The Price of Bitcoin Will Not Matter at the Endgame
The View
Well, that was an interesting couple of months. Since my first posting exploring my conviction for Bitcoin the price of the cryptocurrency has decreased by half it’s (fiat) price in 45 days. While the intention of this post is not to dive or speculate into the reasons for the dip, the TL;DR of the situation is that people and companies got greedy, then they got scared, as they always seem to, time and time again. This was not the first time, and it will certainly not be the last.
Did I get nervous with respect to all of the hype?
Yup.
Did it suck seeing my net worth effectively get slashed in half from the all time high?
Yup.
Did my conviction for the technological and empowerment of Bitcoin change?
No. Not even a little bit.
The Name of the Game
Without getting into the details (read that yourself) the high level of how Bitcoin works is this:
No one group controls Bitcoin. Like the Internet it is owned by everyone and no one.
Everyday computers, as well as large server banks around the world run an open source piece software to verify transactions and secure the Bitcoin network.
Entities securing the network are rewarded with Bitcoin which is then later sold to cover their operational costs namely computing power via electricity, much of which is helping drive renewables development.
Bitcoin is (mostly) bought & sold on various exchanges at open market prices. It can then be kept on an exchange or stored onto a cryptographic wallet.
Bitcoin has numerous use cases including but not limited to:
storing wealth across time and space
settling payments in a nearly frictionless manner
taking a hedging position within a portfolio
used as collateral for debt
Everything explained above is done without the need for traditional finance companies. In fact no company or organization has control, they best they may achieve is influence on price.
Price Is Not Value
Price is not value.
I’m going to repeat that again.
Price is not value.
The influence of modern financial markets (I’m going to pick on the influence of Western culture here) is obsessed with relative price performance of assets rather than the functional aspects of assets themselves. A case example is housing & real estate. Few consider the importance of the home on basis of human needs (shelter) but rather on a societal scale we’ve elevated the importance of home ownership to an investment decision (financial shelter). Where did it all change? I encourage you to read the essay WTF Happened in 1971.
While no doubt financial performance is an important aspect of managing one’s life, our society’s collective obsession with asset price appreciation is a consequence of living in our inflationary world. This is a result of the existing dichotomy inherent in modern monetary theory and the natural deflationary benefits associated with the inherent abundance offered with the productive nature of technology. The consequence of this dichotomy results in the inevitable need to push the hive mind of investors further up the risk curve in order to yield the needed returns to keep pace from a cost of living point of view.
Bitcoin like other assets before it has fallen prey to this though that was never the intent; rather it was inevitable that it would fall prey to market dynamics as it emerged under our existing financial paradigm. This is not a bad thing per se, as the on ramps of mass adoption need a market mechanism for the transitional period; but it is important that the optics of Bitcoin’s promise as envisioned by Satoshi Nakamoto are not lost nor misinterpreted in the FOMO. The Bitcoin community are the guardians and keepers of this legacy, and their efforts will not be made in vein for when technology is attempted to be squashed that technology eventually re-emerges to take up the mantle.
Concluding Remarks
Bitcoin is an alternative; an opt out. It’s a new piece of technology that has arguably initiated an epochal level change event; it is a Pandora’s Box. The political actions taken from the aftermath of the 2008 financial crisis communicated to the world the moral hazard of players deemed too big to fail need not pay the price of their actions. It comes as no coincidence that Bitcoin’s genesis block was released in the midst of the crisis fall out with an embedded article highlighting this new paradigm.
Satoshi’s gift to the world emerged at a time where we need it most, the question is whether we have the moral wherewithal to behave in a manner that makes us worthy of its promise and future. We have a window of opportunity to rewrite the game, let’s make sure we don’t squander it.