Bitcoin’s MAC n Cheese
In last week’s Financial Farmer newsletter I told you about #BREADS - the model farm/portfolio/arrangement of assets I’m very bullish on for building generational wealth.
#BREADS stands for:
Bitcoin
Real estate
Ethereum
Alternative Cryptocurrencies
Dollars
Stocks or #GBC70
#GBC70 is my colleague Paul Mampilly’s creation, which is filled with stocks strictly focused on innovation and technology.
Today I’m going to go over the first asset: Bitcoin.
Financial Rebirth
In Harry Potter and the Chamber of Secrets Harry witnesses a phoenix burning to ash before being reborn among the remains.
Bitcoin in a way had a similar start.
In the depths of the Great Financial crisis back in 2008 when banks around the world were struggling, bitcoin creator Satoshi Nakamoto published the white paper that outlined the crypto.
The breakthrough technology was a peer to peer payment system that did not require a middle man.
No Visa ($V) or Mastercard ($MA)… no need for a government, central bank or any bank for that matter.
It is permissionless, trustless and borderless.
The added benefit was the software made it so only 21 million bitcoin would ever be created.
Digital scarcity without the need for a middle man manipulating markets for their gain was born!
#MAC n Cheese
A common question I often hear from new bitcoin investors is how are you so sure there’ll only be 21 million coins to ever exist.
That’s a great question and I think the answer lies with what is mutually beneficial for all.
Back in the Cold War there was a legitimate fear of nuclear winter, where the United States and the USSR would fire their nukes at one another.
However, this never happened.
The reason was because of MAD - Mutual Assured Destruction.
If one side fired, the other would respond.
For bitcoin I think there’s another acronym at play - #MAC or Mutual Assured Conservation.
The worldwide bitcoin network running on computers or also known as nodes wants to conserve the finite number of coins.
It is in every person’s best interest to keep the 21 million number fixed because if it can be manipulated, like fiat currency, then bitcoin’s allure is gone.
It would be no different than any central bank deciding to print more money expanding the money supply at their will.
This causes inflation, which is the hidden tax on a country’s people.
Here in the US the current inflation rate is 8.2%, but bitcoin’s inflation rate is only 1.8%.
We all know one dollar is worth one dollar, however a dollar today is worth more than a dollar tomorrow.
This is because of the devaluation of dollars caused by inflation.
This isn’t true for bitcoin.
A bitcoin today will be worth the same bitcoin tomorrow.
We only think bitcoin increases in value when measured by a debasing currency like the dollar.
Bitcoin Rising #BREADS
No one knows what the price of bitcoin will do.
My price predictions have been off from time to time, but the overarching bullish trend has been there from the start.
There’s another way of showing this relationship.
Priced in bitcoin website shows the price of a good in bitcoin throughout time.
In the chart above we have Milk per CWT (100 lbs. of milk).
Back in 2012 it took nearly a billion satoshis or 10 bitcoin to purchase 100 pounds of milk.
Now it takes 100,000 satoshi, which is a more than 99% drop when priced in bitcoin.
This tells you goods priced in bitcoin are deflationary versus inflationary when priced in dollars.
In #BREADS I believe bitcoin will increase in price relative to other assets, like dollars, which will grow the #BREADS portfolio.
That’s it from me today…
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Thank you,
Pat, the Financial Farmer