First, let's talk about money. Then we will talk about the future.
Bitcoin is a powerful asset that perhaps not yet revealed how powerful.Understanding why you should always make sure you have some secure money set aside is a key element in planning for your future and is without a doubt at the heart of one of the most common questions I get asked.
How long should I hold bitcoin?
Of course, there are various options, usuallyrelated to short-term and long-term positions, trading in pairs with fiat or holding for the future and so on, but basically all of them require an understanding of the long-term basic characteristics of what Bitcoin is.
This does not mean that yourshort-term strategy, it's more about realizing where we're likely going and how bitcoin can be a tool that can be used to secure a position in the long term.
Perhaps even outside of your life.
This brings us to the first consideration.
1. Store value over time
It is surprisingly difficult to maintain value over a long period of time.
Consider, for example, the case where youYou leave $10,000 in your will to your grandchildren, which is something many people aspire to. Perhaps, like many people, you will also make a reservation that this money will be held in trust until they reach the age of 18.
Assuming the worst happens the next day, these funds will be disbursed in 18 years. But what will be their value at that time?
Historically, we can calculate an example for the previous 18 years with a simple inflation calculator like this one.
Using this tool, you can see that the equivalent purchasing power of that $10,000 is now $6,739.85, which is a 32.6% loss due to inflationary pressure.
However, we can also be sure thatInflationary pressures will build up over the coming years as an ever-increasing money supply fuels ever-increasing inflationary pressures. In short, it is likely that the real purchasing power of cash now bequeathed will be much lower than historically.
So cash is not an optiontransfer of value over time, perhaps even if they were invested for those 18 years through the trust fund in which they are held. We need something different, something more complex.
Traditionally, we consider real estate(which has a good track record and favorable inheritance tax relief in some jurisdictions) or some kind of financial instrument, possibly stocks, bonds, etc.
However, all these tools eventually becomemore risky. For example, individual stocks will be very risky for nearly two decades—history is full of well-known companies that collapsed when they were replaced by new technologies or new network effects.
A more suitable option may be trackerfunds that follow indexes, although this still depends, perhaps, on the sector of the market and the general stability of the money supply. Bonds are not currently worth the paper they are printed on in terms of real yields, and there is no reason to believe this will change any time soon.
All this, of course, is difficult enough for the averageinvestor, and all of them usually need a third party for management, trust or execution. Of course, all this is not insurmountable in our time, but it adds complexity.
Finally, there is another obvious choice, which hasseveral thousand years of the reputation of a "safe haven" - gold. However, as I said earlier, gold is not easy to buy, store and hold on your own, and if you try to do it through third parties, it will quickly become very expensive, which will reduce any profit that can be made.
However, the numbers in our example are indeedwork with gold on paper. If you had invested $10,000 in gold at that time, you would now have $47,803.53 to spend (using the official data obtained here), which, after adjusting for inflation, makes a profit of $32,996.41 on the same date 18 years later. Of course, this assumes that you didn't have any storage costs.
But even gold may not look like thisconfident as before. If we reduce the time scale to a decade, then the numbers look less impressive. Using the same data in 2011, your $10,000 is now worth $9,434.56, which, adjusted for inflation, is a net loss of $2,707.20.
Yes, gold has indeed fallen in value over the past decade and has not yet made significant strides in maintaining its real value.
Of course, there are other assetsdriven by scarcity, such as art, collectibles, classic cars, all of which require knowledge, storage, or even maintenance. However, these are solutions that should theoretically increase or at least maintain value over time.
Bitcoin, on the other hand, does not require anystorage costs, is easily accessible to anyone on the planet, is easily transferable, and can be instantly converted into local currency with minimal effort. And, for reasons we'll see shortly, has a high probability of retaining value over time.
Bitcoin is not just for value transferover long distances, fast, cheap and easy, it is also an excellent system for transferring value over time. Theoretically, my children, grandchildren, great-grandchildren (or even distant descendants) will be able to benefit from the actions I take today in a way that was previously available only to very rich people.
This is a logical choice, so selling bitcoin at any time for fiat, which is steadily falling in price, is not always the best solution.
2. Its rarity has not yet become apparent
The hardest thing to understand about Bitcoin iswhen you first encounter it, it is the concept of scarcity of digital resources. How is it possible that I can easily copy any file from your computer, but I can't copy my hard drive to get your bitcoins? Surely all this is still ones and zeros?
