There are many mixed feelings and theories about bitcoin from its supporters and non-believers. My research in this field has given me some insights which I am sharing in this post. With the mixed sentiment among different schools of thoughts surrounding bitcoin I would like to put up a disclaimer that this is not an investment advice or anything, it is purely my thought from the research I have done. I don’t hold any position in this asset class at the time of writing this article. Always do your research and know the law of your land regarding this before performing any action. Let’s Dive into the topic.
Its time for updating and advancing our economic and technological evolution with a revolutionary technology that is being bestowed upon us from a visionary person or group of persons named Satoshi Nakamoto. To those who are still in confusion about what the Bitcoin & its underlying technology, Blockchain is. It is a form of electronic cash that can be accessed and used by anyone with an internet connection for using the functionalities of money popularly known as crypto-currency. The advancement in the world economy and the digital universe as many are thinking, with security, respect to one’s privacy, and transparency is only possible by exploring and deeply understanding Bitcoin and Blockchain technology. Some of you might not agree or are in disbelief with my thinking about bitcoin and blockchain technology as a medium to bring the change in economic and technological advancement. I would like to provide some facts and analysis supporting why I think that can happen.
Bitcoin As Global Currency Pegging System:-
Yes, you heard it right it is very powerful and possesses these characteristics, it is not just crypto-currency which can be used for speculating. It is digital gold for the next-generation. Everyone knows gold as a pegging system of USD at 35$ per ounce after WWII, which then was used as a pegging system to all other currencies of other countries, because the majority of the gold supply was held by the USA. This was implemented as Bretton Woods system but after its collapse on 15/08/1971 by President Nixon popularly known as Nixon Shock this system is invalidated and the money now is issued by the central banks without any backing system on their discretion. Bitcoin posses similar characteristics as gold but with an added layer of transparency, security, mobility and utility with reduced cost.
- To set forth view for transparency, we as a result of corrupt governments and power-hungry politicians, who without transparency and our will are using resources which belong to us, at the same time restricting us from becoming independent decision-maker for our resources, forcing us to become dependent upon them. Why the 1$ we hold today is worth less than 1$ with passing time in terms of purchasing power? Is this because of us or the so-called our systems’ lack of competence? You may say it is because of inflation but have you ever thought about the reason and cause of inflation? Bitcoin claims in giving a chance to own your asset which belongs to you without having to depend on any systems participant or discounting the trust factor with cryptography and mathematics where you don’t have to perform any action with trust as a primary factor. This transfers the ownership of managing what belongs to you in the way you want(I am not supporting any illegal events that happened, happening, and may happen, these things should be punished severely for which government should act swiftly). It is also cheaper to produce than producing gold and is deflationary with fixed supply. With silent adoption and utilization of bitcoin by powerful countries like the US, Germany, Russia, China, Japan, and South Korea doesn’t give some overview of where they are going and what they are thinking?
- Going further for bitcoin in terms of security, there is insecurity involving gold. It doesn’t have any robust and transparent mechanism to verify its reserve. Gold’s inflationary nature without any fixed % is also a very big problem in the security of currency which is being printed, whereas in bitcoin there is a fixed amount that can be mined which is exactly 21 million, which will be completely mined around 2140AD with status quo utilization of resources. Also talking in terms of cost of securing, gold needs more cost and resources to keep it secure than bitcoin. Bitcoin can be secured with the availability of only one sheet of paper. Going further, today, in an average 2563 M.T of gold is mined in one year which is ever-increasing with each passing year, causing its high supply than the currency printed.
- Bitcoin can act as a utility because its value can be determined up to eight-digit after decimal points it can be broken down into smaller units in case it is desired to be utilized as a payment method, value transfer method, etc. Gold on the other hand cannot be treated as a payment method because of its physical nature which is very hard in value determination and to some extent requires professional for performing such tasks to make it a utility token.
Many persons might think how come bitcoin is compared with gold I would like to state that gold is gold because of whom and how its value is determined? Trust and wide acceptability, it’s all that makes gold a gold so if there are both these characteristics in bitcoin I think it might act as a catalyst to change this corrupt and opaque economy.
-Internet will be widely available with full global reach.
-Community and developers agree about developing a mechanism where one individual or organization can create only one public and private 🔑 .
Bitcoin As an Investment
For something to act as an investment vehicle there should be some consideration that ought to be taken care of. We widely call it investment fundamental. The things that should be considered by investors before investing can be related to answer why bitcoin can act as Investment.
To invest in something things that are to be kept in mind are:-
As bitcoin is generated by mining and it is not a single man company there is no debt and the holders and investors are all the equity holders as well as the management which is decentralized and its consensus provide for the decision to be taken for upliftment and continuation with transparency and incorruptibility without single point of failure due to politics and degradation of a single economy which is what traditional investment is based upon.
As it is one of the greatest inventions done to revolutionize different aspects of traditional economics foundations and technological evolution it certainly has a competitive advantage of being the first mover with not many inventions relating to this.
The intrinsic value of traditional investment vehicles is calculated by considering different parameters of companies like equity, debt, assets, liabilities the intrinsic value of bitcoin can be calculated considering the cost involved in mining. The cost of mining vary according to the country from as high as 26000$ to as low as 590$ so if we take the weighted average from global scale it roughly comes to 8000$ which can be taken to calculate under and overvaluation of bitcoin and this cost is going to increase as the day passes because of resources consumed for it like computing devices, electricity, etc rising price.
This might be the main aspect for many investors to invest in something the ROI of bitcoin for long term from its initial value is exponential and also the short term value can be considered which is around 600% above 2017 starting with a high volatility there exist the high risk but as an investor isn’t it the rule higher the risk higher the gain?
Availability of market and liquidity are also to be considered before investing and bitcoin in its early adoption phase is traded in many exchanges with a daily volume of around 4 billion$ at the time of writing which is at its low due to the healthy correction in the market giving a good liquidity for traders.
With the traditional settlement process where investors should rely on the third-party intermediary to settle their trade ranging up to the T+5 mechanism with a hefty fee payment, bitcoin offers realtime settlement with a negligible fee.
The psychology of the market is also an important factor to be considered in investment which is ever-increasing among this sector it is going to get more high in terms of price. Let’s take a hypothetical example where every individual in the world wants to have some investment in bitcoin then due to its deflationary nature and limited supply each individual can have a 0.003 bitcoin and if they want to hold more what will happen? You might have some guess about where I am focusing.
Not only this due to its segregation method up to 8 decimal places, but it can also encourage small investment to be injected. While you can invest as low as 10$ in bitcoin and utilize it as a payment method, think it in terms of other investment alternatives existing in the traditional market.
Stay tuned for analysis about different blockchain assets.