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It is now nearly impossible to avoid talking about Bitcoin when approaching the topic of investing. Economists at DBS Bank seek to investigate the many opportunities that Bitcoin brings and highlights three of them.

Carry USD1t in your pocket

“Decentralisation – Power to the people. Bitcoin functions on open source software, meaning that decisions to maintain or improve the system are transparent and must be agreed on by a large enough consensus of users – a ‘monetary democracy’, if you will. With power in the hands of the people, some form of the ‘Tinkerbell effect’ is also at play here – an effect that describes things that will continue to exist if people continue to believe in them. With Bitcoin, its discontinuation will only occur when its participants no longer believe it to be a viable medium of exchange. As it stands, this outcome is increasingly remote, with choruses of doubters continuing to fall by the wayside.”

“Limited supply – Effective store of value. The effect of both the limited absolute stock, decreasing rate of mining production and high energy production requirement serves to constrict supply of Bitcoin with the passage of time. Coupling this with an elevated demand through familiarity and adoption sees Bitcoin increasingly stabilising at higher valuations. Bitcoin is birthed through a huge expense of energy, produced in limited reserve – running in direct contrast to an endless supply of fiat currencies that can be seemingly printed to existence on a whim. It is only causal then, to observe the latter being devalued against the former.”

“More Crypto-commodity than Cryptocurrency – High value density increases ease of portability. Theoretically, all the world’s private keys can be stored on a USB drive – valued at c.USD1t. No other physical commodity can rival this portability of wealth.”

 

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