Bitcoin…an Asset for you?

Bitcoin was created as a digital currency back in 2009 by an anonymous person or group of people that goes by the pseudonym Satoshi Nakamoto. Bitcoin since has gained widespread recognition and adoption worldwide and is not simply a digital currency anymore. It has become a force of nature that needs to be talked about and understood from many different perspectives. Since it’s creation, the value has increased by an astonishing 150,000%, despite an 80% downfall last year. But this incredible return of 230% annually, is not even the most interesting thing about Bitcoin.

I’m not here to tell you if you should buy Bitcoin or stay away from it, I’m here to tell you that it’s worth your time to learn what Bitcoin is. Most of us don’t understand it, because it is misrepresented in media and because we are applying traditional concepts of computers, the Internet, software, banking and money to a technology that is not any of that. Bitcoin is also not a coin.

One of the main reasons why it's so important to take the time to understand Bitcoin, is that many of us don't realize how much power and influence the current global financial system has over our lives.

A common argument against Bitcoin is that it doesn’t have any physical, tangible value. That is ironic because Fiat currencies, like the US dollar or the CDN dollar, are a medium of exchange, issued, backed and enforced by a government. No gold or other commodities, natural resources or anything is there to back up these FIAT currencies. Governments just declare that the currency is legal tender and people have to use it to transact in their country. The only one benefitting from that, are the banks who charge you for storing the money, depositing the money, withdrawing the money, transferring the money, buying groceries with your money and so on. These transactions also provide the government with a certain control over our financial lives.

There are many conspiracy theories out there on what the end game is for all of that. Believe in them or not, there is no question that the current financial system is flawed and our ability to accumulate and maintain wealth only functions as a courtesy of the central banks, governments and large corporations that have the ability to influence government and lawmakers.  

Throughout history, all Fiat currencies that have ever existed, eventually went to zero and became worthless. It all began at a meeting on Jekyll island in 1913. Six of the most powerful men in the US had a secret meeting on that private island off the coast of Georgia, where they created a plan for a new US central bank. That central bank became the world's most powerful bank for over a century now, the Federal Reserve.

A central bank in a nutshell is an institution that can generate perpetual profits and never sustain any losses, it creates money whenever it wants. Big businesses and banks receive new money that enters the economy first before everyone else does. Therefore, they have massive financial advantages over the regular crowd, like arbitrage opportunities to buy assets before prices rise. By the time the money trickles down to the masses, assets are more expensive because something called inflation has kicked in. This unequal distribution of money is a key driver of injustices in our modern society and is known as the Cantillon effect. It describes how new injected money effects different people and different industries at different times.

Central banks have the ability to create as much money as they want out of thin air. That causes inflation, as we all found out the hard way over the last few years. The money we earned from spending time and energy working, becomes diluted and worthless. Some think that assets like gold and real estate are disconnected from that control and influence. While that is true to some extent, the price of gold can and has been manipulated and there is still plenty of supply in the ground that could influence the price. Real estate falls under taxation rules and the saying of ‘people being taxed out of their farm’ has unfortunately be reality for some and these scenarios will increase.

The last 15 years should have taught us that we should be concerned about our financial system. Next week we’ll talk about how Bitcoin has exposed some of these concerns, how it actually works, what could go wrong and how people can own Bitcoin without being effected by the recent and future scandals surrounding crypto currencies.

Happy Canada Day!