Against all odds – Why do investors prefer Bitcoin?
Bitcoin remains on top and so does the BTC price. To the untrained eye, it faces competition from the programmable money represented by EOS, Ether, or Tron, and challenges from the likes of banker-friendly XRP, Facebook’s Libra, or the myriad of banker-issued digital currencies that are reportedly on the way.
Although these apparent competitors may well solve real-world problems of their own, the important thing is just that. These problems are not Bitcoin’s. Bitcoin has its own niche. It’s a sound digital asset that is permissionless and borderless, and that is enough.
Why Investors Still Want Bitcoin
Investors choose Bitcoin because it is simple, functional, and most of all, hard money. Hard money refers to the ease with which new units can be created. Fiat currency is not hard money. Central banks can print it and will have an impact on the value of all the other units of that particular currency in the economy. The purchasing power goes down and people get poorer. All to just balance the books.
History is littered with incidents of hyperinflation. Time and again governments introduce too much new currency into an economy and the value spirals towards dramatically. Suddenly life savings are a worth pittance. Images such as those of people pushing banknotes in wheelbarrows in Weimar Germany just to make some seemingly insignificant purchases are frequently used reminders of the devastation such banking practices can have on an economy.
These incidents of extreme devaluation aren’t limited to the annals of history though. Today, countries such as Turkey, Argentina, and famously, Venezuela, are experiencing their own economic crises and dramatic inflation. The Bitcoin network, to many of these people, represents an indisputable truth in a world where government and banker lies are the norm. Therefore, it’s no surprise to see these areas as some of the fastest-growing areas of Bitcoin adoption on the planet.
With Bitcoin, it’s impossible to inflate the supply. Those victims of the aggressive monetary policies of a nation are understandably starting to find this attractive. With other digital currencies, the lure isn’t as strong. For example, Ethereum is seeing incredible usage in the decentralized finance (DeFi) sector lately. DeFi is smart contract-intensive, and smart contracts can go wrong. Previously when smart contracts have gone wrong the Ethereum Foundation managed to convince enough miners to roll back the blockchain. This was done to refund investors following a security breach in the smart contract of an early decentralized app, DAO. This might be fine for a world supercomputer. However, for a financial raw commodity’s value proposition, it’s disastrous.
Similarly, with a platform like XRP, there is nothing to say that huge banker use of the rapid and cheap digital asset will equate to a huge price. Just how much of this stuff do they need to hold if services like the much-hyped On-Demand Liquidity from Ripple never require the institution using it to hold XRP? Usage of an asset doesn’t automatically make it expensive, after all. Also, Ripple itself has been known to dump XRP on the market previously. This further reduces the popular digital asset’s long-term value proposition. Partnerships like that with MoneyGram have resulted in much greater XRP usage, yet it is one of the worst-performing cryptos in the entire industry.
Bitcoin Changing History?
Although there is nothing to say that Ethereum, XRP, or any other digital currency won’t be wildly successful in their own right, they are targeting very different niches to Bitcoin. Bitcoin has solved the problem of soft fiat money. It’s the hardest form of money humans have ever known.
It’s often compared to gold for simplicity’s sake. However, Bitcoin is superior in many walls to gold. Gold found its way to be a historical store of value by being an incredibly hard form of money. Different peoples throughout history used different things as currency. However, when gold came along they all eventually switched to it because it was superior. The market chose to use gold because it worked better. It was harder to forge or find more of, essentially.
It is incredibly difficult to create Bitcoins and one day there will be no more of it. The same can’t actually be said about gold these days. Although it’s difficult to rapidly increase gold excavation, with today’s technology this obviously won’t always be the case. Scientists believe there is a lot of gold in the universe.
Bitcoin is not only a harder form of money than gold, but it’s also much easier to transport, as it moves electronically. It’s also much easier to store and protect. This is also done digitally. Compare this to gold. If you wanted to transport a few million dollars’ worths of gold from one side of the earth to the other, it would likely cost you tens or hundreds of thousand to arrange it all. With Bitcoin, you just enter a public key to send and protect a private key to save.
The only thing Bitcoin lacks compared to gold is its significance over time. The leading digital asset has only been around for just over 10 years. Gold has existed for millions of years and been used as money for thousands. Money is all about trust. If you can’t trust your money – like those in hyperinflating economies can’t – what worth has the currency? Since Bitcoin is so radically different from other forms of money, it is yet to fully establish the trust needed to make it universally accepted. However, if it continues doing what it is doing without fault, this trust will come.
With Bitcoin possessing upgraded capabilities to the planet’s historic store of value, governments like those in Venezuela, Turkey, and other nations give it a sound reason to exist and have value. With such a sound monetary policy, the more these nations demand Bitcoin as a way of opting out of their nation’s economy, the higher the price will rise.
This, in turn, makes Bitcoin a very attractive tool for speculation. Only, it’s also entirely permissionless. Unlike the stock market, you don’t need anyone’s approval to buy Bitcoin. This makes it infinitely more accessible. It’s finite supply, ease of access, and growing demand makes Bitcoin a potential rocket that could blast off at any moment. The more people fear the rocket leaving without them, the faster they pile into the market and the sooner the take-off occurs once again.