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Bitcoin and Long-Term Wealth Preservation

Exclusive Research

  • Bitcoin is the latest in a long line of wealth-preservation technologies.
  • Bitcoin is the new gold. Its value ultimately comes from its mindshare.
  • Bitcoin will likely become the largest store-of-value commodity asset, surpassing Silver and Gold.

Investment Idea

Like Gold, bitcoin’s value comes from its ability to capture mindshare. Gold doesn’t derive its value because of its limited industrial uses, but instead because people believe gold has value. Bitcoin works the same way. But gold has a much longer history, as a store of value, to back up this mindshare.

Bitcoin offers some other benefits relative to gold, such as being easier to buy, store and transfer. But it is centuries behind gold in its conquest for mindshare. However, arguably, bitcoin has a stronger mindshare than gold among younger generations. If this is the case, then bitcoin will perform extremely well as younger generations acquire more wealth and direct a portion into bitcoin.

Potential

The people that most strongly believe and understand bitcoin’s value proposition are the younger generations (< 40 years old). They grew up in a world of digital technology and extreme money printing and understand bitcoin’s central investment thesis. As this generation ages and captures a higher percentage of global wealth, they will direct some portion of this wealth into BTC. The net result should be that BTC will have a value that is a greater percentage of the world’s overall wealth, which will mean a dramatic price increase in fiat terms.

When looking at it from this perspective, Bitcoin has massive potential.

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As of 2020, Boomers and the Silent Generation owned 80% of America’s total net worth. But these generations are much less likely to put their capital into BTC. 20% of millennials claim they own some bitcoin while only 2% of those 65 and older claim to have any bitcoin. If 20% of the next generation of wealthy individuals own BTC, the price could go up by many multiples.

Risk

In the short-term, bitcoin’s price action remains uncertain. Billions flow in and out daily, as the price is pushed around by options volume, other forms of leveraged and derivative trading and the whims of the largest hedge funds in the crypto space. But in the long-term, bitcoin’s value will come from its ability to retain mindshare.

Among the younger generations, bitcoin has already established itself as a place to park idle capital for the long-term. After 13 years of building this brand and reputation, it will be very difficult for a hyped-up upstart coin to usurp bitcoin’s position.

But recently, bitcoin has increasingly come under fire for its environmental impact, even though it is arguably more environmentally-friendly than the traditional fiat system. Although these challenges are in some ways baseless, they could negatively impact BTC’s adoption and brand, which ultimately will impact its price.

Conclusion
Bitcoin will likely remain one of the world’s strongest stores of value. It has a history and meme-value that can never be replicated as the first cryptocurrency. As a result, it will retain its role as a store-of-value asset in the long-term.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

The full article is only available for Numbrs clients.

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