10 Reasons I’ll ALWAYS Buy Bitcoin
While short-term volatility is real, “long-term” Bitcoin is proving itself to be one of the safest & most stable assets.
Late last week, Bitcoin [$BTC] hit a huge milestone in its short, 12-year history: it had joined the ranks of Alphabet/Google, Amazon, Apple & Microsoft bypassing a total market value of $1 trillion.
Unfortunately, while many rejoice at the continued success of the OG cryptocurrency, there are many haters- I mean, analysts and financial experts that still feel that Bitcoin is an unstable market or a bubble, destined to implode on itself and inevitably fail. The logic behind these arguments is almost always the same and normally stems from one of three things: being uninformed, being misinformed, or intentionally trying to mislead others.
Yesterday (Feb. 20), this article by a writer at The Motley Fool (an American private financial & investing advice company) was released with the title, “10 Reasons I’ll Never Buy Bitcoin” (provocative title to say the least — one that was sure to get some attention).
Despite the wave of large financial institutions that have taken it upon themselves to add Bitcoin to both their personal portfolios AND their clients’ (including The Motley Fool), this writer was adamant in their bearish stance on Bitcoin.
In this article (the first in a series that I’m calling “Crypto Clapbacks”), I will address each point made in the original article and clarify why Bitcoin is far from “the single most dangerous investment in 2021”.
Here are the ten reasons I’ll always buy it for my portfolio.
1. Scarcity is almost guaranteed
The original article highlights the possibility of Bitcoin’s code being changed to alter Bitcoin’s hard cap (the maximum number of bitcoin that will ever exist). However, it grossly oversimplifies the difficulty of implementing such a drastic change.
One of the first things that you normally learn about Bitcoin is that the core code was designed to only ever create 21 million bitcoin that would be slowly released over many years — a process known as bitcoin mining. As I write this on Feb. 21, over 18.6 million of them have already been mined, with 6.25 new bitcoin being mined about every 10 minutes and the amount of new mints algorithmically decreasing by ½ every 4 years.
The beauty of a decentralized network is that any changes that will be universally applied must first be accepted by the majority of the people sustaining the network (in this case, the nodes/miners). Many changes have been proposed for the Bitcoin network over the years via Bitcoin Improvement Proposals (BIPs) and, for the most part, many of them were approved by the network because they adhered to and built on top of Bitcoin’s core values. Some proposals, though, were so drastically far from Bitcoin’s intended functionality, the nodes/miners/community collectively smacked them like the back of a fresh skin fade (I’m looking at you, Segwit 2x).
Historically, the Bitcoin community has been shown to reject any drastic changes to its core protocol, and as the community continues to grow, and people become more educated and more involved in the network, that slim chance of a hard cap change happening becomes so negligible, it’s almost non-existent. It’s more than just a promise — it’s understanding and consensus that keeps it from changing.
2. Its real-world utility is increasing every day
The original article points out that “approximately 2,300 U.S. businesses accept Bitcoin” while “more than 30 million businesses in the U.S.” currently exist.
Anyone that has been in the crypto space for over a year now can tell you, though, that in recent months, it seems like every other week, another company announces new implementation of, or plans to implement, policies that allow the acceptance of bitcoin as a form of payment.
The article also claims that “investors are holding on to them, which further limits Bitcoin’s ability to be a medium of exchange.”
…FOH.
Haven’t investors been hoarding USD, gold, and every other medium of exchange throughout history? How does their storage of the asset affect its ability to be used as a medium of exchange by the rest of the community?
I’ll answer for you: it doesn’t. In fact, doesn’t their long-term storage of the asset further validate it as a great store of value?
3. The ‘almost nonexistent’ barrier to entry proves Bitcoin’s (current) superiority
The original article points out how easy it is for anyone with some time on their hands to create their own “digital cryptocurrency with tethered blockchain”. It argues that this low barrier to entry makes room for the creation of a plethora of superior Bitcoin alternatives (i.e. clones).
It’s quite true that it doesn’t take much to create a Bitcoin alternative, and there could one day be another crypto that topples Bitcoin from prominence. I’ll give you that.
One fact still remains though: it has been 12 years since Bitcoin’s inception, and with thousands of other crypto projects having been developed since then, we have yet to see another project knock Bitcoin from that top spot.
