Bitcoin – The Best Treasury Reserve Asset Humanity Has Owned
Most companies are founded with hopes that they will live for a long time, preferably centuries. It makes sense to look at how investments can change over a hundred years, as a person can accumulate wealth destined for heirs or even causes such as climate change. Michael Saylor, an American entrepreneur, said that a great way to evaluate any investment is to take $100 million, go forward a hundred years and ask yourself what happens. If I had $100 million in any of the largest cities in the world in 1900 and put the money in the best bank in the city, I would have two types of risks. These would be counterparty risks and inflation risk. As for counterparty risk, all the big banks in all the big cities of the world went bankrupt in 100 years. And that’s a 90% chance that you will lose everything.
Of course, the most apparent flaw when considering the performance of any reserve asset over 100 years is inflation. Of all asset types, fiat currency faces the highest inflation over time.
What about the other assets?
While real estate may seem like a great asset to hold as a long-term reserve, it is sensitive to losing value from things like taxes. More importantly, real estate faces risks that come with changes in regulation or public governance. In 100 years, a government that respects private property is likely to be replaced by one that does not.
Meanwhile, stocks also face risks of mismanagement and changes in regulation.
Even gold and other precious metals have problems when you look at them in terms of a 100 years. While their value increases over time, the logistics of owning them can be stressful. You can use third-party warehousing services like commercial banks. Still, history taught us that gold could be lost even there, especially during times of war or political upheavals like revolutions.
How about Bitcoin?
For now, Bitcoin has no counterparty risks. That is to say, we don’t have to worry that the actions of a third party will lead to a significant loss in the value of the asset. You are also protected from risks that could come from regulation or an extreme change in government policy. Bitcoin holders will always have complete control of their holdings.
We are almost sure that its value will continue to grow over the years. Particularly, as the supply is determined and the issuance rate of new units is cut in half every four years.
The autonomy and growing scarcity of Bitcoin are very likely to increase the value over time. And it would not be surprising in 100 years to see its price considerably higher than it is today.
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