Currency Miasma
Before I get into my commentary on Bitcoin talking heads, I will list my priors. My interest in Bitcoin goes back to 2010. That's when I first read about this digital currency. I distrust every government due to experiences from my 20s with the arbitrary nature of enforcement bureaucracies.
When I was 27, I received a letter from the IRS telling me I had 48 hours to remediate a payroll tax deficiency or my bank account would be frozen. There was just one problem with the IRS's position; I hadn't worked for the company in question (that failed to pay their payroll taxes) for over a year, well past the claimed infractions.
The IRS never froze my bank account, but it did take me a year to clear my name from any wrongdoing, even though within a week, I had proven my case beyond any reasonable doubt. With the IRS, you are guilty until proven innocent. After this experience, I became distrustful of the government.
I started reading about Bitcoin in 2010 and was intrigued because it proposed removing government control over a monetary system. And the Bitcoin financial system is clearly articulated. Bitcoin has a predetermined inflation rate and a predetermined maximum currency limit. It's a decentralized computer program with rules.
There are other details about the design of Bitcoin that I found appealing. First, no single person controlled the currency because it was a network that relied on individual mining nodes to verify transactions and create new coins through a persistent, secure, immutable formula.
In late 2010, I planned to buy $1,000 worth of Bitcoin because I wanted skin in the game, but the Mt Gox implosion happened, and I thought Bitcoin would die. Then the Silk Road case went to trial, and I thought that would be the end of BTC. Despite these issues, Bitcoin survived.
I finally got around to buying some during COVID-19 in 2020, and I plan to keep all of the BTC I've purchased. I'm treating Bitcoin as a hedge against the failure of the US Dollar—investing five percent of my net worth in the asset.
The USA exports dollars everywhere, and many international transactions are valued and settled in USD. Hence, the USD has a significant advantage over all other fiat currencies. The USD hegemony is why all other fiat currencies will fail before the USD.
Of course, the bureaucracy isn't intentionally trying to collapse the world. Politicians and appointed officials can't help themselves. They don't like delivering the truth when it is unpleasant. I recall the good ole days when the US Federal Debt was only $2 trillion. Today the US Federal Debt is over $31 trillion. In the last decade, United States leaders have added most of that debt with massive unfounded spending programs. Our government leaders are not capable of constraining themselves. For this reason, I'm not bullish on the long-term future of the US Dollar.
Most governments in other countries suffer the same problem. The majority of governments aren't fiscally responsible. You can find exceptions, mainly ones with windfalls of revenue from oil reserves. These windfalls enable them to operate in more financially responsible ways. Still, they suffer from a reliance on a single commodity that will not be sustainable forever.
At a time when Bitcoin ownership should be exploding, it is slowly expanding. The people promoting the coin are one of the reasons for this lack of uptake. Ignorance and fear of new technology also factor in.
Why do so many Bitcoin experts seem like cranks? I listen to many Bitcoin podcasts. The people with the most conviction seem nutty. Even when they say something believable or intelligent, they muck up their message with extreme positions that sound farfetched.
My position is simple and reasonable. I can't predict the future of fiat currencies. But, it makes sense to hold some Bitcoin in your portfolio as a hedge against fiat currency disaster. Let's keep the numbers simple and assume you are fortunate enough to have amassed retirement savings of $1,000,000. In that circumstance, the portfolio should include $50,000 worth of Bitcoin.
In 15 years, if the dollar collapses, it is not out of the question to think that BTC might be worth 100X your current $50,000 investment. If the USD tumbles, your BTC investment could be worth $50,000 x 100 = $5,000,000. That should be enough to offset the effects of inflation on the USD over the next 15 years before the currency's collapse.
That's why I own Bitcoin. If the collapse of the USD doesn't happen, and Bitcoin goes to zero, it won't make any difference in my retirement lifestyle. But if a USD currency meltdown occurs, Bitcoin seems to be the best hedge against that problem, and it is much easier to carry than 157 pounds of gold, given the current price of gold is approximately $2,000 per ounce.
What do you think about Bitcoin? Is Bitcoin crazy money or worth owning as a hedge against financial disaster?