Updated: Oct 14, 2021
In my last blog, I showed why Bitcoin (BTC) is a better builder of wealth and store of value than gold. But why Bitcoin (BTC)? Why not Ethereum (ETH) or Cardano (ADA) or Binance Coin (BNB), the three largest cryptocurrencies by market cap after BTC (according to CoinMarketCap: https://coinmarketcap.com? Let me address that question in this post.
Why should we put our trust in Bitcoin or consider it the “best” relative to any other cryptocurrencies? Because the marketplace has decided it’s the best. When billions use Google, Amazon or Facebook, they have an incentive to defend each network’s application or software. Why? Because the cost to switch to a new app or software product, in terms of actual cost (for businesses) and aggravation (for users) is too high. Think of yourself personally? Would you switch, without a compelling reason to do so, to a different brand of phone or computer? There is an actual “value” in time invested in an app or software product that prevents one from casually replacing it.
So what would stop people from abandoning Bitcoin when a better piece of “monetary software” comes along? Well, that’s part of the attraction of Bitcoin. And there’s probably an economic or scientific (read: brain pain) theory that explains it more technically. But the simple explanation is, as more people buy Bitcoin and join “the network”, they have an incentive to improve and defend the network. This means as more people join the network, Bitcoin’s “moat” around its cryptocurrency “castle” grows wider and deeper.
Think about that. Now that PayPal, Square, MicroStrategy and MassMutual are multi-million dollar holders of Bitcoin, they’ll usher in their army of lawyers and lobbyists to defend the network against overacting and overreaching regulators. And now that Fidelity, Blackrock, JPMorgan, Citigroup, and others on Wall Street are developing financial products to take advantage of the growing acceptance of Bitcoin, they will mobilize their formidable legal forces to ensure the U.S. government keeps its mitts off Bitcoin.
As Bitcoin grows and attracts more powerful users, its defenses against external “invaders” will grow simultaneously. Think of it like a small historic village in medieval Europe. That small village was easy to invade and bully into submission at first. But if eventually that small village grew into a vast nation-state (think William Wallace as a Scottish rebel who lead an uprising against the cruel English ruler Edward the Longshanks), it’s able to eventually defend itself against the biggest barons of money in the world.
There may be better versions of Facebook, Apple and Microsoft’s software, but the network effect and the investment of that network in their software has grown too large to overcome. PayPal and Square are now making millions off the Bitcoin network. Consider what forces you think they’ll usher in to defend its growth?
In the meantime, Wall Street is preparing to introduce a lot of securities products surrounding Bitcoin because they know they can make billions in fee income off these products. The global financial system has accepted Bitcoin into its “private club”, so-to-speak; so it’s going to award the largest of all cryptocurrencies (BTC) its full protection. Consider for a moment what that means.
Bitcoin has achieved a level of fame or notoriety unique to all other cryptocurrencies. Governments may not like it, but they won’t outright ban or interfere with it.
Despite all these fears and doubts about its legitimacy, Bitcoin has still managed to grow from zero valuation around 2014 to being worth in excess of $700 billion today. Realize, that’s bigger than JPMorgan ($479B) and Berkshire Hathaway ($648B). And how long did it take these companies to reach their valuations? A lot longer than 7 years (for BH it is 55+ years and for JPMorgan, 150 years; compared to 7 years for Bitcoin!). Think about that. Bitcoin grew in 7 years to become larger in size than it took JPM 150 years to achieve!!
So if you remove the fears and look at the facts, you have to conclude that Bitcoin is here to stay. For over 10 years, Bitcoin has survived every attack against it and come back stronger. It’s time to accept the fact that Bitcoin is here to stay. Why? Because people of massive wealth and influence have concluded that Bitcoin is a better version of gold.