So it is, but for reasons I won'there to describe, the value of bitcoin is largely due to the fact that it is simply impossible. Each bitcoin (or part of it, most transactions are fractions of a bitcoin, known as "satoshi") is digitally separated from any other. There is no scenario where you send someone a bitcoin and then retain the ability to spend it again.
Since we know for sure that there will be only 21000,000 (again, for technical reasons, which we will not discuss here), we know that there will most likely be a shortage of them eventually. They will not be enough for each person to have one whole bitcoin. There are not enough of them even for every millionaire to own one.
It's easiest to think of it as physicalcollectibles, say baseball cards. If there are only a few hundred of them, and there are more people who want to collect them than cards, then there is a supply problem, which, in turn, increases their price.
The fact that cards sell for thousandsdollars above their original price tells us that this has already happened and, in fact, has been maintained for many years. The situation will change only when people collectively decide that they no longer need them. And this, as we know, is unlikely.
It is important to note that the supply of, for example, 1934 Babe Ruth World Wide Gum cards is absolutely fixed and can only decrease over time as cards are lost or destroyed.
In terms of scarcity, Bitcoin worksthe same way. As the network effect continues to intensify and more people join the network at an increasing rate, they are all competing for the same bitcoin. This makes selling for fiat money easy and tempting in the short term, but over time, the inevitable scarcity of available bitcoins will make it increasingly difficult to acquire.
In other words, every time you leavebitcoin system and re-enter the traditional fiat money system, it is likely (based on historical data and extrapolation of current trends) that you will have to pay more to re-enter the bitcoin network in order to purchase the same amount as before.
Based on this premise, if you already ownBitcoin, it certainly makes sense to hold some (or all) of it now and always. If you don't currently own bitcoin, it might be worth doing further research and consider acquiring a small amount as soon as the opportunity arises.
3. Global measure of value
I've written a lot about this in the past and you can check out the article here, but the point is that this is the first economic constant in the world.
Now, for example, it is very difficult to compare the cost of goods and services in different countries without doing mathematical calculations to determine the relative value of the respective currencies.
So, if someone were to compare the price of a widget inUK and Spain and sent the results to someone in Brazil for comparison, they would most likely use the US dollar as the common denominator since it is the world's reserve currency.
However, this requires mathematical calculations and is notmay be more than a rough estimate for more than a short period of time, since in this example alone, four fluctuating currencies need to be considered.
However, by valuing everything in Bitcoin (or Satoshi), any consumer can easily compare the cost of goods and services anywhere with the cost anywhere else.
In this scenario, bitcoin becomes a constant,by which everything else is measured - not only local currencies in the form that they may be in at the moment, but also goods and services. This ensures global trade and the free movement of capital, which is quite logical in an increasingly digitalized world.
This is practical, beneficial, and already happening between people who regularly use Bitcoin, and it is logical to conclude that this process will continue to evolve along with the adoption of Bitcoin in general.
Owning bitcoin, as the process becomes more accepted over time, has clear benefits.
Extrapolating trends in adoption, development andthe use of bitcoin, coupled with the inevitable departure of fiat, and based only on logic and not on emotional attachments, it is easy to conclude that some kind of bitcoin standard is inevitable.
But this is just one of the possible developments.events, there are many others. The only thing we can say for sure is that our financial system will look very different in ten (or maybe even five) years.
The main thing to remember is that bitcoin is a long-terma phenomenon that has yet to pick up its final speed, so planning for this long term and checking progress against key milestones is just as important as living in the present.
So, get into trading if that's your forte -volatility creates incredible opportunities to gain (or lose!) fiat funds, which, at least for now, are still valuable. It is worth noting that, in the scenario described above, there will likely come a time when bitcoin becomes “boring”, with little fluctuation around the world.
And of course, spend a few satoshis (ormore) here and there to support the network and the traders who use it. Spend a few more satoshis to learn how to use, for example, The Lightning Network.
Like everything in life, it's about balance, personal choice and timing.
At the same time, the future is where we will spend the rest of our lives. It is very important to plan ahead and have a sense of confidence that the financial system is certainly not perfect.
Your children may be very grateful to you one day.
Perhaps even your great-great-great-great-grandchildren.
Information disclosure:The author of this article has been active in bitcoin for several years and owns a significant portfolio of cryptocurrencies, including bitcoin. He also owns a mining farm based on the SHA-256 algorithm located in Siberia and is the author of publications on understanding and accepting cryptocurrencies. Jason is an analyst at Quantum Economics and a consultant at Luno.
Denial of responsibility:This content is for educational purposes only. It is not trading advice. Past results are not indicative of future results. Don't invest more than you can afford to lose.</p>