptive technology starts to permeate the country and the world, it makes people think hard about its effects, usefulness, and whether they should participate in the modern gold rush. The more novel, and disruptive the technology or product is, the more eyes will be looking in that direction. Bitcoin is interesting in the sense that it fits these qualities to a modern extreme, but also has an answer for one of the worst inventions in human history – fiat currency.
Historically, currency was used to exchange value. So instead of walking around with gold, or meat, or wood, humans could exchange coins or bills that represented the value each good was assigned by the free market (supply and demand). The currency was backed by gold or land, and when you paid with that currency you were exchanging pieces of paper that had real value to them. It meant you owned a small piece of land or gold, and those two hard assets had real value.
After Nixon took America off the gold standard in 1971, the United States dollar then became backed by the government. The obvious problem with this is inflation, and the Federal Reserves ability to print money and control the flow of money that is in circulation. Another major problem is government control. Your money is said to be backed by the government that is now twenty trillion in debt, has a massive budget being allocated to many questionable things, has proven to bail out massive corporations, wave goodbye to the little guy, and keep interest rates as low as possible.
So now let’s paint the picture. We have a fiat currency that will eventually fail as history tells us it will. And not only that, we have a large portion of the country upset with the total lack of fiscal responsibility by the government, and here comes a digital currency birthed out of technology. We are told there is a limited number of bitcoin so inflation cannot affect it. It’s extremely secure due to the blockchain the currency is embedded in. It’s global, free from any reckless governments, rich billionaires who can hide it from taxes, and has value due to its finite amount…….or so we are told.
And that brings me to the main point of this post. Fiat currency is obviously something that is not sustainable, especially with the actions of our government. Bitcoin attempts to attack this problem with advanced technology in the hope of a global utopian currency with easy transactions, value, freedom from governments, and ease of use. But can it deliver on these promises?
When I look at bitcoin as an investment, it does not check my boxes. It is a currency and not a cash producing asset. The biggest irony with bitcoin is its value is measured by the U.S. dollar BTC/USD. The other problem is the world is run by governments that will do just about anything to step on bitcoin if it ever begins to see wide adoption in any country. A country’s government would rather see the president assassinated then give up control of their currency.
Bitcoin is looking far into the future and attacking one of the biggest problems in society. This means Bitcoin, or any cryptocurrency, will have a long and hard road ahead of it. But people’s willingness to accept it, love it, and drive it to the crazy prices we saw two years ago tells us one definite fact. People are tired of government-run fiat currencies, and they are looking for any way out.