Let's start with THE PROBLEM...
Governments are addicted to debt and fiat money that they can print at will. We are drowning in debt to the point that the only viable solution is either:
A) balancing the budget and stop adding to the debt or B) inflation.
A) ain't happening so therefore B) inflation
Inflation is happening at a greater rate than "they" would have you believe. The desired CPI target of 2% annual is total fugazi bullshit designed to convince everyone that inflation is lower than it really is. Why would this be the case???
Because the middle class has been shredded and the majority of people are not wealthy. They live paycheck to paycheck and inflation is quite bad for them as their salaries aren't increasing fast enough and they don't own scarce assets. If you're wealthy, you can surf inflation by storing that wealth in assets such as real estate, equities, etc...
Any analysis of prices with any scarcity (real estate in desirable location, tuition of top universities, etc...) shows that inflation is definitely >> 2% per year. Also, we saw when the FED raised interest rates to 5% that small banks started going out of business earlier this year. Interesting outcome because in the 70s & 80s interest rates were double or triple this.
There is no way we could possible sustain interest rates that high now. Why is that? The Debt baby. We are adding to the deficit every year at the same level relative to GDP as during WW2, which is pretty irresponsible and insane.
ItsUpToUs It's easy to find information on this subject with quick internet searching.
The point is: governments are not responsible with their budgets, therefore the debt is getting massive. Inflating the currency is the ONLY solution other than austerity (which has zero shot of working for multiple reasons but that is beyond the scope of this argument). This is the DIRTY LITTLE SECRET. We must inflate.
Other countries have been doing this. If their currency has no international demand, then you see hyper inflation and the people are screwed (Turkey, Argentina, Venezuela). We are lucky in America that we can print and everyone around the world with dollars must eat it.
Going back to the CPI... that's why they use an odd and always-changing basket of goods... to MANIPULATE the answer. Because they have to convince the general public that inflation is under control when it is higher than what "they" are telling you. Because inflation is terrible for the vast majority that aren't wealthy, and we live in a nation that is supposed to be a democracy; the masses must be convinced inflation isn't that bad and is under control.
The end game to ever-increasing debt and inflation is not a pleasant one. The governments and their currencies will ultimately default. Whether there is war, who knows. This is more a matter of when then if. And the true canary-in-the-coal-mine for this is the interest. Every year we must pay interest on our debt. That money does not pay down the principal. It essentially is a tax on our country's collected income that disappears in order for us to not default on the debt owed. "In 2022, the federal government spent $476 billion on net interest costs on the national debt. That total, which grew by 35 percent from $352 billion in 2021, was the largest amount ever spent on interest in the budget, and equaled nearly 2 percent of gross domestic product (GDP)."
And the interest payment spiked in 2023 to $659 billion making it the fourth largest government program behind only Social Security, Medicare, & Defense. Yup, a little over 10% of the estimated federal budget of $6.3 trillion went to paying the interest. The interest number, money which essentially disappears for practical purposes to maintain the game of musical chairs, is increasing every year. This problem, even with inflation working hard to mitigate it, is ultimately unsustainable.... even for the great ole US of A.
For wealthy countries, and especially say the USA who has the #1 intl' reserve currency with a lot of demand, this game of musical chairs could still be a long time playing (here is where you actually THANK inflation for saving the day). Perhaps soon... but I kind of doubt soon actually. I think the dollar & USA are currently powerful enough and we are resourceful enough at avoiding disaster to keep kicking this can down the road for a while. Perhaps not in our lifetimes. Although surely in our lifetimes some currencies will default, even if the dollar does not, and that might even come with a reordering of that currency's goverment.
Truthfully, I don't know when this will happen. In America, or elsewhere. I just know that it will happen eventually. History has showed this very consistently.
That is why ultimately monies with a central authority that doubles as a single point of failure, will not be the best monies. Monies that have no cap on inflation, will not be the best monies. Fiat monies are not the best monies. Not even close.
Bitcoin is not like those monies. It is decentralized with no singular point of attack or failure. It is not beholden to the needs and decisions of a country. It has a mathematical cap on inflation that everyone can understand. It is not just slightly the best money we've created. It is the best money we've created by a country mile. And that's what you need in order to get massive change. You need to not just make an incremental improvement. You need to blow the existing product out of the water. Good job Bitcoin.
