Disclaimer: I am not a financial advisor. Please do your own research or consult with a financial advisor before making any serious financial decision. These are just the opinion of a regular guy on the internet.
“Someone is sitting in the shade today because someone planted a tree a long time ago” – Warren Buffet
This blog begins with the Winklevoss twins.
The Winklevoss twins sued Mark Zuckerberg back in the early 2000s claiming that Zuckerberg stole the concept of the popular social media site from them.
A lengthy legal battle ensued until the parties agreed to a settlement: $20 million in cash and $65 million in Facebook stock.
It’s been eight years since Facebook’s initial public offering (IPO) and with a few stock splits before opening to the public, the Winklevoss twins owned 6 million shares valued at $228 million.
At the time of this blog, those shares would now be worth $1.6 billion. 600% increase on your money in an 8-year span is outstanding, provided you did not touch your shares.
However, the Winklevoss twins decided to take a risk on Bitcoin during the early stages, the original cryptocurrency.
It has been reported the twins purchased 200,000 coins at $7. But most media outlets state they purchased $11 million worth of Bitcoin in Q2 2013, when it was valued at $120 a coin.
Bitcoin peaked close to $20,000 a coin in 2018 and at the time of this blog, its currently hovering at $17,000 and poised to make a run at $100,000 within the next 2-3 years.
That $11 million investment peaked into a $1.8 billion investment in 2018; 16,000% increase on the investment and is estimated to be worth $9.1 billion in the near future.
Bitcoin in its short lifespan has outclassed Facebook in ROI.
This is the wealth building potential of cryptocurrency.
What is Bitcoin?
I would describe Bitcoin as “money without borders.”
Decentralized currency without influences from central banks or government entities.
Digital wallets are created and used to send and receive Bitcoin from initiated transactions.
All transactions are kept on a universal ledger called the “blockchain,” processed by miners who are rewarded with Bitcoin themselves.
The ledger cannot be tampered with or changed retroactively, making it one of the most secure systems in the world.
I can go on and on about the functionality that Bitcoin and blockchain provide, but I want to break down the reason you are more than likely here:
Why does Bitcoin work for me in the current monetary landscape?
Hardness of money
I read a book early during quarantine called “The Bitcoin Standard” by Saifedean Ammous. He does a great job breaking down the history of money over the course of civilization and eventually tying in Bitcoin’s importance. I’ll briefly summarize the key point and how Bitcoin thrives within this and later concepts.
The first point and simplest point: Anything that is abundant and easily produced is not valuable.
Imagine you live in a place where cheeseburgers don’t exist within 10,000 miles. That would make cheeseburgers a valuable commodity correct?
Now imagine a world where there is a cheeseburger place on every block? You get .99 cent cheeseburgers.
It’s a basic example but throughout history this has happened time and time again, no matter what form the currency was in.
Seashells, beads, stones, metals, and even today with paper money.
Throughout history soft money, money that is easily replicated, has corrupted the monetary system of varying societies.
If you have noticed, modern nations utilizing fiat currency cannot help but print and print more money, thus making it less valuable as entities raise prices in comparison.
Bitcoin solves that issue as the total supply of the monetary medium will be capped at 21 million. That is all the Bitcoin that will ever exist.
Wealth in societies, has always been concentrated into assets or hard money; money that doesn’t lose value because there is no growth in supply or readily replaceable.
As corporations and individuals step in to purchase Bitcoin as a “store of value” the more the price will skyrocket due to decreased supply and increased demand.
It is theorized that Bitcoin will be even more rare than Gold.
We hear individuals joke that “$1,000 spends like $100 in 2020,” yet no one thinks of how to solve that problem.
The wealthy are wealthy for a reason. They find ways to make sure their money retains or grows in value.
I will pick up on the other concepts (medium of exchange, store of value, unit of account) in next week’s blog.
Weather Your Storm, Maintain Inner Reign -E.