Bitcoin price is on another epic bull run, almost exactly 24 months after the last epic bull run. In 2013, it gained upwards of 1000% in relative value to fiat currencies worldwide. Then it fell back to where it began. What change over the last two years? Did that Mt.Gox/Chinese Connection Bitcoin Bubble Ver. 1.0 really matter? Does this one?
Let’s look at reasons why the Bitcoin value versus the "Almighty Dollar" is really of little real significance, and may be totally irrelevant both now, and in the future.
Let's begin with our ability to learn from history
Twenty years ago, in 1995, when the Internet was just starting to get over in the mainstream, it was in a similar state of development as Bitcoin is in today. "The Web" was replacing ancient communication methods like typewriters and snail mail at a slow, but steadily increasing rate. These wouldn't be instantly replaced, but would be one day irrelevant. As we moved along a few more years, and the 21st century dawned upon us, mainstream news magnets like CNN and the Washington Post joined "The Online Revolution." This caused newspapers to shrink in size, number, and demand. As The Internet grew in scope, was it ever compared directly, on a daily basis, to the New York Times? So why do the same to Bitcoin?
Just as people today are asking "What is Bitcoin?" people in 1995 were asking, "What is e-Mail?," and "What is The Internet?” Bitcoin is following the Internet's lead, in essence, building its own blockchain technology on top of the Internet's existing virtual blockchain, if you will. Bitcoin's growing influence on monetary systems and global commerce are set to be similar in depth to the Internet's inherent ability to change the way we all communicate worldwide.
Bitcoin is not so much reinventing the wheel, although it may in the currency markets as it is setting the established wheel of the Internet in an exciting new direction. This potential will take another few years to realize fully how far Bitcoin value can go, but it is moving upward and onward, and the world is starting to take notice.
Bitcoin’s progress has scared some sovereign governments to the point that they have banned it outright, in practice, or through de facto capital controls. Taiwan is just the latest victim of self-defeating, primitive, hypocritical regulatory action. Major crimes are committed every day in fiat currency, and it receives no regulatory backlash.
Bitcoin value has not only survived on a global basis for going on seven years, but thrived, and attracted some of the largest merchants worldwide (Microsoft, Dell Computers, Dish Network, etc.). This is much more relevant than any comparison to a dollar currency that is in its final years of relevance itself. If that doesn't prove the inherent strength of Bitcoin value, nothing will. What else in this global recession has grown in use and market attention so quickly?
One currency has a bright future, one not so much…..
They may both transmit value, but that's where the comparisons should end. Today, merely out of desperation, Bitcoin value is compared to the World's Reserve Currency, the most liquid, most distributed, and most established currency of all time, the U.S. Dollar. We compare Bitcoin value to the dollar because they're both seen as currencies, but Bitcoin value is much more than that. Currency is just Bitcoin's first "app." Bitcoin appreciates by design. Dollars depreciate by the design of its debt-based economic system. You can send millionths of a bitcoin to someone as payment. You can send digital keys and documents with bitcoins. The amount of bitcoins produced is market capped. The distribution of bitcoin is fully decentralized and is not bound by any primitive territorial boundaries.
"The Almighty U.S. Dollar,” on the other hand, is kind of like Jack Nicholson, Bill Clinton, or any other media superstar from generations gone by. They've had their time in the sun, where they once ruled their market domain, and now they are fading into our history. The dollar's value is found at this point is found solely within its liquidity, and the ability of the U.S. to coerce smaller countries to use it at the barrel of a gun. Just ask Muammar Gaddafi.
The U.S. Dollar is poised for a collapse of epic proportions, according to many experts. The "Great Recession" of 2008 was just foreplay. A currency's "Global Reserve Currency" status lasts anywhere from 65-70 years, on average, and the U.S. Dollar has been "in office" for over 70 years now. The sphere of influence of the U.S. Military worldwide, with well over 100 nations occupied by American military bases, is the main thing keeping the dollar in business right now, but times are changing.
The BRICS Development Bank is a major regulatory step in advancing the demise of the dollar as an internationally relevant currency. BRICS nations (Brazil, Russia, India, China & South Africa) control 40% of the world's currency reserves and population. They’ve basically spat in the face of the U.S. Dollar, and said they would work directly with each other, and without the current global reserve currency. These countries have been dealing in "Bilateral trade agreements" (International trade deals without exchanging their currency for US Dollars) for many years now. So this new world bank of commerce was just the next logical step. China’s AIIB (Asian Infrastructure Investment Bank) is also another nail in the coffin of the U.S. Dollar. One of the few nations not a member of the AIIB is the United States.
