Posted on 01/30/2021 4:35:29 AM PST by Kaslin
Editor's note: This column was authored by Emilie Dye.
Last January, you could buy a bitcoin for less than $9,000 — that's roughly the downpayment on a 2018 Ford F-150. Today, it costs around $37,000 — that's almost enough to buy the truck outright.
Much of bitcoin’s recent popularity is a product of the times. In 2020, governments around the world spent tax dollars like teenagers throwing around their dads’ credit cards. It’s not surprising that many now wonder if maybe we shouldn’t trust the government to be the guardian of the money supply.
Bitcoin is an entirely digital currency which uses blockchain technology to make and verify transactions. Think of blockchain as essentially a ledger or record of all transactions made with each unit of the currency. Each bitcoin is a computer file with a history of all transactions back to the very first one made on the genius block.
No different from the dollar, bitcoins are valuable because we believe they are valuable. We trust that we can exchange a bitcoin, or a dollar, for certain goods, services, or other currencies.
But unlike the US dollar, bitcoin’s value isn’t determined by governments, and the money supply cannot change. There will never be more than 21 million bitcoins. The founder and originator, Satoshi Nakamoto, remains anonymous. Giving true transparency, the software running the blockchain is open source (anyone can see the code and add to it) and all changes are made by a rough consensus of the developers. But ultimately users must consent to any change in the code.
Throughout the COVID-19 crisis, governments around the world have been reacting. They have cut interest rates and pumped money into the economy through both monetary and fiscal stimulus. While at the moment we are worried about businesses closing and people losing their jobs, inflation is a real threat in 2021.
We are already seeing it in some markets. For example, look at cars again: This time last year I bought a 2002 Mazda MX-5 for $7,500. A quick perusal of used car sites shows that same car is now selling between $14,000 and $16,000. Granted, I’m from Australia and the Australian used car market is hardly a universal measurement, but still it’s concerning that my dollar is worth less of a Mazda than it was last year.
Once our lives finally get back to something that can be called “normal,” many of us will start spending. Those who kept their jobs during this crisis have likely seen their bank accounts grow with restaurants closed and travel restricted. When the flood gates open people are going to want to spend and enjoy life without lockdowns. The increased demand will inevitably lead to an increase in prices.
When the U.S. dollar becomes less reliable, people understandably want their savings in more tangible assets. In the past, when people flocked to safety they bought gold and other precious metals. But in this digital age, bitcoin is the new gold.
Still skeptical? Look at Venezuela: Venezuelans facing extreme hyperinflation picked up bitcoin as a currency. According to coindesk, “expats use bitcoin to send remittances back home, where locals convert it to bolivars to buy food and pay bills.” Venezuela now has a thriving peer to peer bitcoin network as a result of government instability and inflation.
The United States is not facing inflation anything like that which infected Venezuela. However, U.S. debt is now at $26.7 trillion — that’s $81,353 per American. That along with high levels of coronavirus spending should give Americans ample reason to worry about their savings and to diversify into other assets.
If the U.S. cannot pay back its debt the value of the dollar will drop. We can’t quantitatively ease ourselves into prosperity and any attempt to do so devalues our dollar.
Bitcoin is a currency immune to political whims. Anyone looking to protect their savings and to diversify their assets should consider jumping on the bitcoin bandwagon instead of relying solely on money managed by a central government.
An interesting story on the John Batchelor Show the other night. It seems the Chinese are helping the Iranians mine Bitcoin as a way to evade sanctions. One side effect that has the Iranian people angry is that these Bitcoin farms use a lot of electricity, which is already in short supply.
I recently read Bernal Diaz de Castillo’s 16th century account of the conquest of Mexico. He was part of Hernan Cortez’ small army.
Aztec society had never been touched by the West - and yet it also highly valued gold and silver (it also had traditional gender roles, but that’s another story)
There are things about humans and human nature which cut-across time and history.
I agree, but I can’t see statists/socialists/central planners in Washington accepting this long-term. It seems a fundamental contradiction to their desire for control, and keeping the USD Ponzi debt-pile from collapsing. If little people hold it, they can ignore or smash us, but if other elites and insiders are holding Bitcoin for wealth, there will be too much political opposition. I can’t yet see how this will play out.
And yet Central Banks around the world are holding tens of thousands of tons of the stuff. In many countries, gold holdings are even a state secret. It seems there are many “smart” people and people in power who want to hold a lot of this “door stop.”
Why is that?
Or maybe not.
You can hold gold in your hand. Bitcoin is merely numbers floating around in the cloud where one click on a computer and poof! it all disappears.
Same reason a lot of people hold bit coin. It is a useful medium of exchange and store of value that people have confidence in.
The price of gold also goes up and down based on this confidence, despite it having no practical value.
Which makes me want to own nothing but hard assets like real estate and commodities.
Until, someone defines a new range of bits to get prime numbers.
Exactly. People have an irrational belief that their bank balance is “money” when it’s just digital currency.
You can buy it now on PayPal.
Beanie Babies are going to make a comeback. By them now.
Keep telling yourself that.
Make sure you never forget your passwords.
Clutch your bitcoins oh, you can’t.
Bitcoin is capped at 21 million bitcoins that can be mined. There are currently 18 million bitcoins in circulation. I suspect there will be another big spike when the cap is reached.
People seem to think their bank balances are actually there at the bank instead of loaned out sometimes in bad unwise loans, thank you Fanny and Freddy Mack, and senators Frank/Dodd. Banks loan out I believe 85 percent and only have about 15 percent reserves actually on hand. A collapse of the economy, or any currency crisis or any crisis causing a run on the banks would collapse the banking industry like a house of cards.
If the banks don’t have enough digital currency on hand to satisfy a run on the banks then the Federal Reserve will just magically create more to satisfy the need.
Just like they always do.
War with China and a few high atmosphere nuke detonations and crypto turns to zero. Lead and brass will become sought after commodities then.
I think you would have to take out every miner server in the whole world, not just over one or a few countries with EMP weapons.
A Carrington Event solar storm replay might do it though...
If a nuclear war happens, everyone is fked anyway.
The lucky ones will be the ones in the cities that are vapourised instantly instead of dying from radiation sickness or starving to death during the subsequent nuclear winter.
I don’t see the point in planning for this worst case scenario tbh.
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