180. BITCOIN: CAUTIOUS OPTIMISM

This is a chapter from Cassandra’s Memo, latest download available free HERE. And HERE is more good news from Florida.The Bitcoin advocates say it can defeat the central bankers. It is an electronic currency invented in 2008 that is currently classified as a commodity like gold. This means that capital gains tax is due when it is sold.We know its structure is robust because it has been tested repeatedly by sophisticated hackers throughout its existence. If they were able to penetrate Bitcoin, their reward would be billions of dollars. Many serious people have worked a decade on Bitcoin’s structures including the “wallets,” the “mining,” and the exchanges.The total number of Bitcoins has an absolute limit of 21 million, and about 19 million exist now. This is locked into the source code. Because the supply is limited, it cannot inflate. Bitcoin is outside of banks or other central control. It exists in thousands of computers worldwide—the most massive computer network ever built.Game theory says people hold more secure currencies and spend less secure ones. This means that the good ones cannibalize the inflating ones. This has so far proven true for Bitcoin, and its usage and price have increased for over a decade. It is the best-growing asset class—ever—and has appreciated faster than any stock in history.Hyperinflation destroys both the money and the economy. For example, the value of Venezuelan currency has wasted away. Shops there cannot get essentials and are left empty. The following chart shows what has happened to the dollar over the years as its value was purposely destroyed.Gold has been used as money for millennia and is the oldest and best-recognized store of value. Bitcoin has many similar features and some that are superior. These include portability and near-instant transferability. These two assets and real estate are the most likely to hold value against inflation.A simple technical analysis of scarcity called "stock to flow" is the ratio of the total stock of gold to the amount of new gold mined. Bitcoin is "mined" with computers just like gold is mined in the earth. This analysis can be done for either asset, and the result is nearly identical.Bitcoin's price volatility is worrisome, but its trading volume is in the top five exchangeable currencies worldwide. It is used for settlements that are trillions of dollars each year, and this increases year over year. Worldwide Bitcoin transfers are about the same as the huge Fedwire system. Their website says:[We are] the premier electronic funds-transfer service that banks, businesses and government agencies rely on for mission-critical, same-day transactions. Fedwire Funds Service participants benefit from the finality of payments credited to their Federal Reserve Bank master accounts.Bitcoin has had no technical issues since 2013. Its development is slow, deliberate, and focused on security. Its secrecy is imperfect but being developed.People in inflation-prone countries have trouble finding stores of value to save their money and investments. Many instantly understand Bitcoin’s promise, for they know that their currencies are like melting ice cubes. In notoriously corrupt Nigeria, for example, the central bank banned Bitcoin, but this is being ignored. They recently introduced a central bank digital currency, but it has yet to have much success against Bitcoin.for more, see Cassandra's Memo: COVID and the Global Psychopaths on Amazon.https://www.amazon.com/Cassandras-Memo-COVID-Global-Psychopaths-ebook/dp/B0BRKXDX4DSupport the show