On 1st April 2017, the price of 1 Bitcoin was worth $1,070 US Dollars, which rapidly grew by 1,800% over the following 9 months to be worth $19,666 on the 16th December 2017. After that, Bitcoin didn’t surpass the $19,666 mark for another 3 years. With that background, I tried to learn more about it and went further down the Rabbit Hole. Here are 5 things I’ve learned so far:
1. Price is a distraction
When priced in US Dollars, British Pounds, Yen, or whatever other currency you name, Bitcoin is very volatile. You can get double digit % moves up or down in a single day, sometimes both. That means it can be tempting to monitor price constantly, and I’ve certainly been guilty of that. I’ve had to learn not to get distracted by the noise on price, and instead focus on long term reasons why Bitcoin might be valuable. This has helped me keep focus on what’s important, instead of spending too much time watching numbers going up and down on a screen. Quick story, on the 6th Feb 2018 I had a first meeting at work with then President but now CEO of Unilever, Alan Jope. I went into that meeting with Bitcoin down 14% for the day but came out a couple of hours later and it was up 18%. The meeting with Alan went well, but if I’d allowed myself to be too concerned with short term price, I’d have been distracted and not focussed on what I needed to do in that meeting. I remember that day very clearly and it was a great lesson for me.
2. It’s still relatively early
There are many reasons for Bitcoin’s price volatility, although a key one to point out is that it’s still new. Even though Bitcoin has been around for over a decade, it’s early in technology adoption terms. Research by Global Macro Investor showed crypto is at the equivalent of 1997, when it comes to similar adoption rates for the internet worldwide but it’s also growing faster. The UK Financial Conduct Authority released research in June 2021, that estimated 2.3 million UK adults own any cryptocurrency, which is only 4.4% of the population. In the US, Gemini conducted similar research that put it at 14% of US adults. Different studies have found other numbers and the exact values aren’t known, but what they agree on is that we’re at the beginning and adoption is accelerating, rather than this being a one-off fad. Some people are put off Bitcoin by the rapid price increases thinking that they’ve missed the boat, but potentially we’re just leaving the port.
3. QE keeps going
The levels of quantitative easing (QE) by central banks have increased since 2008 and it wasn’t a one-off act just to avert the financial crisis. Here’s a great website that tracks levels of QE by the 4 largest central banks in the world. One chart shows very clearly what is happening:
Even before the COVID crisis, which was cited as the reason for the jump in QE in 2020, QE was increasing rather than decreasing. In short, this means more money in the system and the numbers are so large I’ve found it tough to get my head around, so here’s some context that’s helped me. Since 2009, the total amount of QE by the Bank of England has been £895BN. With a UK population of 67 Million, they have created over £13,000 for every person in the UK. I wonder how many people in the UK feel better off by £13,000 over the last 10 years?
4. “People come for the greed; they stay for the revolution” – Max Keiser
Many people are attracted to Bitcoin because they see the price appreciation in the media and stories of people making large gains, although some have made large loses too by trying to trade it. Once I started to really understand Bitcoin, why it was invented and some of the problems it’s looking to solve, I became more convicted in its ability to alleviate some of those problems. The main thing Bitcoin looks to achieve is the separation of State and money. Whenever money is controlled by a single entity, government or otherwise, it can be manipulated to serve the interests of the controller, and the temptation is always there to do so. A system like Bitcoin that is controlled by no one means that it can benefit everyone, which is what the revolution is about.
5. Constant education
There are times when nobody is interested in Bitcoin. Particularly in 2018-2020, when the price spent 3 years below its December 2017 high. However, by that point, I was deeply intrigued and felt there was something in it that I had to understand better. So, I dove in more and tried to learn, and in doing so developed a much longer-term outlook which helped me not worry about the value in the shorter term. Fun fact, nobody who bought Bitcoin at any price in history and held it for 4 years, has lost money, ever. Doesn’t mean to say it will always be that way, but it’s an interesting thing to think about.
Final thought today, my learning isn’t done, these bullets aren’t exhaustive, and I’m still a novice. Learning about Bitcoin can take a long time, be hard and there are lots of concerns/criticisms about it. Putting in the effort, I hope has helped me be more objective to some of the challenges and concerns people have. I’m not blind to them and intend to touch on some of them in my next letter.
Peace, love and Bitcoin.
Rob