If Bitcoin is a long-term hedge, then there should be more savings and retirement programs to invest in it passively.
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There is this strange idea that with each new financial crisis it becomes clearer that the naked emperor is, in fact, naked. In 2020, when world leaders once again unveiled trillions of dollars in quantitative easing (QE) – just like after the 2008 global financial crisis – to avert impending economic catastrophe, people were once again reminded of how the centuries-old money printing banking apparatus works. There is nothing new about debt monetization – the first among central banks, the Bank of England, was founded by institutionalizing it – but it is not necessarily obvious, nor easy to understand. understand, for a simple citizen.
Until it is.
The growing realization that the global financial system is somewhat illusory, in combination with the annoyance of foreclosure and stimulus controls, has propelled the price of Bitcoin to record highs and fueled the craze for crypto-stocks. And despite its big setback this year, Bitcoin has achieved a new place in public consciousness: the perfect hedge against inflation, the denominator of all fiat currencies. If you are nervous about realizing that all the money is being clawed back, or if you suspect that the United States can print as much debt as it wants because virtually all foreign trade is in US dollars, which is why means all importers and exporters need to keep it to trade, then you might like the idea of a digital currency with limited supply.
As the price of Bitcoin continued to climb in 2020 and early 2021, the world’s most famous investors, from Paul Tudor Jones to Ray Dalio, have publicly announced that they are invested in Bitcoin. This can mean two things: either they have only now, after more than 10 years, realized that Bitcoin is really, really great, or the system is down enough that billionaires over 60 feel the need to invest in it. a range of code with a limited supply. Maybe both are true. Bitcoin is like Pandora’s Box – it cannot be stopped once it is released. Each new Chinese crackdown is just a point on Bitcoin’s timeline. The fact that it is not controllable and that it has an upper limit makes it a perfect hedge against monetary degradation.
Of course, there is a third, less naive reason for big hedge funds to approve of Bitcoin: since it is a complete black box for trading, you can essentially buy and sell it at will through offices. OTC without telling anyone. Singing the praise of Bitcoin, only to sell it to the other side, is exactly what a hedge fund could do. Bill Ackman’s “Hell Is Coming” speech on CNBC in March 2020, when the markets feared the worst, netted him billions, first by betting against the market through the purchase of credit protection products, then, shortly after the markets fell, buying stocks, some of which he said could be heading towards zero.
Still, the argument for Bitcoin is strong. From a purely technological standpoint, Bitcoin is a “version 1” and in technology, “version 1″ rarely succeeds. But Bitcoin is unlikely to be replaced. It fulfills its function well. It is a common denominator of value detached from human control, a bancor-type instrument as envisioned by economist John Maynard Keynes. If you think that, like other empires of the past, the United States is inflating its currency – with the notable exception that it can push things much further because the global monetary system is stacked in favor of the US dollar – and if anything could give it a system reset it’s Bitcoin, then Bitcoin is also a great long-term investment. Or to put it more bluntly, in the words of Cameron Winklevoss, “If you own Bitcoin today, you will become a millionaire in the future. For sure. Congratulations…”
Of course, this is nothing new, and by now you may have read or heard this story hundreds of times, in which case I apologize. But it is striking how few investment products respond to this long-term investment thesis. Investing in Bitcoin went from the realm of pure technologists in the early 2010s to the realm of digitally native. Opening an account on a crypto exchange is easy, as is purchasing Bitcoin through a PayPal app, but it still requires some digital literacy as well as a willingness to manage your own money.
Coinbase recently signed an agreement with a 401 (k) provider that will allow workers to invest a small percentage of their 401 (k) contributions in Bitcoin and several other cryptocurrencies. It’s logic. If Bitcoin is a long-term hedge, then there should be more savings and retirement programs to invest in it passively. Most crypto savings products today cater to the native digital demographics and involve less intuitive concepts like staking, packaging, harvesting, etc., which require special attention and may result in a loss. , both due to user missteps and / or an error in the underlying. Technology. Add to this that integration into the DeFi (decentralized finance) world is still too overwhelming for the average user; it involves building a wallet, transferring trust funds to various ramps, and having to incur excessively high processor fees. Even after that, user management of the portfolio can be intimidating, as it is far removed from anything we know about the traditional financial world.
Research shows that people mismanage their money, which is increasingly dangerous as financial markets become more accessible to small investors through a multitude of options and products. While it is easy to buy Bitcoin on a crypto exchange, selling it in a panic the next time it crashes, resulting in unnecessary short-term losses or painful taxes at the end of the year.
A quick glance at a Bitcoin chart tells us that over the past 10+ years, the best investment strategy has been to passively buy Bitcoin. The bets are that with its limited supply and bancor-like potential to fulfill the role of the denominator of all fiat currencies, Bitcoin will remain an important investment in the long term. Its high cyclicality, however, means that averaging dollar costs may be the best investment approach.
George Juraj Salapa is the co-founder of fintora, which offers a simple and secure Bitcoin savings plan.