2020 has been an unbelievable year. Apart from cementing the importance of relationships and community, bitcoin is the most positive component of a challenging year. 300%+ investment returns are spectacular, but bitcoin is far more important than price appreciation. In this note, I touch on numerous positive aspects of bitcoin, including protecting value in the face of uncertainty, pushing back against govt abuse, investing in sound principles and building community. Plus, I provide an outlook for 2021. I expect the year ahead will be a wilder ride than 2020. I’m preparing myself and trying to remain as level-headed as possible. Hold on to your hats and let’s make the most of this incredible journey together.
Investors flocked towards the store of value for the digital age during the most uncertain year for the global economy in decades. Gold did its thing in 2020, protecting wealth during the volatility and outperforming during the year, but bitcoin completely shot the lights out. A wise man once said, “the proof is in the pudding”.
Yes, bitcoin remains volatile, but 1) volatility is declining & 2) bitcoin is storing value. Remember, bitcoin is positive over almost all 3-year rolling periods. Rule #1 in bitcoin investing; have a long time frame!
Investors have been able to shield themselves and preserve their wealth in a digital network. And with traditional asset classes at expensive valuations and interest rates at record lows, the outlook for store of value assets remains very positive. Because, where else can you store your value? Michael Saylor has made this argument powerfully in 2020. If you haven’t watched any videos of his yet, what are you waiting for?
Bitcoin emerged during the 2009 financial crisis in direct response to government decisions to abuse their monopoly on money creation and bailout banks. During the next financial crisis in 2020 the Federal Reserve increased M1 money supply by $2.7tn in 10 months. A 67% increase in base money! What. The…
Just like 2009, authorities have morally justifiable reasons for their actions, but the truth of the matter is that most of this money has gone to government, large financial players, big businesses and those with ready access to government programmes. The man on the street is under severe pressure and inequality has ballooned through 2020. This dynamic is the same whether you’re in America, the UK or South Africa and its completely unsustainable. Politicians will follow up their 2020 policy justifications with wealth programmes to try and alleviate inequality but their inability to diagnose the problem implies that their responses will be patchwork solutions at best. More likely, their responses will exacerbate the problems that we’ve been speaking about in our monthly newsletter. How are you going to respond to this abuse? Bitcoin presents you with an opportunity.
While governments have created new currency hand over fist to try and paper over the cracks in the global economy, bitcoin supply growth is falling. We experienced the 3rd bitcoin halving in May 2020 (where supply growth is cut in half) without fanfare. The halving highlights bitcoin’s constrained supply value proposition (67% growth in US M1 money supply vs. 1.1% growth in bitcoin supply in 2020). No one implements this change. There’s no central bank, which could be manipulated. The change is pre-programmed into the protocol. Bitcoin’s supply algorithm is executed smoothly and efficiently without political intervention. Where do you want to place your trust? Digital scarcity or government intervention?
Before you start telling me that bitcoin is all about greedy investors making money, here’s a great twitter thread which highlights a few positive real-world use-cases, including banking for the unbanked, a funding channel for those without access in Nigeria and Belarus, helping Afghanistani women learn to code and remittances to Venezuela, amongst others:
And while there’s definitely more to bitcoin than making money, there’s nothing wrong with making money either. I deserve to be able to save for my future, and so do you! The world needs a savings technology which allows individuals to store their wealth in a place that won’t be negatively impacted by government decisions. Bitcoin provides that opportunity, to everyone. Seize it!
Those who have been exposed to bitcoin have been able to protect themselves. They’ve bolstered their purchasing power through holding a constrained supply asset. They’ve invested in alternative financial system, which looks increasingly necessary after the unsustainable largesse of 2020. They’ve invested in sound principles of truth, integrity and positive incentives. And they’re been able to build community with other likeminded people across the globe, despite the social challenges presented by covid19. I’ve been incredibly fortunate to connect with a passionate group of bitcoiners in Santa Monica LA. I’m very grateful for these people.
And while I caution against watching the price alone, bitcoin’s price is a confirmation of the growing global community. Bitcoin’s network has grown above $0.6tn this year. That’s a large amount of capital allocated to a decentralised digital network that isn’t controlled by any individual or organisation.
Wishing all of you a great year ahead. I hope you’ve a restful holiday and valuable time with family. I believe that 2021 will be a very prosperous time if we stick to our principles, prioritise what’s truly important, search for the truth, care for others, stay humble and have fun! Regarding bitcoin specifically, hold onto your hats because a wild ride is in store this year.