Last Updated on November 5, 2024
The key arguments in favour of buying Bitcoin are:
- Bitcoin is the best money in history
- Number Go Up
- Bitcoin is decentralised
- Bitcoin removes wealth from the banking system
- When you take self-custody you have no counterparty risk and full soveriegnty over your wealth
- It diversifies your portfolio away from traditional assets
- It is a highly liquid 24/7 market
- We are still very early into Bitcoin adoption, so there is huge speculative potential
Bitcoin is nothing less than a revolution in money and society.
The investment thesis is quite simple.
By buying Bitcoin now, you are moving to the new monetary paradigm and getting wealthy while doing so by being an early adopter.
Up until Bitcoin’s emergence, gold was the best form of money known to man and the best monetary protection against fiat currency debasement.
But as amazing as gold is as money, it does have certain flaws. Bitcoin has improved upon gold’s flaws and has a good probability of becoming the global monetary standard in the medium term future.
It’s just that most of the world doesn’t realise it yet.
1. Bitcoin Is The Best Money In History
Bitcoin has all the properties of sound money and fulfils these better than anything else ever has. It functions as a store of value, a medium of exchange and a unit of account.
One of the most compelling features of Bitcoin is its supply cap of 21 million coins.
Not only will there never be any more than 21 million coins, the supply schedule is governed by code and is known to all market participants.
Bitcoin’s stock to flow ratio also increases dramatically over time. As more and more Bitcoin are mined the new supply (flow) shrinks in proportion to all the coins already in existence (stock).
The rate of flow of new Bitcoin is cut in half every four years until eventually it reaches zero.
When gold and silver’s prices rise it incentivises new mining, which increases the flow of new supply. With Bitcoin, if more miners join the network the mining difficulty will increase to ensure the rate of new supply stays constant.
That there is no ability to increase mining and therefore the supply of money when price rises has never been seen before in a monetary good in the history of the world.
It is truly unique.
2. Bitcoin Is Number Go Up Technology
Number Go Up (NGU) is a phrase coined by Saifedean Ammous.
While Bitcoin’s price is volatile in the short term, in the long it is always trending up.
That is because it is a scarce and deflationary money.
This may seem like an oversimplification of the qualities of Bitcoin, and in many ways that is true, yet it strikes to the core of what Bitcoin is.
The number is rapidly going up at the moment for two reasons:
- Increasing adoption
- Fiat currency debasement
But even as we get further out along the adoption curve and even if we were on a Bitcoin standard, Number Go Up still applies.
When priced in a monetary standard with absolute scarcity goods and services are always going to be falling in price against Bitcoin, ergo Number Go Up.
Bitcoin is the best store of value in the world.
3. Bitcoin Is Decentralised
I would argue that Bitcoin’s decentralised nature is its most important feature. Much more so than the hard cap of 21 million coins.
Rather than thinking of Bitcoin as a pile of virtual coins, it is more appropriate to think of it as a digital ledger that records ownership and transactions.
Visa, Mastercard and banks all operate with a centralised ledger to record transactions that they control.
On the other hand, the Bitcoin ledger is maintained by a global network of miners and is publicly available to anyone at anytime.
The significance of this is that there is no need to place any trust in a 3rd party to process and verify payments. The Bitcoin network does this in a trustless and decentralised way.
The mechanisms of the Bitcoin network are revolutionary and when you understand it you understand why Bitcoin adoption is only going to increase and the price is only going to go up.
4. Bitcoin Removes Wealth From The Banking System
Most people don’t know it, but when you store money in a bank account you are an unsecured creditor of the bank.
They are not custodians of your money, holding it safely for you. You have given it to them and it is recorded on their balance sheet as an obligation they owe to you.
As long as your bank doesn’t fail, this might not seem so bad.
But on the off chance that there is a banking crisis, having all your wealth in the banking system is catastrophic.
Owning non-debt money outside the banking system is a form of financial insurance.
You can do this with gold and silver. But Bitcoin held in self-custody is even better.
5. Bitcoin In Self-Custody Has No Counterparty Risk
Government currencies, bank deposits, stocks and bonds all have counterparty risk.
That means you are relying on the solvency of another party in order for your asset to retain its value.
Government currencies rely on the solvency of their respective governments, bank deposits on the banks, stocks on the underlying business and bonds on their issuer.
If they fail the value of your asset will decline or could even go to zero.
I held a small amount Terra Luna when it crashed. Talk about massive counterparty risk!
Bitcoin held in cold storage has no counterparty risk. You are not relying on the solvency of any other entity for your Bitcoin to hold value. All that is required is for other market participants to continue to use and value the Bitcoin network.
In a risky world, it is important to hold some money without counterparty risk.
It’s important to note that this does not apply to Bitcoin held on an exchange. If the exchange goes goes under then your Bitcoin is lost.
I would know, it happened to me.
6. Bitcoin Diversifies Your Portfolio
While the hardcore Bitcoin maxis suggest you go all in on Bitcoin, most people are probably not going to do that.
Some of you, like me, might be very comfortable with a high allocation to Bitcoin, others might be content to dip their toe into the water with a small allocation.
That’s fine.
Even a small allocation to Bitcoin can have a dramatic and positive impact on your portfolio over time.
Van Eck has an awesome interactive graphic that shows the impact of a 0.5%, a 1% and a 3% allocation to Bitcoin on a traditional 60/40 portfolio.
For me, I am comfortable with a high allocation because I believe Bitcoin is the future of the world’s monetary system and all assets will be repriced in Bitcoin.
But even if you don’t agree with that and just want to see better returns in your investment accounts in fiat terms, then a non-zero allocation to Bitcoin is essential.
7. Bitcoin Is A Highly Liquid 24/7 Market
Traditional assets trade 9-5.
Bitcoin trades 24/7.
This is important for two reasons.
Firstly, it means the Bitcoin market can respond to news or events in real time. We don’t have to wait until the market opens to see the impact of after hours events on the markets.
More importantly, Bitcoin is sovereign money and therefore you must be able to access it at any time. There is no gatekeeper or counterparty that you have to satisfy to access your Bitcoin and you certainly don’t have to wait until a time convenient for them.
8. We Are Still Early And There Are Speculative Gains To Be Made
Do you think you are late to Bitcoin?
It’s easy to think so with a price this high.
But many people have made the mistake of thinking they were late to Bitcoin and not buying, only to miss spectacular gains.
Sure, it’s not 2012 or 2016 anymore but its also not 2032 or 2036 either.
We are still very early in the adoption curve, demand for Bitcoin is only going to go up and supply…well… you know the schedule, nothing can change it.
Buying Bitcoin now means some volatility in the short term but speculative gains from being early in the medium and long term.
Conclusion
Bitcoin is the future of money and the future is here right now.
Buying Bitcoin allows you to get rich and be ready for the next financal epoch all while giving you sovereign money with no counterparty risk.
What’s not to love.
If you are just here for number go up, then Bitcoin can do that for you as well.
