July has finally ended. It seemed to be a month where every government official, including President Donald Trump, regulator, and died in the wool crypto skeptic decided to make a concerted effort to banish Bitcoin and the notion of cryptocurrencies from the public consciousness. After several years of endless debate, Indian authorities even stopped their dithering about to propose an outright ban on cryptos and withdraw from the field of innovation. Perhaps, these attacks have actually raised the public’s awareness of all things crypto, but the benefits remain undeniable.
Fear and doubt are obviously pervasive in the corridors of governmental “status quo”, where any thoughts related to innovative thinking or of what might turn out to be a disruptive technology are anathema. India is a case in point. The Reserve Bank of India is frightened beyond belief of an option for its local citizens to protect themselves from the mismanagement of the Rupee’s value, even when the country’s citizenry is one of the largest to invest in Gold. As Tim Draper, a billionaire and venture capitalist, noted about its latest position: “[The Bitcoin ban] will set India back 40 years.”
Despite recent attacks from the uninformed and misrepresentations about criminal patronage, Bitcoin and a host of other cryptocurrencies offer a number of advantages that can only appreciate in value as time and public awareness evolve. Since Bitcoin is the unchallenged leader of the group, with over 60% market share and a market capitalization of roughly $200 billion, it is worthwhile to review a few un-refutable facts:
- Preservation of Value: As long as fiat currencies are devalued by the acts of central banks or the mismanagement of government officials, there will always be demand for a substitute. In the past, this substitute has been Gold, other precious metals, and U.S. Treasuries. The latter may be perceived as a “safe haven”, but it, too, has been on a depreciating path for the past four decades. Bitcoin’s nicknames “Digital Gold” or “Gold 2.0” are there for a reason. Citizens in countries where their fiat currency has devalued or been subjected to hyperinflation have quickly found access to the Bitcoin market. Yes, Bitcoin values can fluctuate wildly, but demand will always be present, as long as politicians balk;
- Centralized Digital Currencies Entail Risk: Central banks have tried to respond by pursuing digital currencies tied to their fiat currency or some other basket of assets. The Central Bank Digital Currencies of CBDCs are not without risk. These programs, as well as Facebook’s proposed Libra Coin, are not cryptocurrencies, per se. They do not offer protection from devaluation. They may facilitate more efficient cross-border or domestic value exchanges, but their values, once again, are based on fiat currencies at best;
- Bitcoin is Borderless: The “revolution” that puts fear in the hearts of every central banker is that their citizenry suddenly has an option that holds them accountable, when monetary and fiscal policies work to the detriment of the vast majority. There are no controls that prevent access. There are no bankers that apply their proprietary risk screens to deny you an account. The world’s un-banked can access and own Bitcoin, independent of the rules and restrictions of local bankers;
- Bitcoin is Established: Bitcoin has been around for more than ten years, despite every attempt to kill it in its infancy. It is adapting to regulatory requirements and will eventually police its ill-gotten reputation for harboring the criminal element of our society. Its market cap exceeds $200 billion, no small figure by any means. Of significance in its most established market, Americans in the key age demographic of from “18-34” have taken a major interest is Bitcoin. 18% of this group already owns BTC, and these preference rates can only increase over time. Bitcoin is “new age”, with a shared belief system that is spreading;
- Institutional Attraction: Retail usage at the point of sale may have diminished, but trends favor digital alternatives to cash. Bitcoin is international “legal tender”, and businesses are beginning to recognize its benefits, as well. Of primary importance, however, is that major inroads are being constructed to provide the tools, safety, and security that institutional investors expect in any asset class. In other words, Bitcoin is maturing, and institutional investors are taking notice. The network has been built, and they now will come;
- Network Effects: If you combine all of the benefits above, the sum is greater than the whole, one of the major reasons why Bitcoin valuations have been on such a tear during 2019. Everything is coming together at the same time and producing added momentum that resists revived attacks from government officials, regulators, and skeptics. Bitcoin is here to stay.
These benefits are but half a dozen that come immediately to mind. While skeptics continue to decry Bitcoin’s volatility or its lack of intrinsic value (name one fiat currency that has intrinsic value – there are none!), the short-term issues with cryptos will eventually give way to longer-term truths. Bitcoin is transformative, and the world has only just begun to take hold of the many possibilities that the future holds in store.