By Chris Kline, COO & Co-founder of Bitcoin IRA
Bitcoin turned 12 years old in 2021, and celebrated this year with all-time highs, an ETF, institutional arrival, and even the new Crypto.com Arena—the name takeover of an iconic Los Angeles stadium. Other than the obvious glitz and glamour, something critical is driving its expansion into the fabric of our daily lives. Bitcoin could be the economic evolution that we’ve been waiting for to address the controversy of inflation, and even world poverty, which could potentially lead to a better way of life for us all.
Bitcoin was designed to be inflation resistant. It’s limited in supply, not because a government or entity decides to limit it, but because it has a diminishing rate of return for its producers, consensus-driven miners. As each bitcoin is created, the process to create the next becomes exponentially more challenging— due in part by a mechanism called “halving”, which cuts the reward for mining in half as we get closer and closer to final production. Because of this design, as of today, 18 million bitcoins have been created and only 21 million will ever exist.
This is in stark contrast to the USD, in which monetary supply has increased 10-fold since the recession of 2008. Furthermore, the current Build Back Better bill in Congress is expected to add another $1.5 trillion to an already ballooned balance sheet for the Federal Reserve. This is in comparison to the fixed supply of 21 million bitcoins.
The inflation we are seeing today in the US was recorded as 6.5% in the recent Consumer Price Index (CPI) print. While its causes are currently speculative, one key notion may include that of a potential mismanagement of our current currency, controlled by politicians with a short-term political mindset seeking re-election. To put it simply, near 0% interest rates while printing trillions upon trillions of dollars, may not be the best solution. Just ask anyone who recalls the economic collapse of 1929 of Germany’s Weimar Republic, in which hyperinflation degraded the currency so much that a wheelbarrow filled with cash was deemed more valuable than the cash it held. Or more recently, examine the instability of Venezuela’s currency as a direct result of hyperinflation. It’s detrimental to think about the effect these situations had, and may still have, on actual citizens. This is where bitcoin can serve a purpose for good.
Beyond our borders, bitcoin can do more than just resist inflation. In fact, it may be the world’s greatest weapon against poverty. So far, two countries, one of which is one of poorest (per capita) in the world, have recently embraced it as the hope for a more prosperous future. El Salvador named bitcoin its reserve currency in September and early indicators show this was a move in the right direction. In just the first month alone, there were more citizens with bitcoin wallets than those with traditional bank accounts. It’s led to a national project to utilize BTC profits to fund the construction of 20 bitcoin schools. They even mined their first bitcoin using their natural volcanic power—talk about turning the table on your economy! Now, Zimbabwe has started the conversation about adopting bitcoin as legal payment for their citizens—over half of whom live under the poverty line (less than $200 USD per month).
These are case studies of human empowerment. The essence of what bitcoin represents. It is not one country’s currency; it is the people’s currency.
All of this can happen organically, without the need for a nonprofit organization (NGO), such as the World Bank, to step in. There are no large, corporate bitcoin offices where the attempt to solve a global poverty problem is left in the hands of a bureaucracy. The people decide how bitcoin works in their lives, which is why it may be seen as terrifying to countries like China, where it was been banned for the 16th time just earlier this year.
For gold bugs, the 2020 global pandemic and the subsequent stimulus measures from central banks around the world was the perfect case for gold. However, it’s yet to make its return above all-time highs.
Some argue that bitcoin may have stolen the show as the next hedge against inflation and other uncertainties in the economy. Others argue that bitcoin isn’t tangible, therefore it’s not a real asset, like gold. Perhaps that tangible nature, which comes with storage, shipping, and security logistics requirements, may be hindering the precious metal’s rise. Unlike that of crypto, which has a simplified use case and lower barriers to entry, making it more accessible to everyday folks.
Regardless, both bitcoin and gold are strong proponents for a diversified portfolio, given the economic outlook at play today. What happens next is a big question among investors right now. Rising inflation that isn’t transitory, large stimulus packages from central banks and more and more buzz surrounding crypto, overall, means it may continue to define its relevance in today’s global economy.
There are even those who believe bitcoin should replace banks. This just isn’t realistic. Rather, more likely is the emergence of more banks, institutions, sovereign nations, and individual investors betting that bitcoin may play a key role in the foreseeable future.
For middle class Americans, it may be a chance to protect themselves from increasing inflation pinches. For citizens living in poverty in the poorest nations of the world, bitcoin may be a second chance at a better standard of living. Time will inevitably tell, but like the internet and email before it, it won’t be long before crypto embeds itself into the fabric of our daily lives.
Chris Kline is the COO and co-founder of Bitcoin IRA, the world's first, largest, and most secure digital asset IRA technology platform
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.