REAL CLEAR CRYPTO: The “Distraction” of Bitcoin as a Currency

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By John Sarson | Sarson Funds

This morning, I tuned into CNBC and found myself engrossed in an interview with a man who needs no introduction in the world of finance and technology, Michael Saylor. The CEO of MicroStrategy, an ardent Bitcoin supporter, and a visionary with an uncanny knack for predicting market trends, Saylor has always been ahead of the curve. Today was no exception. He articulated a compelling perspective on Bitcoin, one that goes beyond its widely debated use as a currency and delves into its potential as a powerful store of wealth. His prediction? A staggering $100 trillion market value for Bitcoin.

Saylor’s views are a wake-up call, a fresh perspective on an asset often mired in the daily volatility of price swings and regulatory hassles. His ideas might seem audacious at first, but remember, this is a man who has been right before. Let’s dissect Saylor’s arguments and understand why he believes Bitcoin’s future is far more significant than we may currently comprehend.

Bitcoin as a New Generation Wealth Store

Just like our ancestors used precious metals and real estate to store wealth, the modern generation has found a new avenue – Bitcoin. Michael Saylor, in his recent talk on CNBC, suggested that Bitcoin might serve as an efficient wealth store for many. Drawing parallels to real estate, Saylor emphasized Bitcoin’s superiority as a wealth store in terms of cost-effectiveness and liquidity, which are hard-to-attain characteristics for real estate.

One of the key points Michael Saylor underscored during his CNBC interview was the misperception of the need to view Bitcoin as a functional currency for its continued adoption. Many people, according to Saylor, are sidetracked by the idea of Bitcoin as a digital currency that they can use to buy everyday items, from a cup of coffee to a new car. This notion, he believes, is a distortion that distracts from Bitcoin’s true potential as a wealth storage vehicle akin to “digital real estate”.  Investors that currently store wealth in physical real estate hardly think less of their real estate investments because their equity locked in real estate can’t be used to purchase a cup of coffee.

Bitcoin vs. Real Estate: A Comparison

Real estate, traditionally seen as a primary source of storing wealth, and Bitcoin, a relatively new player in the arena, may seem like two very different entities. But the comparison becomes relevant when we consider both as means of preserving value over time. Let us delve in to understand further.

Accessibility and Liquidity

Buying or selling a property often requires a significant amount of time, from listing the property, negotiating prices, to finally closing the deal. This can take weeks, if not months. Bitcoin, on the other hand, offers immediate liquidity due to the presence of numerous exchanges worldwide. You can buy or sell Bitcoin virtually anytime, making it a highly liquid asset.

Storage and Maintenance Costs

Real estate incurs a considerable amount of costs in terms of maintenance, property taxes, and insurance. Bitcoin requires no such physical maintenance. Once you purchase Bitcoin, you can store it in a digital wallet with minimal costs. The low storage costs make Bitcoin a more affordable option for many.

Divisibility

Unlike real estate, Bitcoin can easily be divided into smaller units, down to one hundred millionth of a single bitcoin – a Satoshi. This divisibility makes it possible for individuals to own fractions of Bitcoin, thereby making it more accessible to a wider section of society.

Security

Real estate, though tangible, is subject to risks such as damage, depreciation, and sometimes even government expropriation. Bitcoin, being digital, can be encrypted and backed up, providing enhanced security. However, it’s important to remember that Bitcoin too can be vulnerable if not stored properly – it can be susceptible to hacking or loss due to forgotten passwords.

While real estate still holds its own advantages such as providing a steady cash flow in the form of rental income and the reassurance of a physical asset, it is clear that Bitcoin offers unique benefits too. The comparison between Bitcoin and real estate ultimately comes down to the investor’s preference, risk tolerance, and investment goals. As we move forward, it will be interesting to observe how the growing interest in Bitcoin as digital real estate shapes the future of wealth storage.

Saylor’s audacious prediction that Bitcoin could reach a market value of $100 trillion is not based on whims and fancies. Instead, it hinges on several critical factors. Let’s break them down for better comprehension:

  1. Bitcoin’s Deflationary Nature: Unlike fiat currencies which can be endlessly printed, thereby leading to inflation, Bitcoin is innately scarce. There’s a cap of 21 million coins that will ever exist. This scarcity, according to Saylor, makes Bitcoin an attractive store of wealth.
  2. Institutional Adoption and High-Net-Worth Individuals: Bitcoin is increasingly being recognized as a viable hedge against inflation and economic uncertainty. The pandemic has reinforced this belief, with institutional investors and wealthy individuals flocking towards Bitcoin as a safe haven.

While these factors are indeed powerful catalysts for Bitcoin’s growth, they aren’t guarantees. It’s crucial to realize that the cryptocurrency market is highly volatile and unpredictable. External factors, such as regulatory decisions and technological changes, can significantly affect Bitcoin’s value.

Furthermore, while Bitcoin’s market cap is currently about 1.5% of the global real estate market cap, it’s worth noting that Bitcoin is a much younger and more volatile asset. As such, it may take time for Bitcoin to reach the same level of acceptance and stability as real estate. But as Saylor points out, the idea of Bitcoin as ‘digital real estate’ could be a useful framework for understanding its potential to store and grow value over time.


Disclosures: Not investment advice. The Author, Sarson Funds, Inc. and its affiliated managers may hold positions in the projects mentioned.

Talk with your financial advisor before making any investment decisions or have them contact Sarson Funds directly at [email protected]