Unlocking the Future of Money
A journey through "The Bitcoin Standard"
Disclaimer: This article is my personal opinion and is not financial advice! It should not be considered as such. Do your own research and invest with care!
“When the RMS Titanic disappeared beneath the dark waves of the North Atlantic in the early morning hours of April 15, 1912, it left many mysteries in its wake. One of the most puzzling, even now, was the behaviour of the passengers and crew. Why did so many people on board act so calmly when more than 1,500 of them would die in a matter of hours?” Source: The History Channel
This is, of course, a loose analogy about the tragic results of the historic sinking ship over a century ago. However, there are lessons within about human behaviour and nature and how the majority of us typically follow along with the crowd without learning about, critically thinking, and acting on information that might be essential to our well-being, or even our lives! People have a “status-quo” bias and will stick to what they have always known or what is comfortable to them until there is a compelling reason to change.
People on board were generally sold on the claim that the Titanic was “unsinkable” and they believed it! Can we blame them? It wasn’t until over an hour after striking the iceberg that the true reality of the situation revealed itself. It was a tipping point, surely as the deck of the Titanic tipped to an unnatural angle, revealing the grave nature of the situation.
Why am I telling you about the Titanic when the intention of this article is about Bitcoin? The short, “TLDR” answer to this is the increased risk over the stability of the world’s current financial systems at this point in history. Increasing interest rates, high inflation, money printing, debt coming due, etc. are all the most recent signs and symptoms of a monetary system on its last legs. It’s still kicking, but how long does it have? Can we risk waiting without taking steps to hedge our bets?
Introduction
I recently (finally) read the book entitled “The Bitcoin Standard” by Saifedean Ammous, originally released in 2018, and wanted to share my thoughts on this seminal work explaining why EVERYONE should take time to both gain a basic understanding of the history of money in general and how Bitcoin will likely play a significant role in the future of money.
The first half or so of “The Bitcoin Standard” rarely even mentions Bitcoin or provides arguments for it. Instead, “The Bitcoin Standard” goes into the history of money as a fascinating tapestry woven through time, reflecting its evolution alongside that of human civilization. In the quest for a reliable medium of exchange, societies have experimented with various forms of money, from seashells to precious metals. The author explores this intricate history including the flaws of our current fiat system and unveils the potential of Bitcoin as a revolutionary force in shaping the future of money.
From Sount Money to Fiat
TBS lays the groundwork for Bitcoin with a discussion on the characteristics of sound money. Drawing from historical examples, notably the gold standard, the book highlights the importance of scarcity, durability, portability, divisibility, and recognizability. It is argued that these attributes provide a stable foundation for a functioning monetary system. This is demonstrated in contrast to the shortcomings of fiat currencies, emphasizing issues like inflation and centralization, which have plagued economies around the world for over a century in recent times.
Money and Time
Delving deeper into the general concept of money, “The Bitcoin Standard” explores the intricate relationship between money, time preference, and economic growth. The book explores how the properties of money influence individual and societal decisions, drawing connections between sound money and long-term thinking. This provides insights into the profound impact that a well-structured monetary system can have on fostering a healthy economy.
Bitcoin as Hard Money
Finally, “The Bitcoin Standard” dives into the concept of Bitcoin significantly for the first time. Based on the core characteristics for the definition of hard money (i.e. scarcity, durability, portability, divisibility, and recognizability), Bitcoin is analyzed in the context of these characteristics. Given Bitcoin’s decentralized nature, combined with cryptographic security, Bitcoin is positioned as a contender for a new global standard. “The Bitcoin Standard” draws parallels between the scarcity of Bitcoin and that of gold, challenging readers to reconsider their notions of what constitutes valuable money and why.
Bitcoin and the Future of Money
Once “The Bitcoin Standard” gives the reader the foundation for what Bitcoin is and what it is not, the pivotal question on the future of Bitcoin is asked: Can Bitcoin become the future of money?
The author goes through numerous common criticisms and concerns to present a compelling case for the potential of this digital currency. As governments grapple with economic challenges and conventional monetary systems face scrutiny, “The Bitcoin Standard” suggests that Bitcoin, with its fixed supply and decentralized nature, may offer a viable alternative.
A New Monetary Standard
In the final chapters of “The Bitcoin Standard”, the author consolidates the various threads of his arguement together to argue for a future where Bitcoin plays a central role in the global economy. The author acknowledges the skepticism surrounding cryptocurrencies in general but invites readers to envision a world where a decentralized, digital form of hard money provides the stability and security that traditional fiat money systems have failed to deliver.
Closing Thoughts
I’m disappointed in myself that I did not take the time to read “The Bitcoin Standard” sooner. However, the narrative of the book as highlighted above proved to be a great refresher and history lesson on money and how we came to be in the position we are today. Is Bitcoin a “silver bullet”? Should we go all-in on it? I think we all need to understand for ourselves what volatility and risk we can tolerate in our financial situation. However, diversifying your assets has typically been sound advice. I have long been bullish on Bitcoin despite its volatility and, to date, I have had zero regrets.
Bitcoin cycles are typically four-year periods based on the halving event, next anticipated around April 2024. Following the halving, when the mining supply of Bitcoin is cut in half, the resulting supply shock typically pumps the Bitcoin price to a new all-time high (ATH) followed by a steep price correction resulting in a price floor much higher than the previous cycle. My thoughts on the halving and this current Bitcoin cycle are discussed in my earlier post on this topic.
So, we conclude with the millon dollar question, should you buy into Bitcoin? I don’t know, and I will not advise you on that. However, I strongly and urgently advoicate that you LEARN everything you can about Bitcoin and how it works so that you can make an informed decision from there. It is commonly said that everyone buys Bitcoin at the price they deserve.
Would you commit to learning and understanding Bitcoin, even if you don’t buy any? What do you think the future of money will be given the issues with the current monetary system?