In addition to this, the blockchain is censorship resistant. Bitcoin promotes freedom. Two parties cannot be stopped from transacting. Great for anti-authoritarian purposes. Elizabeth Warren is now arguing to ban it for this reason. Because criminals can use it.
Are we going to ban cash as well? Criminals can use cash. It also is censorship resistant. Should we just give up all our freedoms willingly to the government because criminals can misuse our freedoms to commit crimes? Shame on you Senator Elizabeth Warren, you are an enemy of liberty.
While I'm making the case, let's also throw in that BTC has Swiss army knife-like functionality. It can do international remittance, offshore banking, and personal savings with very high security. Actually the highest of any asset you can personally own. Further discussion beyond scope here.
Take international remittance = IR. El Salvador made it legal currency. A large % of GDP is IR, currently nearly 25% according to this article. Western Union rakes it in with all kinds of fees. El Salvador solves this problem with Bitcoin.
Using the lightning network, transfers are fast & free. Yes free. I think it is likely that other countries in a similar situation re IR will follow El Salvador in this regard and legalize Bitcoin. It's just rational. It's better, faster, and cheaper than Western Union by a lot. Countries with large % of their incomes coming from international remittance crush by adopting Bitcoin.
Bitcoin also doubles as a great way to store, transport, & send money. Most of us in the gambling world have already realized how awesome it is for debt settling purposes. The personal security is such that with little work it can be the most secure asset you own.
Bitcoin is Unconfiscatable, unlike anything else you have.
As a final positive aspect, Bitcoin is a net positive for humanity wrt energy use. It is a common take that BTC uses too much energy, therefore it is negative. This is the worst kind of level one thinking applied by people who either haven't taken the time to analyze the situation or disingenuous detractors who know better but are choosing to make a level 1 argument hoping people listening will take it at face value and won't investigate futher.
In fact, BTC actually bridges us to clean and renewable energy sources… making it profitable to expand renewable generating capacity to those places where it wasn’t otherwise profitable to do so.
Another example; BTC also allows poor rural areas to increase usable energy for their people as BTC miners can use the excess throughout the day (turning on when excess, turning off when people are using the energy), allowing poor areas that cannot profitably afford an adequate energy supply in to profitable areas regarding energy supply. This is literally happening in poor areas in Africa.
These arguments are expanded upon in part 4 of this 2020 shareholder letter by Stone Ridge.
The best quote from that section: "Bitcoin mining is the only profitable use of energy in human history that does not need to be located near human settlement to operate. The long-term implications of this are world changing and hiding in plain sight."
And all that ignores the fact that using energy to secure the best money we've ever made is a totally valid and worthy use of energy to begin with. The fiat system uses way more energy than you might think, and many Bitcoiners have authored essays about this topic.
To summarize and conclude: Bitcoin has a myriad of uses that make it an amazing form of money. Bitcoin has also proven time and again that it is amazingly anti-fragile. It has survived three 80%+ drawdowns to go on to make all-time highs, and is about to do it a fourth time. It survived the contentious BCH fork in 2017. It survived the China ban and exodus of more than half of the hash power. And I believe it will only continue to do so moving forward in ways other monies cannot. We've created the cockroach of monies. And that's a great thing when it comes to money. Being anti-fragile is the nuts.
Our current situation is one where we must inflate our currency rapidly in order to afford the ever-increasing debt burden. Austerity is impossible. Our government is bitterly divided and both sides are addicted to spending.
Politicians live on short cycles and are not incentivized to solve problems longer than a 1-2 year time horizon. This is a massive shortcoming to our democracy, but that also is beyond the scope of this article. We are extremely likely to not solve our debt through austerity.
So let's store our inflating fiat in scarce assets! Great. But real estate is becoming very expensive. Most people cannot afford houses, let alone in places that are truly scarce with high demand like Manhattan, Miami Beach, Venice, etc...
