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The genesis of today’s monetary policies could be traced back to 1936 when John Maynard Keynes presented his ideas during the Great Depression which inspired the current central bank-led quantitative easing leading to massive asset price inflation globally.
Bitcoin has been perceived as a decentralized revolt against consistent monetary debasement by central banks across countries. Irrespective of the merit of the monetary policies, there is a rationale for a peer to peer payments/finance network and which solves many real-world problems.
The counter-view has been that anything digital is susceptible to fraud and Bitcoin is too volatile to be institutionalized. One cannot dismiss this criticism and many governments have banned crypto-currencies under the same pretext.
The value of Bitcoin is purely driven by the perception of people who are willing to pay a price for its scarcity and the respective risk and reward. It has no intrinsic worth and in some sense is no different from Gold which has sustained its “Perception value” through millennia.
In the long run, blockchain network/cryptocurrencies could provide a sovereign way for wealth creation, storage and protection from the state. This is a very big idea with a total addressable market of trillions of dollars. It would be interesting to see how central banks/governments react to Bitcoin’s rapid adoption as ironically it also becomes “too big to fail”.
10 Reasons why Bitcoin has emerged as an investment idea:
Investing in Bitcoin/cryptocurrencies have inherent risks meant only for high risk-taking investors. Deep corrections, exchanges being hacked and excessive government regulation could crash the markets in a matter of hours. Do not invest unless you understand these risks and allocate capital accordingly.
This is not investment advice. This is strictly my personal opinion. I have invested some of my savings in Bitcoin and other cryptocurrencies.
Author: Himanshu Khandelwal, CFA
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