The Fundamental Case for Bitcoin as a Treasury Asset
- westcaden
- Jul 26, 2024
- 6 min read
Disclaimer: This is an educational opinion. It is not financial advice. Consult your own financial professional.
This article is for those who do not understand Bitcoin and the applications that it will have to your business and personal life. The fundamental problem with 99% of people, is they think of Bitcoin as a trade. It is NOT a trade. You don’t need to be a stock trader to understand what this thing is. If you see Bitcoin as a speculative trade then you will miss out on one of the most important economic inventions in the history of humans. Once you devote your ‘100 Hours’ to studying what this is, you cannot unsee it. Do your own research. What you will find below is my conclusion.
Bitcoin uses what people don’t know about computers and it is based on what people do not understand about money. Bitcoin is backed by 141 terawatt hours of electricity annually (That is the equivalent of .6% of the world energy supply. It uses computational power to verify transactions and update a public ledger. Bitcoin is backed by an absolute fixed supply of coins at 21 million. Bitcoin shares no borders. Bitcoin does not play favorites. Bitcoin does not have a central bank. Bitcoin does not have a CEO. Bitcoin does not have a favorite politician. Bitcoin is freedom. This is why any central bank despises this asset. This is why they have been subtlety against it. “Bitcoin is engineered money. It is better than gold without the defects.” -Michael Saylor.
The skeptics will say, “It is not backed by anything”. I ask the skeptic, “What is your paper bank notes backed by? Is it backed by money printing? Is it backed by oil? Is it backed by global conflicts? Is it backed by the military might? What happens when those things decay? Every major civilization has run into this problem (of currency decay)”.
The Skeptic will say, “We don’t know who controls Bitcoin.” I ask the skeptic,”Do you put full trust in your national central bank and do they have your freedom/sovereignty/retirement in mind?”
The skeptic will say “This token is an overvalued bubble, and it is not an asset”. I ask the skeptic, “What if there was a tool to keep the bubbled stock market and overvalued housing market in check?”, for this skeptic does not understand monetization premium.
The skeptic will say,”Bitcoin is for criminals”. I ask the skeptic, “Why do large banks get fined billions for compliance mishaps? Why are money managers, hedge funds, and governments stockpiling this asset? Why is Larry Fink appearing on CNBC talking about this asset? Why does the skeptic have indirect exposure to this asset class (in his professionally managed portfolio) and he doesn’t even know it?”
The skeptic will say, “Gold is a superior asset.” I ask the skeptic, “Have you tried transporting a gold bar through an airport?” If it is your gold bar, then surely you won't have any trouble doing that. First of all, you will have to declare it, and second, good luck getting the gold back. Third, try taking more than $10,000 cash through the airport. I guarantee they will have many questions to ask, even if it is your hard-earned, legal money.
The skeptic says “What happens when the whales pull the rug? Are we too late to the hype?” I ask the skeptic, “Is a 1.3 trillion dollar market capitalization reasonably liquid and solvent?”
Ok, if we can reasonably say this asset is a tool, and not a giant scam, what is the use case or utility?
Personal Use Case
Bitcoin was designed to be the most efficient way to store your hard work. It is resistant to inflationary decay. 21 millions is the coded limit. No more, and no less; the first 20 million coins have already been mined. The only close in scarcity is that of gold, and even then Gold supply inflates 1% a year. While gold may be a scarce asset, bitcoin is even more difficult to create (Stock to Flow Ratio). This means for the rest of human existence there is only 21 million coins and it cannot be diluted. This certainty is so difficult to wrap heads around. And for this reason it doesn’t make sense to normal people. Our society is simply accustomed to government printing money. The gold standard generation is coming to an end, and for those younger, they cannot comprehend a world without easy/paper currency. What this means for you, if you hold bitcoin you are storing your hard work today, and that coin will go up in value over time. You can get rewarded to save (A concept that died in 1971).
An asset that can only be accessed by you (your wallet/seed phrases). This total sovereignty is essential for retaining your economic freedom. This is why governments like Russia/China have been so resistant to cryptocurrency. They cannot confiscate a password in your head. This is the US 4th amendment on steroids. Bitcoin is also the 1st amendment (Crypto is text. Text is a form of speech. Therefore, Bitcoin protects your power, freedom, and voice).
Business Use Case
The large majority of business is conducted in US Dollars, after all, it is the most liquid/strong form of paper. There are very few currencies that are more valuable than the US dollar. The US dollar (The currency that has won two World War’s) is depreciating, even faster, due to post COVID lockdown money printing. Maybe shutting down the economy was not a great idea.
Why buy treasury bonds if inflation can run past 4-5% (very more in an economic lockdown)? Invest in heavy metals/commodities? Businesses do not want to hold metals, nor do they want oil, as they can pull more out of the ground. They definitely don’t want to hold exotic currencies that depreciate faster than greenbacks. Businesses do not want to buy real estate, because cities can ‘Tax the Greedy Corporations’. Here is a secret about economics: The market ALWAYS finds a way. Bitcoin is filling a massive gap. A digital fixed number asset that can be stored and trade instantaneously. Companies of all sizes will recognize the innovation of this idea. They will start allocating a % of their balance sheet. Think about it, a completely liquid asset that has years of positive CAGR. This concept is completely disruptive, because usually the best allocations have been in private placements, not available to peasants. The common man or business can buy/sell as much as they want. These spare cash reserves will act as a need warchest for business cycles. You cannot outwork inflation, no matter how hard you try. Bitcoin levels the field for productivity. Every business can store their hard work with equity. No more playing favorites with liquidity and credit by ‘Too Big to Fail’ banks. Bitcoin is fair to the cobbler, carpenter, contractor, and S&P 500 company down the street. Bitcoin will help keep politicians and bankers honest. Bitcoin discourages reckless lending and credit. Let me repeat that in a different way; Bitcoin solves fractional reserve banking crisis. It will teach people how to value work again. This is a solution that no one wants to talk about or recognize. Sound money, morals, and pursuit of happiness is the foundation for a thriving society.
The Future
Where do we go from here? Someone at my work mentioned yesterday, “I’ll just wait to buy BTC again when it reaches $17k.” My response is, “Good freaking luck”. The horse is out of the barn. Retirement money, hedge funds, governments, and corporations are now purchasing this asset. Money managers, this minute, are contemplating how much they will allocate as part of portfolios. The days of $17k Bitcoin are over. It is legally here and the government cannot legislate it away. Don’t treat it like a trade, it is a new system and foundation being laid. It is my opinion that we won't see $40k bitcoin again. It could happen but it is unlikely. Let’s reference the forecasts. The current price is baking in less than %1 of the population understands it. What does the price look like when your grandpa, girlfriend, or children ask about effectively storing bitcoin savings, at the dinner table? All great ideas are controversial. Nobody envisioned listening to music on a phone. Nobody envisioned buying groceries off that thing called the “Internet”. It is a very controversial discussion to improve money. Just ask any world leader who challenges the petrodollar. This article isn’t anti-US banking. I think the USA should adopt bitcoin into their monetary policies. It would solve a lot of problems both at the individual and government level.
Do not yolo your net worth or speculate your “bag” into this. I don’t like appeasing the idea of gambling. I want this article to help those who desire to understand. I am biased. I personally own fractions of a bitcoin. I have a small allocation. You should study bitcoin, then you can agree or disagree from there.
Do your own research.
Cheers,
Caden
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