At the time of writing, the city of Miami (FL) was hosting the BItcoin 2021 conference. In attendance are the influencers in this space that include Bitcoin maximalists (Max Keiser, Winklevoss Twins, Jack Dorsey), public figures (Tony Hawk, Floyd Mayweather, Jr.) and visionaries (Michael Saylor). There could not have been a better place than Miami, which has a pro-crypto mayor Francis Suarez (who also spoke at the event). The city is propping itself up to become a center of cryptocurrency and blockchain technology. Perhaps that insight shows just how much of an impact cryptocurrency has had on the world.
While the narrative from mainstream media and finance has not been positive (unless Bitcoin’s prices are up), the cryptocurrency market is far from negative. There are so many developments taking place with projects as more capital flows into the market. There are use cases with Bitcoin as a store of value and a hedge against economic uncertainty (e.g. inflation). What detractors often see is a bubble that is a large ponzi scheme that will eventually go to zero. Perhaps they don’t realize that there is a network effect and belief system that is keeping Bitcoin and the cryptocurrency market alive. It is also creating solutions to solve common problems regarding money.
Bitcoin has had a global impact that many do not yet realize. It is happening under the noses of the media, who do not report too much about it. The main thing that investors are realizing is that it is a far better investment than the stock market. Bitcoin has outperformed just about every stock on the NASDAQ, DJIA and S&P 500 for the most part. Bitcoin is up 1600% compared to the stock market. Even the FAANG group was outperformed by Bitcoin in 2020. Bitcoin has even been hailed the best performing asset of the decade by Yahoo Finance.
According to their report:
Since 2011, Bitcoin’s cumulative gains have exceeded 20,000,000%, far outpacing the cumulative gains of the Nasdaq 100 and US Large Caps, which recorded returns of 541% and 282%, respectively.
On an annualized scale, Bitcoin returned 230% – 10x higher than the Nasdaq 100, which was the second-best performing asset class.
For the same period, U.S Large Caps recorded an annualized return of 14%, high yield bonds gained 5.4%, while gold returned 1.5%.
In 2020, Bitcoin was the top performing asset. It outperformed gold, silver and crude oil.
There is also a social component to Bitcoin that brings about inclusivity to the financially underprivileged. These are mostly people who live in less developed countries who do not have access to financial services. The unbanked make up a large portion of the world’s population. According to a study using World Bank 2021 data, there are 1.6 Billion adults from around the world who don’t have bank accounts or use banking services. There are many factors why they cannot access banking, but it is primarily due to lack of documents. These people mostly come from the lower class with lack of higher education and can also be due to socio-political persecution.
In other cases, the problem is with inflation. This is true in Venezuela, Argentina and countries in Africa. Bitcoin provides a way for citizens in these countries to preserve their wealth from failed economic policies. The rate of inflation in Venezuela alone was reason for using Bitcoin. Venezuelans are not using Bitcoin to make money, but to save their wealth against hyperinflation. Chainalysis reports that Venezuelans are among the most active crypto traders in the world. In countries hit by hyperinflation and political instability, it is more a means for survival rather than investment opportunity. Once money is converted to BTC, it cannot be confiscated by government. This allow people more freedom to transport their wealth to other places where they can escape from hardships.
There is a major application of Bitcoin as a frictionless way to transfer money. Bitcoin is creating solutions that help with transferring value, whether direct peer-to-peer or across borders. Fred Thiel (CEO of Marathon Digital) mentions this during the Bitcoin 2021 conference panel with investor Kevin O’Leary (Shark Tank). Overseas workers can use Bitcoin ATMs (BTM) to remit value back to family in their home countries. They can do this at less cost and less time than if they had used a wire transfer service. Elizabeth Stark (CEO of Lightning Labs) during her talk at Bitcoin 2021, mentions the benefits of the Bitcoin Lightning Network as a way for developing countries to make payments. Stark mentioned that:
“People are able to use bitcoin to send value globally, instantly and for almost no fees,” Stark said. “With Lightning you can send a fraction of a cent.“
In the Philippines, crypto is being used for many purposes. According to a FinTech magazine report:
The Philippines is one of the world’s fastest adopters of cryptocurrency, new reports show. According to data, the pandemic has fuelled the trend, with Filipinos releasing the value of crypto as an investment and income generating currency.
The Philippines also has one of the world’s largest overseas communities. There are significant Filipino populations in the United States, Spain, The Middle East, the UK and Canada. This group alone remits up to $30 Billion a year back to the home country (based on Nikkei report). Since many overseas workers have lost their jobs during the COVID-19 lockdowns, the value has somewhat declined, but it is still a large market. Filipinos are sending money OTC (Over-The-Counter) using Bitcoin payment channels, either using the Lightning Network or via a payment processor. It is fast and it saves them on fees.
In early June 2021, the country of El Salvador has announced plans to make cryptocurrency like Bitcoin, legal tender. If the bill is passed by the government, then it will put El Salvador at the forefront of the cryptocurrency space as it recognizes Bitcoin as a medium of exchange for goods and services. The president of El Salvador Nayib Bukele tells reporters:
“In the short term this will generate jobs and help provide financial inclusion to thousands outside the formal economy,”
The Salvadoran president also agrees about how it can help uplift many people to gain access to financial services outside the mainstream. Users will be able to access DeFi products in cryptocurrency that offer lending and payment services that do not require bank accounts or financial statements. It offers some hope to those who cannot access capital for a simple loan or to pay for a medical procedure since they have no bank account for insurance companies and billers to come after.
These are positive developments that lead Bitcoin in the right direction. It is not primarily used by criminals for money laundering or to hide from authorities. Those are problems that also occur within the mainstream financial industry, and banks have been used more often to carry out these illicit activities. Looking at Bitcoin from a different perspective gives a better idea of its purpose and the problems it can be used to solve.
Quadchain Solutions Foundation 