Why we can believe that bitcoin still has a future:
3. 1 Bitcoin as a store of value
I’ll start off a little bit broadly. The world’s monetary system is built on people’s confidence that the money they have in their bank accounts is really theirs and that it is liquid. But this confidence is not justified by anything. Banks hold only about 6% of all assets (i.e. cash). Everything else is just derivatives of money. To clarify, the money you have in the bank has, in principle, only some of the properties of the original money. Its value is not tied to anything. You say to yourself, “well, that’s the way it’s worked for 50 years”. Yes, it’s worked as an interesting experiment. A similar situation has been punished quite severely several times in the past.
Well yes, central banks pump more and more money into the economy, which they then lend to their clients for peanuts. Ever wondered how it is that banks are giving mortgages with interest rates below 2% when inflation is 3%? There is more and more capital in circulation, an infinite amount of dollars that can be printed. It’s called quantitative easing. The Czech National Bank is planning something similar. There is a reason why they are trying to lend in Czech koruna bonds. The United States borrows in its own currency, which it prints itself. That is, after all, why, despite the huge debt of the United States, it can never go bankrupt.
The stock markets are pumped to bursting with money. Some garage companies have market capitalizations in the hundreds of millions of dollars. What happens to all that money when the bubble bursts? Where will all that “money” go. And what happens to something that is too much? It loses its value. In economics parlance, that’s called hyperinflation. At that point, money loses all of its attributes of being a universal medium of exchange (no one wants to hold it), a unit of account (values change dynamically), and a store of value (I suspect it doesn’t have that property even now).
But what about bitcoin? Well it just can’t be printed, can it be mined? Yes it can, but we know exactly how much is mined, approximately every 4 years the rate of mining slows by half. This is also why some large and progressive companies are putting their assets in Bitcoin, why some progressive pension funds are doing the same. Yes bitcoin is digital gold. Other cryptocurrencies like Etereum, Cardano, Solana etc, perhaps digital silver. It’s a way to protect against inflation. One thing I consider certain. If conventional money loses value, it will still need to be paid for by something and somehow, and I believe that the store of value will be Bitcoin and the payment medium will be several alternative currencies, because they have all the attributes of money.
3.2 Bitcoin has been cyclically growing for 12 years
Every time Bitcoin rises above a certain threshold, we learn that it is a bubble that will burst, and yes it is. Indeed, after the rise in the value of BTC there is always a fall, this happens with most investments. However, if the value of BTC falls by e.g. 30% after a 300% rise, you will read everywhere that BTC is dead and it makes no sense that it is falling brutally. This is nonsense, of course. Nominal value has always been outperformed. Well yes, after every bubble comes a correction, but if you have ever invested in BTC your investment has appreciated, unless of course you sold at the first correction. Personally I don’t think it will be a thousand percent appreciation in the future, however it will never lose its value and as a store of value it will be with us for centuries to come. The value can and certainly will continue to fluctuate, but in the end it will always move higher than it was the previous season.
3.3 No government will confiscate your bitcoin
Even if anything happens, for example, totalitarianism returns or some monetary reform comes, no one can get their hands on your bitcoin and some other cryptocurrencies. No government has the power to stop bitcoin, or to break the BTC network. Without knowing the private key to your BTC wallet, no one can get to your Bitcoins, not the government, the police, or anyone else. In principle, it is the world’s most powerful supercomputer, and its power is growing, and could only be surpassed by a quantum computer, which of course does not exist for this purpose, and it is questionable when it will exist. Of course, as the computing power of mining machines grows, so the question is who would be faster. Yes governments can ban bitcoin, they can damage it and reduce its value in the short term. That is certainly possible and will almost certainly happen, but it will destroy bitcoin. It will not destroy it in the long run, on the contrary it will make it stronger.
3.4 Bitcoin is and will be rare
We know exactly how much BTC will be mined, we know how long it will take, and we know that approximately every 4 years bitcoin is mined half as much. This means that its rarity will increase. A lot of electricity is needed to mine cryptocurrencies and Bitcoin in particular, and it is very expensive. Thus, the value of cryptocurrency does not stand on water. You can’t just print Bitcoin.
The intrinsic value of bircoin is so much greater than the intrinsic value of any other currency.