Why Hold More Bitcoin?

Grayson McLeod·10 Feb 2021Share

Most things are obvious in hindsight, Bitcoin will likely go down in history as one of the best examples of that. In the grand scheme of things, it has taken very little time to go from worthless nerd money to one of the largest and fastest growing networks since the internet, with no signs of slowing down.

‘Money printing’ has become a somewhat mainstream concept following the COVID-19 blowup, as more people than ever are beginning to question how sustainable it really is to just conjure up trillions of dollars at a time. Following this, millennials and the younger generation found investing apps like Robinhood as their escape valve for beating inflation and money printing. A rapidly growing stock market may seem like a good thing on the surface level, however it can also act as an indicator for worse things to come. A good example of this was the rapid flow of money into the Venezuelan stock market prior to and during the hyperinflation experienced in 2017-2018.

IBVC Index

“Even turkeys can fly in a hurricane” sums up this phenomenon quite well. As people start to flear inflation (quite possible without even knowing it), scrambling to random assets for wealth preservation is the logical thing to do. Two of the largest examples of this that we have seen in western countries are real estate and tech stocks such as Google and Amazon, where people have mistaken leverage and inflation for genius. At the end of the day, Bitcoin is the only verifiably finite asset that we have, and it is soaking up legacy finance at an exponential rate. If you are looking to do some more reading on how the scarcity of a money affects its value, a good place to start is Modeling Bitcoin Value with Scarcity by Plan B.

Bitcoin stock to flow model

Sticking with the theme of stocks, the fiasco caused by the gamma squeeze of GameStop ($GME) also outlines one of Bitcoin’s most valuable traits: censorship resistance. In the wake of the retail traders from Reddit/WallStreetBets having a hugely profitable return on the stock, multiple brokers and providers subsequently stopped people from buying and in some cases even forced sold people’s shares. For many, this would have been the first time they were stopped from accessing a financial product at the whim of someone else. This brings up a topic that most people in developed countries have likely never experienced or thought about: financial censorship and the ability for someone else to completely stop your participation in the market.

It’s for this reason that Bitcoin has gained so much traction in developing countries where the financial system is more blatantly corrupt and untrustworthy. As the saying goes, most people get into Bitcoin for one of two reasons: you were curious, or you had no choice. For people in countries where capital controls can severely restrict family incomes, Bitcoin offers a solution where business can be done without the permission of central authority. On top of this, political refugees and asylum seekers can use Bitcoin to store and transport wealth by simply memorising a sequence of words. Ultimately, Bitcoin is becoming the world’s most powerful tool for protecting human rights.

It is at this point where some may bring up the argument that “it’s for those same principles that allows Bitcoin to be used by criminals!” The simple answer to this is yes, Bitcoin is for everyone. The same reasoning was used around the beginning of the internet, however the beauty of an open network like this is that once it gains traction you cannot stop it.

Paul Krugman Quote

Bitcoin’s network effects are arguably the strongest in the world, acting as one big positive feedback cycle which gets exponentially stronger as time goes on. The most notable network effect of Bitcoin is that it feeds off the powerful emotion of human greed to fuel the majority of its existence. The incentive of wealth is far too strong to ignore, and is not limited to individuals but also carries over to businesses, investment funds, and ultimately nation states. As Bitcoin gets added to more balance sheets, the risk of not having any of the scarce 21,000,000 Bitcoin becomes even greater.

The high demand for Bitcoin also fuels the mining operations which underpin it’s ever increasing security. This introduces another feedback cycle, as the more secure and censorship resistant Bitcoin becomes, the more safe and attractive it becomes to be used as a store of value.

Bitcoin mining is often misunderstood in mainstream media, and is sometimes considered a waste of energy. Firstly, as the race for Bitcoin increases and mining becomes harder due to the difficulty adjustment miners must come up with more efficient ways to gain access to energy. Not only does this lead to the usage of excess energy production by methods such as natural gas or flaring, but ultimately leads to an incentive for new and innovative ways to extract energy through renewable resources. Traditional fossil fuel energy sources are far too inefficient to be used exclusively for Bitcoin mining, and we see this through studies such as one done by the Cambridge Center for Alternative Assets which determined 76% of miners use renewable energy in some capacity. Bitcoin is being used as a global wholesale energy market, which can turn any kind of wasted energy into money, and simultaneously incentivises cleaner and more sustainable energy sources.

Bitcoin is changing the world as an unstoppable force for financial sovereignty. It doesn’t matter if you are a Wall St banker or a political asylum seeker, Bitcoin will change your life for the better. Will it likely cause friction and redundancy in the legacy finance sector? Most likely, but it is similar to how the computer put typewriter manufacturers out of business while improving everyone’s life as a whole.

If you have ever talked to a ‘Bitcoiner’ about when the right time to ‘get in’ is, a common response may be “when in doubt, zoom out”, and that has proven to be a good stance time and time again. Accompanying this, it is very common that people think they have “missed the boat” when they first get into Bitcoin, which can be seen all the way back to when it was as little as $30. Regardless of how early or late you think you are, if (when) Bitcoin becomes the denominator for which everything is measured, it means that any advancement or discovery made for humanity automatically makes it more valuable.

21 million Bitcoin
Imagine the entire world economy moving into Bitcoin. Everything there is, divided by 21 million. - Knut Svanholm

At paybtc we’re dedicated to supporting this revolutionary network by empowering people to hold more Bitcoin. We’re a seamless and near instant Bitcoin to AUD off-ramp allowing people to hold more Bitcoin and easily spend when needed.