With each new halving cycle Bitcoin is getting more valuable. But that’s not necessarily how people new to the space view it.
For some people Bitcoin at $50,000 doesn’t look valuable, it looks expensive and they might be tempted to buy some coins that “look cheap” like XRP at $0.50...
Obviously this is a purely psychological phenomenon. The fact is you don’t need to buy a whole Bitcoin to invest.
The easiest way is to start stacking sats...
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Now let’s dive in.
If you can afford a Big Mac, you can stack sats
The satoshi is the smallest unit of Bitcoin. There are 100 million satoshis in one Bitcoin. That means sats are a pretty good unit to talk about the value of smaller every day items without having to use too many zeroes or decimal places.
Take a Big Mac. In the US you can get a Big Mac for about 12,000 satoshis.
Not everybody has $50,000 sitting around ready to buy a whole Bitcoin. But certainly everyone can afford to stack sats.
You don’t believe me? Just take a look at the chart below then.
Each point represents a country.
On the horizontal axis is the number of minutes you need to work at the minimum wage to afford one Big Mac.
On the vertical axis is the number of minutes you need to work at the minimum wage to afford 10,000 sats.
As you can see, in most countries it takes about as long to afford a Big Mac as it takes to afford 10,000 sats.
Hence the rule: if you can afford a Big Mac, you can afford to stack sats.
You don’t need to be a whale to enjoy the benefits of Bitcoin.
If you can’t afford to make a sizeable investment now just look at Bitcoin as a savings technology with a big potential upside.
By using dollar cost averaging to accumulate satoshis regularly over a long time horizon you:
Get a direct exposure to the exponential growth of Bitcoin giving you access to one of the largest asymmetric bets of our lifetime.
Ensure that your purchasing power won’t evaporate as fiat currencies are racing to see who can debase faster.
You will not become a billionaire doing that on a small scale. But over a long enough time horizon you are likely to do much better than anyone who decided to park their savings in cash.
There are very few asymmetric bets with the upside potential of Bitcoin that you can get access to for the price of a Big Mac. Don’t miss that opportunity.
Digital Euro
Here is one reason you’ll want to own Bitcoin in a world of Central Bank Digital Currencies:
“Panetta [European Central Bank Executive Board member] said officials keen to prevent bank runs could make the hoarding of digital central bank money unattractive by “penalizing remuneration” of holdings in excess of 3,000 euros.”
Yep, you read that correctly. How do you force European citizens to spend their digital Euro? Just charge negative interest rates for those who decide to save.
That’s only one of the controlling tools central banks can exert with Central Bank Digital Currencies:
Charging negative interest rates on your savings.
Directly levying taxes on your account at the central bank based on your personal profile.
Controlling where and when you are allowed to spend your digital Euros.
These are just a few of things that I can think off the top of my head.
This is coming. Bitcoin can help you stay out of this system. Don’t say later that you haven’t been warned.
Roubini at it again
You can always count on Nouriel Roubini for an over simplistic take on Bitcoin and cryptocurrencies in general.
On that front his latest Op Ed in the Financial Times doesn’t disappoint.
This article is all over the place. But it seems that the main argument of this piece is that:
Bitcoin is not digital gold and thus is not a hedge against tail risk.
Nouriel’s reasons for why Bitcoin is not digital gold are more like a laundry list than one coherent argument.
So let’s cut through the fluff and go to the heart of what he is saying.
First.
“Referring to Bitcoin [...] as ‘currencies’ is a misnomer. They are not a unit of account: virtually nothing is priced in them. They are not a scalable means of payment [...]”
Nouriel Roubini
Am I getting this right? Bitcoin is not like gold because nothing is priced in Bitcoin… when was the last time you’ve seen anything priced in gold?
These days everything is priced in fiat. You might be able to pay at the going exchange rate using Bitcoin or gold. But gold is definitely not used as a reference.
In that respect there is no difference between gold and BTC. At least from a practical point of view it is more likely that you’ll be offered to pay using Bitcoin rather than gold coins. See Tesla.
Which brings us to the “scalable means of payment” part. How is paying in physical gold more scalable than paying with BTC?
A Tesla model S goes for something like $140,000. That’s 2.5kg of gold you need to transfer. Meanwhile you’d just have to scan a QR code to pay with BTC.
When it comes to scalability there is no discussion Bitcoin is far superior to gold.
Next.
“Even referring to crypto as assets is a misnomer. Most assets have a stream of income (stocks, bonds, commercial real estate) or a use (housing) or some other utility (fiat currency provides liquidity and can be used for payments).”
“Crypto has no income, no utility, no payment or other services.”
Nouriel Roubini
Note the use of “most assets” in the sentence. Most is not all:
Some stocks do not pay dividends, so no stream of income there. Last time I checked Amazon has never paid dividends. Still you’d have done pretty well holding on to AMZN.
Some bonds have negative yields so you are actually losing money on those. I’m pretty sure Nouriel Roubini still counts government bonds as assets.
As for commercial real estate, ask the malls owners what they think about their stream of income these days.
Bitcoin is an asset with its own characteristics.
Bitcoin is a decentralized, permissionless network that allows for people to conduct trustless transactions with finality.
I don’t know how Nouriel Roubini missed it but that’s the utility.
Finally.
“Gold has no income but it has industrial uses. It also has utility as a store of value and a hedge against inflation, currency debasement and tail risks.”
Nouriel Roubini
Talk to me about industrial use... The breakdown of demand for gold seems to be something like:
49% for jewelry.
29% for investment.
15% held by central banks.
7% industrial use for technology.
So if you remove the use case of gold as a store of value there is only 7% going to the industrial applications. Needless to say this is not what’s driving the value of gold.
Now gold as a scarce asset is most certainly a store of value and a hedge against inflation. But the conclusion from this analysis should be that Bitcoin is too.
Bitcoin and gold have different value propositions but both qualify as stores of value.
Obviously gold has been around as a store of value for much longer than Bitcoin. But give it time and we’ll get there too.
That’s it for today. If you have learned something please subscribe and share to help the newsletter grow.
Cheers,
Nick
The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:
Click on the subscribe button right below.
Done? That’s great!