Am I too late to Bitcoin?
Bitcoin and the Internet
It’s hard to comprehend that in just 12 short years Bitcoin has gone from being an obscure idea without any monetary value, to being a globally recognized form of money with a market value of almost $1 Trillion. But as far as Bitcoin has come, it is still very much in its infancy since it was birthed in 2009.
Bitcoin Adoption Visualized
According to data analyst Willy Wu, there are an estimated 135 million Bitcoin users worldwide. This is less than 2% of the global population. To put that into perspective, PayPal has 361 million user accounts, Facebook has 2.8 billion monthly active users, and the internet in total has an estimated 4.7 billion users.
This chart is a great way to visualize how small Bitcoin still is on the global stage. Another thing to note from this visual: there are still billions of people not connected to the internet. For many people born in the last 30 years it’s hard to imagine a world without the internet. However, it’s important to remember that the internet itself is still very young. Thirty years ago almost no one was on the internet. Twenty years ago only 6% of the world used the internet. Ten years ago a third of the world was online, and today that number has nearly doubled to just under two thirds. There are two takeaways here: The internet is growing fast, and more growth is coming. When you realize that Bitcoin is an extension of the internet, and that its growth rate mimics closely to that of the early internet, things get exciting.
If we assume the global penetration of Bitcoin to be at about 1.7%, this puts it on par with the the internet in 1997. If you or someone you know asks whether the train has left the station on Bitcoin, ask them the same question regarding the internet in 1997. What were people saying about the internet back then? Let’s take a look at this gem from our favorite Nobel Prize winning economist Paul Krugman back in 1998:
Source: New York Times Magazine
And as much as we like to make fun of Krugman, he wasn’t alone. Many people well into the 2000’s continued to deny the inevitability of the internet. Many businesses that did not adapt to the digital age were left behind.
Today we see an eerily similar sentiment regarding Bitcoin. Among its most fervent detractors are Warren Buffett, Jamie Dimon, Peter Schiff, and (shocker) Paul Krugman. Warren Buffett, while the long undisputed king of value investing, is known for being late to the game when it comes to technology. He refused to buy Apple until 2016, and now calls it "the best business I know in the world". Most of you reading this probably knew Apple was a juggernaut long before 2016. Where Buffett is correct, is in his advice to "never invest in something you don't understand." Unfortunately for him, at his age he is struggling to keep up with the rapid pace of modern innovation. So it should not come as a surprise that the 90 year old Oracle from Omaha is not on board with Bitcoin. Krugman, on the other hand deserves less leeway. To borrow a quote from the domain of sports; “Skate where the puck is going, not where it has been.” In 1998 Krugman was looking at the slow, inefficient 1998 version of the internet and was not impressed. He couldn’t see the development and infrastructure growing exponentially below the surface. Bitcoin skeptics should be careful not to make the same mistake.
“Its too slow, no one is using it, its too confusing.” – Internet critics, 1997
“Its too slow, no one is using it, its too confusing.” – Bitcoin critics, 2021
It is easier to buy, sell, hold, and transfer bitcoin today than it was one year ago, and harder than it will be one year from now. The benefits of the infrastructure, applications, and companies being built now, won’t be felt for months and years. But make no mistake, there is massive investment of time and capital being deployed into Bitcoin all around the world.
Carolina Panthers offensive tackle Russell Okung recently made news as he partnered with Bitcoin startup Strike, to become the first major professional athlete to receive bitcoin as a part of his salary. Strike, founded by Jack Mallers, is aiming to change the global payments game forever. Utilizing the Lightning Network, an application built on top of Bitcoin, Strike allows participants to transfer dollars, euros, and other fiat currencies across the world instantly at near zero cost. Fold is providing consumers an opportunity to earn bitcoin back on everyday purchases with their Fold Debit Card. Swan Bitcoin is taking the stress out of timing the market by offering easy “set and forget” automated purchase plans, while at the same time offering the lowest fees in the industry. And in recent news, Elon Musk has just added $1.5 billion worth of bitcoin to the Tesla balance sheet and will accept BTC as payment for their products.
Put simply, Bitcoin is acting as a black hole, attracting and capturing the most innovative and creative minds throughout the world. And because Bitcoin is not national, and not corporate, it is open to be built upon by anyone in the entire world with an internet connection.
Why Will Bitcoin Follow the Internet’s Growth?
