I rarely raised my hand in Engineering School. Never wanted to look stupid among my peers.

It took a few decades before I felt worthy of sharing my opinion in groups of smart people. Then when I got into my 50’s I really didn’t give a shit any more what people thought. If I had a question in a group setting, I asked it. If I had a point to make, I’d make it.

The benefit I quickly realized was how much I would learn by opening my mouth. If someone thought differently and spoke up, I’d get another perspective. Sometimes I would get supportive comments which were reinforcing.

Feelings of inadequacy surface like a Freshman in College when I start talking about Bitcoin, though. Many very smart people I respect support it. They think it’s the future of money and currency.

Among such great minds and with me having so little understanding or mental capacity, I really should keep my thoughts to myself and spare looking like a doofus.

Nah.

What I see as Bitcoin’s advantages over our current ‘fiat’ currency – the dollar:

• Bitcoin cannot be produced “out of thin air” like the Treasury and the Federal Reserve Bank do with the dollar. It needs to be “mined” electronically which takes energy.
• Bitcoin is open sourced which means no one controls it. It was created and let run loose in the wild. Governments and Central Banks can’t track it nor control it.
• Bitcoin is electronic. Can’t get any easier to store wealth than that. No more stuffing mattresses with cash or hiding gold in the basement.

So why don’t I fawn all over Bitcoin?

Not just for smart people

Blockchain technology and Bitcoin are brilliant technological advantages. It’s no wonder smart people chase after it. Though I have my doubts about digital currencies such as Bitcoin, I have little doubt about the future of Blockchain. (If you’re interested, research the use of Non-Fungible Tokens (NFTs) as a means to protect digital assets. It could and probably should replace our system of copyrighting for these things.)

But regarding Bitcoin, it’s not just the smart people that defend it.

Some of those that I follow on Twitter who are pro-Bitcoin post videos of opposing views. I read the replies to these views and am surprised how many people degrade the person with the opposing view without actually debating the points with facts.

Those aren’t the reactions of smart people.

Is Bitcoin too smart for many of us?

I thought this Seth Meyers video was insightful. Many that support Bitcoin are well-versed in its strengths. Others are just going along.

https://www.facebook.com/watch/?v=288600998335966

True, we don’t need to know how the Monetary System works to use dollars, but with Bitcoin there are added degrees of difficulty – wallets, exchanges, codes to remember…

Lately, I’ve seen a lot of smart people chase after smart technology only to get burned. Tesla and FTX are popular examples. Cathie Woods’ ARK Innovation ETF (ARKK) contains some of the biggest names in technology. Lots of smart people bought in only to lose their shirts.

Bitcoin – Not Money

The argument goes that because Bitcoin is open-source and is not controlled by anyone, including the government, it is better than our ‘fiat’ dollars.

Bitcoin has been around for 15 years and its volatility has proven that it is not valuable as a currency. Back in March of 2022, you could have bought a new Tesla for a Bitcoin. Now it costs 3.

Look at this one-year chart:

We panicked over 8% inflation. We simply aren’t ready to have a serious discussion about using Blockchain for currency. Still, a lot of Central Banks globally are trying to shift to a digital currency (CBDCs). We’ll see how that goes. IMO, Bitcoin will suffer whether it goes well or not.

Intrinsic Value

Advocates think that because governments aren’t controlling Bitcoin, it has a more constant value. This simply isn’t supported by the charts. Bitcoin has been around for about 15 years. It’s value is all over the map, with BTC peaking around $60,000 and now around $17,000.

It is true that the US Dollar as a fiat currency has no intrinsic value. However, the US Dollar is backed by the “faith and credit of the US Government”. OK, you laugh, but it is backed by SOMETHING and has been relatively stable, compared to Bitcoin, for the past 15 years.

Value is in the eye of the beholder. Dollars have value because we THINK they are valuable. The same goes for precious medals like silver and gold.

The things that REALLY have intrinsic value – like food, shelter, energy – are awkward to use for currency. Real Estate, which is required for food, shelter and energy also has intrinsic value.

Bitcoin as an Investment

Just because Bitcoin is too smart to be useful to me isn’t enough reason to not to invest in it.

There is a fixed amount of Bitcoin. It can be divisible by mining to make more for currency for use. However, as it is divided and used, the value of Bitcoin increases.

The early adopters – those that bought Bitcoin early on – get richer as more people used and valued it.

Now you know why so many people get fired up when they talk about it. They have a stake. All they have to do is convince the masses that it has value. It’s a massive sales pitch, involving putting down anyone that objects.

Bitcoin has historically been a good investment. It made people millions. So did Tulips in 1637. So did Tesla stock.

My View on How to Stay Safe

I believe money works better as a means of exchange than a store of wealth. Central Banks and governments make a mess out of money by debasing it – printing more and giving it away. As long as you use money as a medium rather than a store of wealth, you’ll be OK when inflation rears its head. If you store your money in real estate or precious metals, you never have to worry about debasement affecting your savings.

My position is that it matters less what money is “worth” as long as it is only used for exchange. If money buys less food, than people need to be paid more money to buy that food.

Applying Occam’s Razor

IMHO precious metals are the perfect currency. They have intrinsic value and are physical in nature. If you want to exchange something physical – like labor – for something else that is physical – like food – why not use a medium that is physical?

Digital currency may be better than the fiat dollar we have, but precious metals are better than digital currencies. They’re simple – a genius IQ is not required. They cannot be manipulated. They are a global exchange.

And you don’t have to have electricity to exchange precious metals. You don’t have to worry about cyber-security or someone knocking out the power grid so you can’t buy your food.

My smart friends can have Bitcoin and all its brethren. I’ll take Silver, Gold , Real Estate and Oil any day.

Ron