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Is Bitcoin's raison d'être to be the world's Digital Gold?

September 2017

As Bitcoin grows into the mature investment asset that evidently it's destined to become, the buzz, both from within the Bitcoin community but also from economists and finance experts on the outside, is whether Bitcoin can take the role of safe haven investment. Is Bitcoin a type of digital gold?

Let's look at the Bitcoin's aspects that may well render it an ideal hedge against regular investments.

Clearly, Bitcoin is rare. In fact, it's more than rare, it's finite. The maximum number of Bitcoins ever to be in circulation - by design - is capped at 21 million. And this number will only be reached in the year 2140! Until that time, from the 16+ million we have in circulation now, a regular and wholly predictable drip of Bitcoin will be released into the system. This construct cannot be altered - it's hard-coded into Bitcoin. You could say that it is Bitcoin.

Since we know Bitcoin is finite, there's a case to be made that it's more limited than even precious metals and minerals like gold and diamonds. After all, whilst these are certainly rare, we know that any time their value goes up, mining them will become commensurately more lucrative.

At this point, by extension, more newly-mined gold or diamonds will be released into the system, introducing a kind of inflation, which results in downward price pressure.

This feedback loop occurs in every precious metal or mineral, But it does not apply to Bitcoin. As Bitcoin's value reaches ever-higher, there's no release valve to temper the price.

And that brings us to how high Bitcoin's price can realistically go.

While sources differ on the number of millionaires in the world, Credit Suisse estimates there to be about 35 million. This includes all "financial and non-financial wealth" as well as assets, collectibles, and real estate. This implies there will never be enough Bitcoins in existence for every millionaire in the world to own even a single one! Not to mention the fact that, from a prestige perspective, no self-respecting millionaire will strive to own just a single Bitcoin. There is, after all, only one cryptocurrency that was the first ever: Bitcoin.

The other favorable trait is that Bitcoin, by its very make-up, is the most counterfeit-proof currency in the world. Its building-blocks, the blockchain that makes up its entire transaction history, is said to be immune to duplication, or any kind of tampering for that matter.

In addition, since Bitcoin is decentralized, there's no one party authorized to speed up or slow down the release cadence of Bitcoins into circulation. These two characteristics make for comprehensive stability.

But let's not forget Bitcoin's undeniable utility, including a global network and its peer-to-peer ability to transfer wealth swiftly and at low cost.

Drawbacks? Hazards?

Does Bitcoin have any drawbacks? Any existential hazards on the road ahead? There are a few things to consider, yes. Bitcoin is still in its infancy and it shows. Bitcoin is new and these are unchartered waters. Its value tends to show substantial volatility for one thing. And the fact that it's an intangible asset isn't doing it any favors either, because to the uninitiated, especially, it's easy to mistake Bitcoin's digital somewhat ethereal nature for a kind of "house money".

Furthermore, Bitcoin is not yet globally accepted by any means.

All that being said, this nascence is where Bitcoin's promise lies and hence its financial rewards. Because let's face it, the longer you wait, the more Bitcoin fulfills its potential, the higher its value will creep, the costlier it becomes to own Bitcoin, and subsequently, the lower the ROI.

Bottom line: the best time to buy Bitcoin was 2010. The second-best time to buy Bitcoin is today.

Another area where there's bound to be change is where Bitcoin and governments transect. The cryptocurrency industry is still awaiting the government regulation that we all know is inevitable. In fact, despite the uncertainty, Bitcoin and all its digital cousins are likely to benefit from regulation clarity in the space. But for now, Bitcoin legislation is something that has only been introduced in a few countries. How Bitcoin will be regulated in the US, Europe and China, and elsewhere, remains to be seen. But it's clear that government regulation will have a major impact on its timeline.

Still, with most of the world's currencies in a race to the bottom, as governments in Europe, Japan and US relentlessly manipulate their currency to suit their agenda, it's the people that ultimately pay the price for this insidious inflation. National currencies are failing their citizens. Bitcoin, on the other hand, gives everyone an equal opportunity to protect their financial future.

Thinking of getting some crypto? This is how you do it. / Buy some.

I wrote the above article myself and it expresses my own personal opinions and views on Bitcoin. I am unable to guarantee that the information and/or results will be correct. Furthermore, whilst I own some cryptocurrencies, I do not receive compensation for my writing and I have no business relationship with any of the companies mentioned in above article. In addition, I am not an investment advisor and above article is for purely informational purposes. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.

Bryan, a Singapore PR, has spent two separate stints in Singapore, spanning close to two decades. As is the case for most non-techies, although Bryan's first exposure to Bitcoin was around 2010, it wasn't love at first sight. However, Bitcoin's impressive resilience, meteoric rise and world-changing potential have converted Bryan, to the extent that he has now pivoted to fully commit to Bitcoin.

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