So, in terms of market penetration, Bitcoin in 2021 is at the same stage as the internet in 1997. But this statement alone doesn’t mean much. Internet usage exploded because of the massive amount of value it provided to humanity in areas such as commerce, communication, education and many others. So what value does Bitcoin provide to humanity? For some people, Bitcoin arguably provides more value than every other aspect of the internet combined.
The World’s Store of Value Dilemma
Bitcoin has not gone from $0 to $46,000 at the time of writing because PayPal, Venmo, and Visa aren’t good enough payment processors. Bitcoin is where it is today because the globe has a store of value problem. Put simply, individuals and companies do not have a viable place to store their wealth. The Number 1 Most Important Use Case of Bitcoin is as a Store of Value.
With central banks suppressing interest rates and pumping out more currency than ever before, holding cash has become a losing strategy. This is why many people since the 70’s have been saving their wealth in gold, and why today many companies (MSTR, SQ, TSLA) are deciding to adopt Bitcoin as a treasury reserve asset. When you hold a fiat currency like USD or EUR, you put your faith in central banks and government not to debase the currency. Oh, by the way debasing the currency is literally part of the stated mandates of the Fed and European Central Bank. Central banks have inflation targets. A 3% inflation target means the central bank aims to debase the currency by 3% annually.
Inflation is an invisible tax on your savings. The number of dollars in your bank account stays the same, but the value steadily decreases. $100 buys much less today than it did 50 years ago. Why do central banks do this? Because they pursue a policy of 'growth at all costs'. If there is anything they can do to discourage saving and encourage spending, they’ll do it. Even if it means threatening to confiscate your savings using negative interest rates, as the ECB just announced they plan to do in the near future.
How many dollars are in circulation? How many euros? Nobody knows exactly. But what we do know is that the total supply is increasing faster than ever before. Bitcoin, on the other hand, has a fixed total supply. Only 21 million coins will ever exist, meaning bitcoin has a 0% terminal inflation rate. If you own 1 BTC, you own a 0.0000048% stake of the total supply of bitcoin. That percentage will never be diluted. In 100 years, you will still own a 0.0000048% stake. Users of Bitcoin do not need to trust a bureaucratic organization not to debase their money, because there is no central organization behind Bitcoin.
There is a growing demand to escape the sinking ship of fiat money, and to find refuge in scarce assets. This is the reason the stock market is at all-time highs despite the real economy being in worse shape than it has been in years. People would rather hold shares of Apple or Amazon than cash.
The case for adopting a sound money as a personal unit of account is becoming more and more obvious in the developed world. But in the developing world, no such case needs to be made. They know the devastating effects of poorly managed fiat currency, because they’ve experienced it first hand. In countries like Zimbabwe and Venezuela, the currency was so worthless that it lined the streets. Holders of the currencies lost their entire savings. Countries such as Lebanon, Turkey and Iran are in the beginning stages of the same phenomenon. For citizens in these countries, the question, ‘What’s the point of Bitcoin?’ is insulting. Bitcoin is a life raft that is keeping many families afloat throughout the world.
Source: @SegoviaBastidas on Twitter
Tying it All Together
Today no one doubts that the internet is changing every aspect of our lives. In fact, it seems so obvious that it’s hard to believe anyone ever doubted that it would. However, as we know, that was not the case. Hindsight is 20/20 and many things that seem obvious after the fact were anything but obvious to many people at the time.
To some people, Bitcoin became obvious in 2013 during its first major price bubble as it shot up from $13 to over $1,000. To many others, Bitcoin became obvious in 2017, when it began the year around $1,000 and finished near $20,000. And for millions of people (including bitcoin folk hero Michael Saylor) Bitcoin became obvious in 2020 amid an unprecedented central bank campaign of market manipulation and currency debasement. But considering the fact that we estimate only 1.7% of the globe to be holders of bitcoin, it appears that Bitcoin is nothing close to obvious for the vast majority of people.
Anyone buying bitcoin today is still considered an innovator based on the adoption curve above. 2021 will be the year that Bitcoin exits the ‘Innovators’ phase and enters the ‘Early Adopters’ phase. The early adopters are likely to include more public companies, large investment firms, and maybe even small countries beginning to buy bitcoin to hold in their treasury.
So are you late to Bitcoin? All the evidence suggests no. Not even close.
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Want to learn more about Bitcoin? “The Bitcoin Standard” is a must read for anyone looking to understand why Bitcoin is poised to continue its ascent towards becoming the world's dominant monetary asset. Click here to purchase on Amazon.
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