In fact, there are at least nine unique and powerful reasons why Bitcoin could win the battle for digital money: IS BITCOIN THE FUTURE OF MONEY? 1 BITCOIN IS THE NEW ‘DIGITAL GOLD’
Money is one of humanity’s greatest and most enduring creations and it is once again on the brink of epochal revolution. Money, which has evolved through the millennia from cowrie shells to clay tablets to precious metals, bank notes and bank balances, is taking another step into the future. Money is becoming digital. Bitcoin is the largest, most consequential and valuable new form of digital money today. The Bitcoin Network is greater than the market capitalizations of JPMorgan, Wells Fargo, and Goldman Sachs combined. Precisely because of its success, it has attracted other stakeholders such as governments and corporations who also have their sights set on the future of money. The next decade of innovation will prove decisive as these legacy institutions and organizations compete with the assertive digital civil society that spawned Bitcoin for control over the lifeblood of our economic lives. These groups all have different goals. For some, the digitization of money is an opportunity to further entrench the dominant businesses of today (such as Facebook) who have their eyes on the reinvention of money. For governments, it’s a chance to either defend the status quo, in the case of the U.S. dollar as global reserve currency, or create a new global hegemon, in the case of China’s central bank digital currency. If you want to understand our collective future, follow the money . While the competition from governments, banks, and other legacy stakeholders will doubtless be formidable, Bitcoin has a very strong case.
Gold was the original money and Bitcoin is starting to take its place as a store of value, diversifier, and hedge against currency debasement. Like gold, Bitcoin is a scarce asset that takes time and energy to produce and is not controlled by governments. However, unlike gold, Bitcoin is easy to move and store, impossible to forge, and is infinitely divisible... whereas gold is costly to store and move and is limited by its physical nature. Forgery is too common in gold investments, but Bitcoin is impossible to forge. Over time, investments will rotate from gold to this new “digital gold.” Recently, firms such as JPMorgan, BlackRock, and others have made a similar case for Bitcoin to their clients and in the media. Investment is a precondition to utility, and mainstream investors are increasingly buying Bitcoin as a portfolio diversifier and as a digital gold. Analysis suggests that adding a small amount of Bitcoin to your portfolio improves risk-adjusted returns because of its low correlation to other asset classes. The floodgates are open with firms such as Guggenheim Alliance Bernstein, Ruffer, and Mass Mutual making this case, and this trend will only accelerate... Not everyone (yet) makes the explicit connection to Bitcoin as digital gold, but all smart investors see the potential as a diversifier and hedge against other elements of their portfolio, a role that
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February 2021
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