Part 1 of 2 in a series to objectively look at Bitcoin and Cryptocurrencies
Personally, I am sick of all of the Maximalist Hopium, and FUD, around Bitcoin — and other Cryptocurrencies.
Bitcoin Maximalists are on YouTube promising 20x gains by December 31st, with a 2-second disclaimer about how “this is NOT Financial Advice!”
On the other end of the hallucination spectrum, skeptics are openly saying Bitcoin will crash and go to $0, there’s no intrinsic value to crypto, and the whole thing is a big Ponzi scheme.
Therefore, as somebody who has done some research, and seriously considering getting more into this, I have put together my own list of pros and cons of Bitcoin & Crypto.
Please comment to educate me, disagree, or let me know if you want to gift crypto to my soon-to-be-created wallet. :)
Bitcoin & Crypto Pros
Global adoption is increasing
El Salvador. Brazil. Argentina (because if Brazil is going to get in…). Panama. Ukraine. Vietnam. Pakistan. India. Kenya. More.
Is this just a Ponzi scheme on a more global scale? Is crypto the SARS of money?
Or are citizens of poor countries, who no longer trust their governments (Venezuela looking at you), coming up with Bollywood-euphoria levels of hope and enthusiasm that Bitcoin will make things better for themselves and their children?
Read on.
Global inflation is increasing
This is the #1 reason why I am seriously considering buying Bitcoin.
Inflation is happening. I think the USA’s current inflation rate is much higher than recently reported 6.2%. The CPI index has always understated inflation, in my (non-economist) opinion.
Inflation is increasing around the world. Nearly every major Central Bank is printing money like it’s going out of style (which might be ironically true). The more money printed, the less each piece of paper is worth. Industries are measured in terms of % of GDP. If there is a $2 Trillion per year economy, housing might take 15% of that, energy 10%, food 20%, government 15%, and everything else 40%. These are purely illustrative ratios. But, if there is a $20 Trillion per year economy, the ratios will stay the same. Just the price of everything will go up 10x. This is TERRIBLE for everyday people.
Ray Dalio posted an excellent commentary on economics, and you can learn much more from him about economics than you ever could from me. The point that left the strongest impression on me, is that inflation must be kept under control — which is not happening.
www.youtube.com/watch?v=PHe0bXAIuk0
Meanwhile, Bitcoin will NEVER be diluted, money printed, or artificially inflated.
Bitcoin has a FIXED supply — 21 million coins is all that will ever be minted.
As Bitcoin adoption for payments becomes more and more common, Bitcoin is looking more and more like it will at least keep pace with inflation; certainly much better than TIPS, which are based on a bogus CPI index.
Gold is flat
Gold has long been the ultimate hedge.
During the last two major periods of uncertainty, 1980, and 2008…Gold went to the moon. Today? Gold is losing value, if you count inflation.
Where are wealth risk managers looking instead? Bitcoin and crypto. The Billionaires’ network is a chummy club, and how long do you think it will be before other rich pricks decide Michael Saylor and Elon Musk are actually onto something.
The price of Gold has gone from $1,600 in 2016, to $1,700 in 2021. I’m not as patient as Warren Buffett, but that’s not a great return.
Which leads me to . . .
Warren Buffett doesn’t know what he is talking about
Yes I did.
“When you buy non-productive assets, all you’re counting on is whether the next person is going to pay you more, because they’re even more excited about another next person coming along. But the asset itself is creating nothing.”
http://www.youtube.com/watch?v=LtITDtZPYEw
While I have lived and died by The Intelligent Investor Chapters 8 & 20 for years, I want to highlight that Warren Buffett was anti-Internet for decades. He just didn’t understand it.
With respect, what Mr. Buffett doesn’t understand about Crypto is the real-world business value right around the corner. Which leads me to my next point.
Blockchain will disrupt business as usual
Currently, Blockchain is used to facilitate crypto markets, and gaming NFTs.
But consider that the Internet in 1999 was only used for sending email and selling items delivered via “snail mail.”
Today’s blockchain possibilities are just scratching the surface.
Use cases are still emerging. And I am not talking about ridiculous infographics listing how crypto will revolutionize everything from personal healthcare HIPAA confidentiality, to small-scale 501(c)3 non-profit donations.
No, blockchain does have real business use cases in the works:
- Legal contracts
- Supply chain
- House / property sales
- Intellectual Property licensing (this could be HUGE)
- Democratic elections
- Global operations
- Audit & compliance
- Equity stock markets
As crypto entrepreneurs go from in their 20’s to in their 30’s, as blockchain startups get Series B and hire proper Sales VPs, and as more Gen Z’s and Millennials replace Gen X’s and Boomers as corporate economic buyers, business as usual is ripe for disruption.
Regulators are clueless
The government still doesn’t know what to do with crypto. Is it property? Is it securities? Is it currency? Should it be taxed? HOW should it be taxed? Which crypto sites should be banned? Which crypto coins should be prosecuted? When can we prop up CBDC?
In my opinion, regulators are not even asking the right questions, such as how can scammers be caught? How can lost wallet passwords be recovered? And how can citizens be educated to adopt this safely and easily?
As long as governments and regulators keep focusing on the wrong questions, the Wild West aspects of crypto will continue growing without restraint.
Perhaps the most clueless regulatory body is New York State. If you listen to these people talk, the sheer ridiculousness of their statements can only be explained by these politicals are jockeying hard to get a plush post in the Biden administration. They really don’t care about crypto one way or another.
I am NOT a Maximalist
Tomorrow, I will present equally strong reasons why Bitcoin and other Cryptocurrencies are risky, immature, and could even all go to $0.