But everyone can buy Bitcoin. It's divisible down to the Satoshi. 1/100millionth of a Bitcoin. A Satoshi is currently about 1/250th of a penny. It's the first truly equal opportunity asset that anyone and everyone in the entire world can opt-in to and save in.
The Bitcoin supply curve looks like this:
USD M2 money supply curve looks like this:
Fiat + credit cards are great for day to day use. I am not telling you that Dollars, Euros, Yen, etc... are useless. They have a great purpose and will continue to be the primary money used for day-to-day transactions. You don't need Bitcoin to buy coffee.
But when you want a monetary asset that you can store your wealth in as well as use for a myriad other purposes, we have Bitcoin. And unlike gold it is digital, divisible, easily transportable, and programmably truly scarce.
This is the part where people say, but what about this other cryptoasset like Ethereum or Dogecoin or ....?
Ethereum is literally changing from Proof of Work to Proof of Stake right now due to the decisions of a very small group of people. Do you think the best money would do this? Do you think countries will buy a money that answers to the decisions of a small group of people? There is zero chance. But countries are already buying Bitcoin. Right now not many at all. But give it time. Proof of Stake might be a great system for Ethereum to operate on as the mercantile center for a decentralized system of apps. But it is inferior to proof of work in terms of securing the world's hardest and best money. Not to mention no other crypto has the track record of being secure for over a trillion dollars worth of value and operating for as long as Bitcoin has. And every year that goes by is just another notch in the belt. Soon Bitcoin will have ETFs and be traded and owned by hundreds of billions of dollars in retirement accounts and trillions in funds. This is a moat that is unreachable by any other crypto in my opinion except maybe Ethereum. And for reasons stated above I believe that for purely the purposes of hard and sound money, Ethereum is structurally and permanently behind Bitcoin. This topic is a deep one and also mostly beyond the scope of this article. I'll just leave this section with a video from Michael Saylor on this topic: There is no second best. Exactly. ETH is trying to do something else. And what it is doing will have a lot of value, if ETH can figure out how to do it. For now, most projects on it don't really work as intended. I do hope ETH solves the scaling & other issues so that these projects can work as dAPPS on the ETH network. That's a usecase that makes a lot of sense. It isn't Bitcoin though, and IMO it will never be as good as Bitcoin at doing what I've described in this article
People ask: "do you think Bitcoin will reach $X price?"
Yes, I do.
"But wait, I don't understand. What if X is Y?"
Yes, I do.
"Ok but ... what about Z?"
Yes, I do. But that might not be in our lifetime. And by then most people will be referring to Satoshis and not Bitcoin as the preferred unit of nomenclature.
When not if.
I believe that Bitcoin is the rational evolution of money. Good job, humanity, you're so damn resourceful. Bitcoin is so much better than anything else we have for money at this point that I think it will be hard for it NOT to win. That's the real question you should be asking. Not how does Bitcoin win, but rather how does Bitcoin not win? (I have thought about this extensively, and have come up with a few possibilities. I don't view them as likely. One would be quantum computing makes current cryptographic security, such as SHA256, solvable. Bitcoin fails to fork to a quantum-proof solution and the network is no longer secure.)
I hope you read the article linked directly above. I am quite aligned with Svetski's thinking there. Opt in to Bitcoin and store wealth in the best money humanity has created. In doing so, join the first generation of Bitcoiners. As the years roll on, and the Bitcoin network grows along with the value stored on-chain, you will be witness and benefactor to one of the great technological transformations and investment opportunities of our time, of all time: the evolution of money towards something digital, decentralized, and censorship resistant.
Or don't. But Bitcoin will go on with or without you, inscribing digital permanence every 10 or so minutes in the next block. And I promise you that one day you will get it, and you'll look back and say to yourself, "Damn... instead of buying in for $Y, if only I got it sooner I could of bought in for $X. Then I'd have more Bitcoin/Satoshis."
Trust me. I'm writing this article and I've had these thoughts.
And then one day, you won't even be thinking about Bitcoin in terms of US dollars. Or maybe not you, maybe you never get there, maybe that will be your children.
"And those who were seen dancing were thought to be insane by those who could not hear the music." Bitcoin is making music, friends. One-by-one people are discovering it. Once you start listening, you can't unhear it.