Your Wealth Is Melting: Why Bitcoin Is the Freezer Your Portfolio desperately needs

Originally published on Unchained.com.

Unchained is Bitcoin Magazine’s Official US Co-Managing Partner and an essential sponsor of related content published through Bitcoin Magazine. Please visit our website to learn more about the services offered, our storage products, and the relationship between Unchained and Bitcoin Magazine.

Bitcoin is deep frozen

As humanity continues to advance in producing goods, services, knowledge and financial assets, we are now painfully aware of new problems. That is, when everything we save is either produced in larger quantities or falls in value in a competitive market, we realize how inefficient our savings are. From dollars to real estate, traditional savings methods are increasingly challenged by our own productive capacity, which in turn drives down the value of these assets. Another way to think about this is that these assets are simply “bad money.” But compared to what?

“Bitcoin is the only thing in the world that is not price elastic.”
– Michael Saylor

Meet Bitcoin, a paradigm shift in the concept of savings. Bitcoin stands out as a new monetary instrument with unique properties that redefine what we think of as money. Unlike traditional assets, Bitcoin is designed to have an immutable, fixed supply. Since there are only 21 million Bitcoins, it is not affected by the inflationary trends that plague fiat and all other asset classes. Bitcoin operates programmatically, with an exponentially decreasing supply schedule that allows initial distributions and entrenches long-term scarcity, with mining difficulty increasing indefinitely as more miners attempt to mine more Bitcoins, resulting in a predetermined supply schedule. to be able to maintain it.

“There are two common arguments about the lack of Bitcoin. I’ll summarize it here.
It is not scarce because people can still create other currencies.
“It’s not rare because you don’t know fractions.”
– Phil Geiger

“There will only be 21 million Bitcoins, and the trust factor is completely removed from the equation. Bitcoin’s fixed supply is enforced by a decentralized network consensus mechanism. No one is trusted and everyone enforces the rules independently. The combination of these two features makes Bitcoin the rarest form of money that has ever existed.”
– Parker Lewis on Bitcoin makes all other currencies worthless.

Immutable scarcity is at the heart of Bitcoin’s value proposition as a savings tool. In a world where other assets can be permanently produced or devalued, Bitcoin’s fixed supply provides a permanent solution. Bitcoin’s monetary properties are consistent with the economic principle that systems tend to converge on the most marketable instrument: money. Just because something is in short supply doesn’t mean it’s valuable. What makes Bitcoin valuable is that it is the best currency due to its outstanding monetary properties.

It is the world’s first completely rare item with sufficient monetary characteristics. Unlike all melting assets that people use as savings vehicles today, Bitcoin is completely frozen at absolute zero.

In his book “Gradually and Then Suddenly,” Parker Lewis explains Bitcoin’s clearly enforced fixed supply and others:

Recognize that there is nothing on the blockchain that guarantees a fixed supply, and Bitcoin’s supply schedule is unreliable because the software dictates so. Instead, 21 million are trusted because they are managed on a decentralized basis and managed by an increasing number of network participants. The number of 21 million becomes a more firmly fixed number as more individuals participate in the consensus, and ultimately becomes a more reliable constant over time as each individual controls a smaller and smaller share of the network.
– Parker Lewis on Bitcoin makes all other currencies worthless.

Money solved the problem of double coincidence of wants, i.e., in a barter system, two people must have what the other wants at the same time. In a barter system, if you have apples and want bananas, you have to find someone who wants apples as well as bananas. This makes trading incredibly difficult. Money eliminates this problem by acting as one universal tool for transactions. The problem of double coincidence of needs is solved by focusing on the best tool that individuals within an economic system have for money, and that best tool is now Bitcoin. This is objectively true, considering its excellent financial characteristics.

All value is derived from the fact that there will ultimately only be 21 million Bitcoins, but improvements to previous currencies do not end there. It is moved globally without permission at a very low cost), durable (data can be physically preserved on many media), and divisible (1 Bitcoin is equivalent to 100,000,000 Satoshi, so Bitcoin can be used for commerce on a variety of scales). )

Keeping in mind Bitcoin’s outstanding monetary properties, we can look at the market landscape through the lens of Bitcoin. These properties stand in stark contrast to those of all other goods, and since the monetary system is converging on one currency, it is not only reasonable but prudent to visualize traditional stores of wealth measured in this superior asset.

your wealth is melting

We have found that human ingenuity and technological innovation increase the efficiency of producing goods, services, and information, largely saving us assets that allow us to create more as a society. Traditional savings methods, including holdings in fiat currency, bonds, stocks, gold and real estate, are all themselves vulnerable to volume growth, depreciation over time, or are fundamentally linked to assets.

Of course, there are still short-term, medium-term, and even long-term returns that can be earned by investing in different asset classes. How much of a particular asset can exist in the world, or its supply, is not the only factor that affects its price, even in the long run. But in a world where Bitcoin exists, we have to ask ourselves whether Bitcoin might be overvalued when considering risk-adjusted returns.

Is it wise to hold U.S. dollars when a doubling of CPI commodity production capacity forces the Federal Reserve to respond to increased productivity by devaluing the currency to maintain its 2% inflation target?

A bond is simply a contract for a future amount of U.S. dollars. Do you hold a fixed amount of future U.S. dollars with the added risk of potential default? Is this wise, even if these dollars are by design worthless?

At a time when so many consumer technology companies are producing similar devices or disrupting their walled garden ecosystems, which could diminish their unique value proposition, Apple stands to build wealth over the long term with a 30 P/E ratio (paying $30 for every dollar of annual revenue). Is this a good warehouse that can do it? Will this ultimately lead to lower margins and potentially lower profits?

Despite its physical scarcity, gold is a commodity that can be mined indefinitely with sufficient technology. Is it wise to keep it if it can be produced forever?

Given the potential for real estate market saturation, where an influx of new developments could lead to a commoditized housing market filled with fierce competition and declining rental yield margins, is investing in apartment complexes a healthy long-term wealth store?

All of these investments may be logical for a period of time, but over a long enough period of time, they all face the consequences of the innovation trap. That is, future cash flows or revenue streams can and will be contested. Or supply may simply stop. Increased – by free market forces. This ruthless competition is one of the reasons we live in an era of severe financialization. None of these savings vehicles will sufficiently preserve your wealth over the long term, so you will need to hire or become a money manager.

Bitcoin’s promise is to reintroduce the concept of true savings.

“There is and always has been a fundamental difference between saving and investing. Savings are held in the form of monetary assets, while investments are savings at risk. The financialization of economic systems may have blurred the lines, but Bitcoin will erase them and make the distinction clear once again. “With the right incentive structures in place, money will overwhelm the demand for complex financial assets and debt instruments.”
– Parker Lewis of Bitcoin is the great definancialization.

Once you begin to accept that since Bitcoin exists and its supply is decidedly finite, it is unwise to use traditional assets for long-term savings, Bitcoin itself solves the problem by acting as a constant against which to measure other asset classes. It only sheds more light on the problem. When measured against an entirely scarce asset like Bitcoin, the way the long-term value of all of these asset classes is challenged becomes clearer than ever. This is especially true in an era where production capacity is expanding rapidly and markets are becoming increasingly global, interconnected, and competitive. .

(End excerpt. Click here to download the full report: “Your Wealth is Melting” from Unchained by Joe Burnett)

Originally published on Unchained.com.

Unchained is Bitcoin Magazine’s Official US Co-Managing Partner and an essential sponsor of related content published through Bitcoin Magazine. Please visit our website to learn more about the services we offer, our storage products, and the relationship between Unchained and Bitcoin Magazine.