4. Short-selling is a derivative market that is completely unrelated to the Bitcoin network itself
There’s a lot of trading jargon that the average person wouldn’t know offhand, so I’ll simplify it: the original article implies that Bitcoin is not a good investment because the people that make side bets on the rising/falling of its price can’t effectively make predictions on the swings of the market.
I mean… how about just… buying the bitcoin itself instead of losing money on side bets and crying about it? That’s what most veterans in the crypto space do, and you don’t hear many complaints from them.
All that aside, the average person doesn’t even consider options/derivative trading when they are starting out, so this won’t concern most newbies coming into the space.
5. Bitcoin stays in its lane and is all the better for it.
The original article states that Bitcoin is “not even the best network at what it does in the financial space” and highlights other projects like Stellar and Ethereum as more “innovative” and “functional” alternatives.
While Stellar (the Robin to Ripple’s Batman) has definitely been making some price moves in recent times, it is neither completely permissionless nor completely trustless in design (two key components in Bitcoin’s design). This partially centralized nature is part of the reason that transactions can be processed so quickly (also the fact that the network only has a fraction of the traffic that Bitcoin has, but anyway..).
While Ethereum v2 (in case you didn’t know — the popular project today is actually a fork off of the original Ethereum.. no shade though) has been touted as the “Bitcoin Killer’’ for years, it was never actually in the same competition as Bitcoin to begin with. Bitcoin was designed with 3 primary functions in mind: medium of exchange, store of value and unit of account. Ethereum’s fundamental function is to serve as a platform on which developers can build Web 3.0, decentralized programs free from much scrutiny and restrictions. The Ethereum token is primarily a means to achieving that goal.
6. Don’t Confuse Bitcoin with Blockchain
The original article stresses not to “overlook that the Bitcoin story is really about advancing its underlying digital ledger… blockchain” and that “enterprise blockchain has been a gigantic flop thus far.”
I don’t see how this is relevant, but since we’re here…
“Blockchain, not Bitcoin” has been a narrative that has frequently come up in the crypto space, especially since the notorious 2017 bull run that saw Bitcoin shoot up to a new all time high of almost $20k then crash back down over the following weeks. After analyzing the core functions of Bitcoin itself, people started to come up with new ways to possibly utilize the “digital ledger” aspect of the technology.
Many of the corporations that tried to find a way to implement this fell short by overlooking a simple fact: they have already built efficient infrastructures for their businesses by making them closed/private and permission-based. Something like Bitcoin’s blockchain just would not have been compatible with their existing structure, and having a private/closed blockchain is often counterintuitive to productivity.
But above all else — Bitcoin’s value has absolutely nothing to do with the success/failure of “enterprise blockchain.”
7. With a little research, storage and security are fairly simple/straightforward
The original article highlights here “the complexities of storing and protecting Bitcoin from hackers” (also fairly pointing out that this was a bit more of a personal gripe than a general assessment). It alludes to the digital wallets for Bitcoin being “far less secure than most folks realize” and warns that you get “absolutely no protection from the [FDIC]” in the event that your crypto is stolen.
To be fair, as a part of a decentralized network with no backing from any centralized authority, you must take full responsibility for your wallet, your assets, and everything else involved. Storage and security are completely on you. There is no central authority that can get your bitcoin back if you lose them or they are stolen.
Let’s clarify a few things though:
- Bitcoin itself has never been hacked; the exchanges that held Bitcoin were the things that were hacked
- Safely storing your bitcoin does not require any money or extensive knowledge of crypto
- In recent times, institutions are starting to pop up that offer custodial services that guard against these types of threats (I don’t personally adhere to using them, but they do exist if you still want to pass off most of that responsibility)
That being said, securing yourself and your digital assets can be relatively easy. You can even spend a bit of money (around $100 or less) for the additional protection of tried and proven hardware wallets (no free plugs unless they sponsor me). Realistically, with less than a week of detailed research, you can create a relatively secure setup using only a laptop, a cell phone and/or a printer.
8. Taxes WERE an issue, but the community has already caught up
The original article purports that taxes are already difficult and that throwing Bitcoin into the mix makes the process significantly more stressful than it already is. Let’s dissect this into two main parts.