They did this because the dollar is of little intrinsic value, and the Fed can't seem to stop the bleeding. Federal Reserve officials have failed to get interest rates off of the pavement out of fear of collapsing the economy, for going on a decade now. They're on the monetary version of life support. The U.S. Government can doctor the numbers, and change the metrics, but countries worldwide are turning their back on the depreciating asset known as the U.S. Dollar, and they know it. Their main job is to make sure the American people don't know it. You know what they say, ignorance is bliss. And that's also why the mainstream media only reports Bitcoin value drops, not the usual rise in Bitcoin value.
Many financial experts like Peter Schiff, Jeff Berwick, Mike Maloney, Ron Paul, and Robert Kiyosaki are predicting the mother of all economic collapses when the dollar inevitably falls in the coming years. In my former dealings on Wall Street myself as an investment banker, I have to concur. Even legendary super-investor George Soros says the dollar died in 2008. Americans, in particular, are truly ignorant about economic collapses because they have never experienced one first hand. What happened in 2008 was a small heart attack, that is a prelude to your coming demise if you don't amend your ways. Has the U.S. done that, I ask you? Enough said. It's only a matter of time.
"Eventually, this [dollar] will go to it's true worth. Zero. So all of you savers [of dollars] out there, you're going to lose big time!"
- Robert Kiyosaki, author of Rich Dad Poor Dad
Does this mean we won't use a dollar in the U.S.? No. We still use typewriters and snail mail. We still read newspapers.
Sort of. Not really. But when, not if, the dollar eventually collapses, and heads to its true intrinsic value, bitcoin value will have an inverse market relationship. It will then skyrocket to unimaginable heights, at least against "The Dying Dollar." As the dollar continues to slip and slide, Bitcoin will continue its march into the future. The way I see it, the only thing that can stop Bitcoin from outlasting the dollar on the global stage is if Bitcoin defeats itself. Governments attacking Bitcoin out of fear of it's abilities will only cause the "Streisand Effect" to be enabled in their populace.
So the bitcoin value versus the dollar right now is irrelevant, since bitcoin is not going to replace the "World's reserve currency" regardless. Ask Bitcoin industry leaders like Andreas Antonopoulos and Cameron Winklevoss, and they'll tell you the price doesn't matter. As Andreas once said on a Joe Rogan Podcast, the Internet's value is not measured in its ability to replace a number of fax machines. So why measure Bitcoin in dollars? They are totally different ecosystems.
Bitcoin has more than held it's own in the face of great adversity over the last five years and has grown in relative value over 100% in the last 2-3 months. Does that mean the number of people using Bitcoin has doubled? Does that mean the mainstream media or regulators are going to stop attacking Bitcoin at every opportunity? No. It’s just an imaginary scoreboard; a game we play. We make Bitcoin exchange prices too important. What matters is how many people are using it, and how we can grow the community.
As I mentioned earlier, Bitcoin value jumped through the roof in 2013. Did that really help the Bitcoin community? It led to the discovery of the growing cancer that was Mt. Gox and Bitcoin have suffered from the PR hit ever since. It might have been the worst thing that ever happened to Bitcoin.
You know what they say. There is no such thing as bad publicity, but if we think about it, there are better ways to bring the world closer to Bitcoin than the self-destruction of the world’s largest Bitcoin exchange. It did indirectly bring major players like PayPal and Microsoft into the fold, just by shining a mainstream light on what Bitcoin is. I think this community can do better than that.
Where this is all headed
The point is Bitcoin’s price is not the story. Its innate, revolutionary capabilities are the story. We are transitioning from a dying paper currency paradigm to a fully digital, encrypted future. Whether that day is 5 years or 20 years from now, does it matter? The Dollar System is a seventy-year-old man with a bad heart. Digital currency is a 7-year old child prodigy. A “Doogie Howser M.D.”, ready to solve the many ills of the old man on the world’s economic gurney.
Will the dollar, at the ripe old age of 70 years running in its global reserve position, stand up through the next five years? With the international community turning on it, the Fed overproducing it, and Bitcoin beating it through attrition and superior technology? Don't bet on it. The chances of the dollar going to zero in value in five years are at least even versus Bitcoin value doing the same. You may end up betting your bottom dollar on it, sooner than you think.