Why am I so bullish on Bitcoin? There are many reasons for this, but I’m going to tackle one of them in this blog. Before I do that, though, let me begin by talking about what is an asset. Assets are essentially a resource that is believed to have a future benefit or better explained will increase in value over time.
What makes an asset, though? Simply put an asset is something that will increase in value. Thus the concept of scarcity is important. If you have something that is scarce that is in demand you have an asset that will increase in value.
Scarcity is an important concept in understanding assets. To have a limited supply can create demand. This is very crucial. Here are few examples of what I mean.
If you have a piece of artwork that is in great demand but there’s one painting it can be extremely valuable to hold that artwork. It’s a valuable asset with a limited supply. Here’s another example that if you own lakefront property it can be extremely valuable because there’s only so much property around the lake that people want access to or to live by. This is scarcity. There’s a limited supply and a demand.
I would argue that #Bitcoin is extremely rare and valuable. The reason for this is because of scarcity. There will only ever be 21 million Bitcoin. This creates a limited supply. You can also find a continuous demand for Bitcoin over the years. This is definitely scarcity at its best. It makes Bitcoin very valuable.
If you look at cryptocurrencies such as Ethereum for example you will see the opposite of scarcity. Ethereum has absolutely no supply limit. There is a small group of people who control the supply schedule for Ethereum. This group can change the supply at any time and has actually done it several times in the past.
Governments and Central Banks also issue currency. These currencies are known as fiat currency. They also control the supply limit. You can see throughout history that currencies are debased because of the increase in the supply of the currency. This makes your money worthless. This why I and others have said cash is trash.
The reason I share the flip side of this idea of scarcity is because it’s important to understand what’s an asset and what’s not. I am not saying someone should not hold cash, but it’s important to understand your cash will lose value over the long term. I hold cash for two reasons. I hold it in order to have an emergency fund, but more importantly I hold it more as an investment fund. I hold cash to buy future assets that are scarce and will increase value.
I don’t like investments like Ethereum or other cryptocurrencies other than Bitcoin because they do not have a limited supply. There’s zero scarcity in them. When I look at assets some of the things that I’m looking for are as follows:
I am looking for something scarce.
I am looking for something that will be in demand.
I am looking for something that can provide cash flow.
There are many other things that I look for but these are three examples of what I look for when I’m determining if I want to invest in an asset. Bitcoin has scarcity and I believe it will have enormous demand over the years to come. The entire financial landscape and ecosystem is changing. I believe that Bitcoin will play a big part in this new financial ecosystem. This is one of the main reasons that I am still extremely bullish on Bitcoin.