Bitcoin: The Monetary Psychedelic
A first principle approach to understanding the demise of fiat currency.
There exists a simple axiomatic truth upon which I’d like to present the subject of today’s article.
“One you see something, you cannot unsee it.’
The Problems With Fiat Currency
In the winner take all battle for a global store of value, history has shown only one form of money can emerge victorious. That form of money is the one which best satisfies the characteristics of money, most notably whose supply is fixed, otherwise known as the ‘hardest’. As you’re well aware, I believe that money is Bitcoin.
When one enters the rabbit hole in an attempt to understand our global financial system, the rise of wealth inequality, why inflation is at 40 year highs and what they can do about it, they ultimately arrive at the root of the problem, our fiat monetary system.
As we’ve seen in recent years, fiat currency is vulnerable to supply increases by a centralized entity (the Federal Reserve in the U.S.), which then lowers the value or purchasing power of the currency. There’s a lot of smoke and mirrors, but this is the crux of the problem.
The Great Awakening
I like to think of Bitcoin as a monetary psychedelic. Historians will look back upon this time and credit Bitcoin (and its inventor Satoshi Nakomoto, who deserves the Nobel Prize) for awakening a generation of people to the problems with fiat currency and our current monetary system.
Just like psychedelic’s contributed to a rise in the general consciousness of Americans in the 1960’s, Bitcoin is the monetary psychedelic that thrusts people into a paradigm shift in consciousness, leading to an awakening from which their worldview is permanently changed. Once altered, they never return.
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Bitcoin and Monetary Consciousness
The awakening is simple, yet profound. Here’s how it plays out:
The confused market participant realizes something is wrong and seeks answers. They enter the rabbit hole.
They dig for 10, 100 and sometimes 1,000 hours, in search of truth. Notably, this quest is like the hero’s quest in an epic, not born from desire, but necessity. Necessity to protect their hard earned wealth from a precipitous drop in purchasing power, essentially enslaving them.
They conclude that the problem is our monetary system, with fiat being the root cause. They learn about the history of money, and that every instance of fiat currency has failed throughout history.
They see that the United States is not on a different curve than the thousands of other fiats that failed before it, but rather its on a different point on the same curve.
A greater sense of urgency arises for those who awaken in other countries, since they don’t have the superpower of being the global reserve currency, which is the last domino to fall (a la the ‘Dollar Milkshake Theory’.They look for solutions for where to store their wealth outside of the bounds of the fiat system. Inevitably, they arrive at Bitcoin.
Although it varies slightly from individual to individual, this is the general process of awakening that millions have gone through worldwide.
‘Why does this matter,’ you ask. Who cares where someone stores their wealth?
As I argue in The Future of Money, Bitcoin is not a choice. Failure to store value in the hardest currency ultimately leads to lagging actors losing so much purchasing power that they are forced to look for an alternative.
The mass exodus of the fiat system is a one way ticket. When everyone leaves, there’s nobody left to hold the bag, and the fiat fails.
Bitcoin vs. Fiat Currency
Once sees the problems with fiat currency and begins to store their wealth in Bitcoin, they cannot unsee that problem. Trust is difficult to gain and once broken, nearly impossible to regain. This phenomenon explains why cheating is so damaging to monogamous relationships, and many never recover from it.
An individuals relationship with fiat currency is akin to an exclusive marriage. Once that trust is broken and the individual realizes he’s been in an abusive and toxic relationship for decades (as his or her wealth has been siphoned due to currency debasement), they naturally seek a new partnership.
With Bitcoin, they live in complete harmony, resting assured their purchasing power will increase over time.
Millions of people have undergone this transformation, and decided to store their wealth in Bitcoin. They will never go back to the fiat system. Many more one way journey’s will happen in the future, until eventually there are not enough people left who trust the fiat system. Eventually, it breaks.
The Great Exodus to Bitcoin
I’m not exactly sure when this happens, nor what happens when it does, but that’s a topic for another article. The point is that the journey from fiat to Bitcoin is a one way ticket from sleepwalking to consciousness, upon which there is no return.
Therefore there is an ever increasing number of people who are opting out of fiat and opting into Bitcoin.
As I’ve written before, it can be said then that our fiat currency system is a giant game of musical chairs, where everyone is singing and dancing so long as the music is playing, but you don’t want to be the schmuck flailing around when the music stops.
That’s when everyone rushes for a chair, but of course, there aren’t enough. The game is over, immense wealth has been destroyed and everyone is fighting for a place. Gradually, then suddenly.
It seems that the question is, have you found your chair?
Alec
You didn’t mention the 60+% drop in bitcoin value over the last 9 months. Does not appear to be a safe harbor for peoples dollars who invested or adopted this newer form of currency.