Recent volatility has shaken investor confidence in the crypto markets, but the world’s first digital currency has real value that will continue to increase over the next decades.
Analysts have been talking about “crypto winter” since the end of 2021, and after a few false starts, it appears to have arrived in full force. As of June, 72 of the top 100 coins globally have fallen more than 90%, and fatal flaws in the governance and fiscal integrity of former top coins like Terra/Luna have caused catastrophic collapses.
This is a time when weaknesses in this new market are being exposed, and the promise and potential of the digital economy is being revealed to be constructed on shaky foundations – at least for many projects. Even with Bitcoin falling to its lowest levels since 2020, testing a new bottom of just above US $18K, I believe that when Crypto Winter’s snow finally melts, the world’s first cryptocurrency will emerge stronger.
My journey into Bitcoin came at a time when it was impressive that it had reached the US $2000 point, and over the past 6 years, I’ve experienced many ups and downs in the market. From an all-time high of US $68K to the early pandemic crash to 50% of its value in 2020, Bitcoin has had anything but an uneventful evolution.
Now, many traders are predicting a lengthy period of consolidation, similar to ones experienced during 2018 and 2020, where Bitcoin could trade around its new bottom for months, waiting for a trigger to once again accelerate upwards. Crypto educator Income Sharks summed up current perceptions of the market well in a recent tweet:
“#Bitcoin- At a price where shorting no longer makes sense. But also at a price that longing is still very risky. Unless using tight risk management this is a spot buy only zone for majority. It’s ok to wait for a trend to develop to start trading again.”
“#Bitcoin- At a price where shorting no longer makes sense. But also at a price that longing is still very risky. Unless using tight risk management this is a spot buy only zone for majority. It’s ok to wait for a trend to develop to start trading again.”
Personally, I’m long on Bitcoin – now, at its all-time high, and even if it drops further – for reasons beyond short-term investment gain. When I think about investing, my timelines are in decades, not months, and accounts for the biggest economic challenge facing the world – the need for sound money that can’t be manipulated, inflated, or restricted.
I’m excited that Dr. Saifedean Ammous, leading Bitcoin economist and author of The Bitcoin Standard, will be joining the Canadian Blockchain Consortium in July for a seminar on Bitcoin’s value, because he has been instrumental in helping me and so many other people understand the fatal flaws in our monetary system that this revolutionary technology can help solve.
“Sound money allows people to think about the long term and to save and invest more for the future. Saving and investing for the long run are the key to capital accumulation and the advance of human civilization,” he wrote in The Bitcoin Standard.
This simple concept – sound money – is critical for every aspect of our world, and Bitcoin makes it both possible on a global scale, and accessible for every human with an internet connection. Currently, more than 1.7 billion people are excluded from the traditional financial system under the management of governments and banking institutions, a failure at a colossal scale.
Billions more have their wealth left at the whims of monetary policies that devalue their savings, erode their earnings, and make life more expensive – a form of legal theft that destroys upward mobility and even risks people’s survival. Dramatic examples include the collapse of the Venezuelan bolivar in 2018 or Zimbabwe’s hyperinflation, where the entire country of 16 million people became impoverished overnight, but we have plenty of examples closer to home with Canada’s own inflationary bubble.
Our inflation rate hit 6.7% in May – the biggest jump in 31 years, with prices for many kinds of housing, food, and consumer goods rising well into the double-digits. This is a direct result of the fact that 1 in 5 dollars currently circulating in our economy didn’t exist before 2020, and the consequences of the Bank of Canada’s pandemic stimulus are now coming home to roost.
The current trading price of Bitcoin matters less to me than that we need an economic system that doesn’t enable central bank policies and government decrees to inflate our currency supply at all – we need sound money backed by finite value, and it has to be able to work for the digital age.
With its supply forever constrained at 21 million coins, Bitcoin has “programmed scarcity” – coins are mined slowly as transactions are validated on the network and increases in demand will never increase the total potential supply. Unlike other types of currency backings like gold, Bitcoin is easily tradeable for goods and services.
New payments services like the Lightning Network are reducing the time and energy it takes to transact with Bitcoin, and the growing adoption of major retailers like Starbucks and even luxury brands like Gucci, are making it more convenient to spend, and virtually indistinguishable from the experience of using fiat dollars.
Low transaction costs compared to credit card fees and new customer markets benefit businesses and are driving further adoption, especially across borders. The internet has created a globalized world, and as Twitter founder Jack Dorsey once said, Bitcoin is the native currency of the internet.It’s both sound money, and easy to use, and I believe more countries will join El Salvador and the Central African Republic in making it a full legal tender currency.
Bitcoin isn’t a cryptocurrency for short-term thinkers – it’s a new model for value. One that uses increasingly advanced technologies to help overcome systemic flaws in the way we manage money in our society and can create a new level of freedom in how we work, live, and spend our money. That’s why I’m still holding, and believe that in the coming decades, the long-term view on BTC will win.
