Cryptocurrencies

Weekend column: Where does the passion for bitcoin come from?


Dear son,

I have decided to write you this letter from the past. At this moment you have yet to be born; when you grow up and read this letter for the first time, keep it as part of my legacy and your inheritance.

This is how Kudzai Kutukwa opens his most recent article (click here)

This piece has opened my eyes again. Because sometimes we lose sight of what it’s all about. What gets the blood flowing and the fire going. Why I started writing about bitcoin in the first place.

The purpose of Bitcoin is simply to separate money and the state. To take the power of money creation away from the central planners. Because no one should be able to create money out of thin air and money should always have an unforgeable cost price.

If money is too abundant, it will lose value over time because more units can and will be created and more will be needed to buy a good or service. This is the result of inflation; the expansion of the money supply. Something that affects us all and is an unfair consequence of the current system! That’s where the passion for bitcoin comes from.

*Click here if you are reading this in the blox app

But this ideological aspect of Bitcoin won’t resonate with everyone. And it doesn’t have to. Because ultimately, you just want to know what’s in it for you.

What’s in it for me?

The continuous expansion of the money supply causes a flight of capital towards scarce assets. Because you cannot save in euros, you have to look for alternative ways to save / forms of value storage.

So where is value stored?

Scarce assets, things that cannot be easily produced.

Bitcoin is a so-called, number go up technology, which in a nutshell comes down to the following. Because ultimately only 21 million bitcoins will be put into circulation, this is the scarcest asset on our planet. There will never be more bitcoins. More and more people are becoming aware of this, which will lead to an increasing demand. With increasing demand, the value will go up. This creates a positive feedback loop. The value of Bitcoin increases and therefore the interest and demand for Bitcoin increases, which in turn results in a rising price. Scarcity is not the only reason why people attribute value to Bitcoin. However, it is a very important characteristic.

We are seeing Bitcoin slowly draining value from all other assets. As long as Bitcoin has the most attractive features as a store of value within the investment landscape, it will continue to do so. With a total market cap of $1 trillion, it is still a small drop in the bucket of total global asset value.

Ultimately the question is: What will best retain its value over time?

In my opinion, Bitcoin is the best long-term savings technology humanity has ever seen. You see that over a 4-year period, the Compound Annual Growth Rate of Bitcoin was at worst around 25% and often much higher. If you can withstand the volatility and dare to hold Bitcoin for a longer period, you will do better than 99% of active investors.


Every week, Bitcoin expert Rick Hutting writes a weekend column on the topic. You can sign up for his free daily online newsletter by clicking here . You can also follow him on Linkedin.

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