In the last eighteen months, Bitcoin has seen a tremendous run-up in its price. From an all-time low of $4,000 per Bitcoin in March 2020 to the recent high of $67,000. Bitcoin’s price appreciation has been phenomenal and incomprehensible to those with no idea why Bitcoin is valuable and how the software protocol works.
Many disciplines come into play when understanding Bitcoin’s dynamics. Economics is one, and as a business owner, this was the discipline that initially led to my interest in Bitcoin. Other fields include an understanding of how computer software works, how the more extensive financial infrastructure of the world works and, to a certain extent, politics. In my last newsletter, I went to great lengths to explain how politics ties intimately to money in our current society and how this is somewhat unusual historically speaking.
In the last few years, we have seen dramatic events in the political sphere. First, the Brexit vote initiated a shocking series of events for many people as the UK contemplated the end of its collaboration with the EU, then the election of Trump in the US, then the pandemic. I do not intend to write a political essay here, so I won’t go on, but you get the idea…
With political disruption and too many unexpected events, planning can become extremely tricky. When the stability of money ties to political stability, money can start to become tricky too. The pandemic has created devastating circumstances for many small businesses, including supply chain disruptions leading to empty shelves. When the stability of a currency relies on its custodians’ excellent management, and those custodians are simultaneously being buffeted unexpectedly in all directions. It creates an environment where almost anything could happen.
In a crazy world, certainty is a welcome balm. With its constraint of twenty-one million coins that the Bitcoin protocol will ever create, Bitcoin provides a level of algorithmically secured certainty. When almost everything else can fluctuate in value, one Bitcoin will always be one Bitcoin, and for many, this is a comforting thought and a welcome foundation.
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