First, we must acknowledge that the Alphabet Boys (IRS, SEC, FinCEN, etc.) had refused to acknowledge Bitcoin (or any of the other crypto projects) for more than half of its life. Bitcoin was created in 2009 and these governing bodies only started to see it fitting to even publicly discuss the field roughly around 2017/2018 (after seeing how much money people were making in the space, I’ll assume). The reason the laws are so scattered and confusing is because the space is growing exponentially faster each year and, since they jumped into the game late, they are winging it as they go, struggling to figure out how to tame/rein in the wily asset. It’s not our fault that they’re late to the party and scrambling for beer foam and leftover Four Loko.
Second, amidst all the chaos of new laws and legislation for crypto regulation being passed like kidney stones through the urinary tract of our society today, many members of the crypto community that hail from different fields (such as legal advice and tax preparation) have done their due diligence and now readily provide these services to all in the community that requires assistance, helping to demystify the clutter and ensure that they remain tax-paying, law-abiding citizens.
Besides… to the average person, taxes have always been unnecessarily confusing, long before Bitcoin came up. That’s more of a failure on the lawmakers’ side, not ours or Bitcoin’s.
9. Its ‘price’ is driven by fundamentals and simple market analysis
The original article boldly claims that “there are only two drivers to Bitcoin’s value: investor emotions and technical analysis (i.e., pretty charts)” and that things like “fear of missing out (FOMO)” and “cheerleading from the likes of…Elon Musk” are the primary driving forces for Bitcoin’s upward climb.
“Pretty charts”? Who gave mans the thumbs up on this article? Seriously?
First, if we look at it fundamentally, the main thing that “drives” Bitcoin’s speculative price (and I emphasize “speculative” because Bitcoin was not intended to be traded or to have its price gambled on) is economics 101: supply and demand. There is a known finite supply of bitcoin that will ever exist (re: point #1) and as people continue to buy and possess them, the available supply for new buyers decreases, which leads to a higher demand. And last time I checked, increase in demand = increase in price.
Second, the “investor emotions and technical analysis” that the article mentions (which, might I add, are present in every traded market on every type of exchange) almost exclusively affect short-term positions in Bitcoin. To put it simply, the longer people have held onto their investment instead of trying to buy and/or sell at a profit, the more consistent most of their gains have been.
10. History IS undefeated
The original article summarizes its final point with “history suggests that parabolic moves in assets tied to next-big-thing trends aren’t sustainable.” It highlights massive trends from the past few decades (including things like the birth of the internet, 3-D printing and marijuana) that went through “next-big-thing investment bubbles” that eventually burst.
In a sense, this is a sound argument. Historically, whenever there was some “next-big-thing” that garnered a lot of attention, troves of rookie/ambitious investors flocked to the market because they didn’t want to miss out on the ‘amazing investment’ that could change their lives. With little research being done by these investors, there was too much opportunity for them to lose money: be it through a bad investment in a company/project that was destined to fail from the beginning, or through scammers and snake oil salesmen that took advantage of this lack of insight to pawn off complete garbage as the next “next-big-thing” in the space.
However, the important thing to remember here is that, even in many of these “investment bubbles,” some underlying facet of that space survived and went on to become a staple in modern society:
- Many people lost money during the dot-com bubble, but look at the current state of the internet
- 3-D printing is becoming a staple asset in fields like manufacturing and healthcare
- Do I need to point out what the legal cannabis industry looks like today?
Like these other spaces, the crypto space has also occasionally suffered from ‘next-big-thing, investment bubble’ syndrome, with many investors losing hundreds, thousands or even millions of dollars on projects that were commonly advertised as ‘the next Bitcoin’ (please go look up Bitconnect).
The core of the entire space (in this case, Bitcoin), however, is proving to be the foundation for this new financial system to be built on top of. The core mechanics still work, the fundamentals remain intact and developers are working on different ways to improve the protocol every day.
Yes, there are issues and growing pains — but, there always are with new technology.
Yes, it’s scary to take that plunge into the unfamiliar and uncomfortable — but, that’s where most growth and maturity happens.
Yes, Bitcoin is unlike anything we’ve seen before and it’s difficult to align with a new way of thinking — but, wasn’t that the case with every great innovation in human history?
For these 10 reasons, I plan to ALWAYS invest in Bitcoin. If you are interested in Bitcoin (or any crypto project), I encourage you to do your due diligence, do your own research and make the final call for yourself.
*I am not a financial/investment advisor, this article is not financial/investment advice and any information shared here should be personally researched prior to making any financial/investment decisions.*
