As the central banks of the world continue to push forward with QE infinity, there is finally a way to avoid international currency devaluation chaos without speculating on precious metals or rocks as I like to call them. As we all know, the likely result of this aggressive policy will be inflation, if not hyperinflation. But it appears I am already off topic…
What is Bitcoin? If this is a new topic to you then please view these videos which were put together by the expert teachers over at Khan Academy: http://goo.gl/majyrx. I am not going to be providing an introductory lesson on the revolutionary virtual currency, but instead will be focusing more on the advantages of this particular habit changing phenomenon.
In short, it is an uncorrelated asset class which is currently classified as property by the IRS, and allows for cheap, fast, and secure online payments and transactions. As a matter of fact, you can transfer Bitcoin into any major currency in the world for a fraction of the cost a bank would charge. Let us dig into this point a bit further – banks would get 3% out of you on the exchange spread, and then they charge an often substantial fee to transfer the money via a wire. This can all be done in Bitcoin for little to no fee. There are a lot more benefits and draws to Bitcoin then just that, but this is a good start.
Given the crazy and outlandish behavior of our international governments; from the debauchery of American congress to the land grabbing Russian leaders – it may be to our benefit to build a stake in a currency which is decentralized and not controlled by a governing body with excessive ulterior motives. Interestingly enough, the US government seems to be leaning towards supporting Bitcoin. They appear to be desperately ready to stand behind any new industry which offers the potential for job and earnings growth.
My last point on the benefits of holding Bitcoin refers to its deflationary tendencies. While the US dollar loses value every year due to increases in supply, among other catalysts – Bitcoin’s supply increases at a set rate which decreases over time and caps out at 21 Million. As a result of this, the currency is disinflationary and appreciates in value as opposed to most commonly used currencies which are inflationary and tend lose value over time. See this link for more detail on the controlled supply: http://goo.gl/nohUvS. While Bitcoin’s supply does increase, the demand for the coin has outpaced this increase in recent history which has resulted in rampant appreciation. Considering that only a small portion of the world is aware of this currency and has access to purchase Bitcoins, I anticipate that demand will increase dramatically as commercial accessibility and application ramp up – which I might add, is happening as we speak. What does all of this spell out? Short term, medium term, and long term appreciation.
So there are the facts – should you invest? Well at the very least, it is a good diversifier with potential for massive returns, but there are also many risks involved with an investment in Bitcoin. So it really just depends on your risk profile. I certainly have built my stake and am exceedingly bullish on the underlying technology, but then again I am a serious risk seeker. If you are looking for a high risk/high return investment, then this may be right for you. If you cannot stomach the risk, then perhaps just stick with index funds and bonds.
If you enjoyed this article please feel free to donate Bitcoin. I am also available to complete consulting projects and am willing take requests for research projects in return for bitcoin.