Whenever bitcoin comes up in conversation, somebody always asks me whether they should buy it. In the midst of financial crisis and pandemic disease, they’re still all about the money, not the substance.
Do they think they might need a source of money that works when banks don’t? Do they care about the potential social and economic impact of cryptographically-secure, time-stamped distributed ledgers that allow people to exchange things digitally, securely, and instantly?
Nope.
A while back, I wrote Why You Must Buy Bitcoin Even If You Don’t Believe In It as a response to everybody who asks whether to buy bitcoin.
One person called that article “the worst article I have ever read about crypto currency and bitcoin.”
Another said he “will not be buying that useless, energy sucking, centralised, Ponzi scheme.”
Other comments expressed similar levels of disappointment and outrage.
Keep it simple, stupid
Perhaps they thought my rationale for owning bitcoin was too simple? Maybe, but it’s based on facts:
- It’s a hedge against the collapse of our financial system.
- Its price tends to go up over time.
That’s it. Easy, proven, and valid. Doesn’t change depending on the global financial environment. Remains true during crisis.
You can find lots of things that hedge against the collapse of our financial system. You can also buy lots of things that tend to go up in price over time.
Only bitcoin does both.
In case the system falls apart . . .
Bitcoin’s technology relies on math, not people.
No matter what happens to banks, governments, businesses, or credit card companies, bitcoin will always work.
Math never fails. Computers will always do what they’re programmed to do regardless of what’s going on in the financial markets. Equations do not have counterparty risks. Nobody can default on their bitcoin.
Do I expect our financial system to collapse?
No.
I also don’t expect to die within the next 27 years, but I own term life insurance through 2047. If that’s worth investing in, why not bitcoin, too?
Price tends to go up
Since its inception, bitcoin’s price has never stayed below the 200-week moving average, a measure of price over time. That line always goes up. Check it out:
Additionally, we have on-chain data and analysis correlating movements along that line to movements of bitcoin through the network.
As long as the network remains intact, those correlations should hold. As long as those correlations hold, the 200-week moving average should go up. Therefore, you can expect the price will go up, too.
Bonus—you can use bitcoin for stuff!
Guess what?
You can also send bitcoin to anybody, anywhere, anytime, in any amount, instantly, with certainty the payment will go through, without needing to collect or share any personal data.
While that’s no reason to invest, it’s a nice perk. You can’t do that with stocks, bonds, gold, real estate, tax liens, private equity, businesses, or pretty much any other financial asset.
Bitcoin is literally the definition of an investment
About two months ago, I mentioned bitcoin at a party. One of the guys said “oh, you’re a professional gambler?”
He did not consider bitcoin an investment, but the dictionary does:
Investment: the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.
Dictionary.com
Perhaps you prefer the Cambridge English Dictionary version?
The act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc.
Cambridge Dictionary
Not sure what else to say.
If you still believe bitcoin is not an investment, there’s no point arguing. Toss out the dictionary and bury your head in the sand, we’ll see who comes out ahead in a few years.
No bitcoin standard
Lots of people will offer all sorts of other reasons to invest in bitcoin. They’re all valid, but they change all the time.
Store of value? Permissionless money? Digital gold? Non-correlated asset? Medium of exchange? Hedge against inflation? Replacement for fiat?
Yes, at one time or another, people believe all of these things. People also change their minds all the time. They’re speculating.
I choose to look at facts and history.
Of course, facts change. We learn new things.
History does not predict the future. Two events rarely share the exact same causes and consequences. Everything can change in an instant.
But you can say that about every financial asset.
If you don’t want to INVEST in bitcoin, just buy some. Justify your purchase however you’d like and hope your bitcoin will be worth something in the future.
Over time, you’ll be very happy you did.
(Note: portions of this post came from my subscription newsletter, Crypto is Easy. Read the newsletter for more on this topic, including my plan for making the most of bitcoin’s bull market.)
Mark Helfman is editor of Crypto is Easy and a top writer on Medium for bitcoin and investing topics. His book, Consensusland, explores the social, cultural, and business challenges of a fictional country that runs on cryptocurrency. In a past life, he worked for U.S. House Speaker Nancy Pelosi.