February 13, 2021
Everyone’s getting in on it – BlackRock, MassMutual, SkyBridge Capital, and of course, the one man who can change the economy’s gravitational field with one tweet: Elon Musk. In a word, #bitcoin.
Why is bitcoin hitting so hard right now? And with prices skyrocketing to upwards of $47,000 per coin and chatter about volatility, is it a safe investment for most Americans?
On my podcast this week, my guest was former White House Press Secretary Anthony Scaramucci. Anthony recently kicked off his bitcoin-centric investment fund, and he helped me make sense of the current crypto craze.
Coining a New Phase
In Anthony’s words, bitcoin is to cryptocurrency what Amazon is to retail, what Google is to search engines, and what Facebook is to social networks… And speaking of Facebook, the Winklevoss Brothers pitched him on bitcoin back in 2014 at a SALT Talks Conference. He didn’t bite then, though.
He said that, at the time, bitcoin didn’t pass the Metcalfe Law stress-test. This Internet-centric theory purports that any network’s value roughly equates to its number of users squared. Or, put cleanly, in 2014, not enough people were trafficking in bitcoin for it to be a viable investment opportunity.
“Bitcoin has slain the Crypto dragon.”
Think of Steve Jobs. Since the 80s, Apple’s products – personal computers, smartphones, iPads – didn’t initially have many users. But now, nearly everyone has each of these. And bitcoin shows the same strength for adaptation and growth, as it keeps scaling exponentially and more investors are becoming aware of its potential.
For many readers, you still want an answer to the more beguiling bitcoin question: what exactly is it?
Bitcoin is a cryptographic code on the Internet that’s sequenced and transferred to you over a blockchain in the most literal terms. If that last sentence meant nothing to you, here’s the takeaway: Bitcoin’s a thriving, decentralized financial network: portable, transferable, safe, and scarce, i.e., very valuable.
Crypto transactions take out the middlemen and have a fully transparent ledger – this is wildly appealing to consumers. And since bitcoin started saturating the market, it caught the attention of regulators. And any time regulators get involved, you know it’s legitimate. Bitcoin’s also insanely safe and almost impossible to hack – the code itself can be stored on your own digital devices (USB/SIM card) or at institutions as Fidelity Digital Assets.
Bitcoin by the Numbers
In terms of a potential ROI on bitcoin, Anthony served up a hypothetical. If you put $10,000 in Amazon on its IPO date in 1997, you’d have 21 million dollars by now. He thinks these same kinds of gains are possible with bitcoin (if you’re able to suffer some losses along the way).
At this moment, there are 21 million bitcoins, 105 million users, and Anthony himself has put 25 million dollars of his own company’s capital in a crypto-fund. Bitcoin currently sits as a store of value and will be treated like gold over time (or already by millennials).
Whether bitcoin has a chance as an actual currency is still unknown. What is apparent is the ever-growing enthusiasm around it – and there’s only so much of it. Even if you don’t understand developers mining for coins or blockchain, try grasping the idea that this is a finite digital resource. And anyone can appreciate the value in that.
If you want to grapple with the existential question of what bitcoin is worth, think of all the legal tender in humanity’s history.
Whether it was the paper money of the 20th century or digital inputs on a bank ledger now, money has always been an idea, a representation of something else, an entity worth far less than the goods and services it backs. In short, money’s an agreed-upon bit of fiction meant to correlate to reality.
And our current reality is a landscape where everything is digitized, a trend ramping up even more so since the pandemic. So, why wouldn’t that happen with our monetary networks? Cryptocurrency like bitcoin provides more transparent, secure, and safer fiscal transactions for Americans. As its network expands, so shall its undeniable worth.
Did any of you even know what Zoom was in 2019? Exactly. But now it’s ubiquitous. That will be bitcoin in just a few years… a phenomenon that seemingly comes out of nowhere and ultimately, we won’t be able to live without it.
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Publisher, American Consequences
With Editorial Staff
February 13, 2021